<PAGE>
LGT ASSET MANAGEMENT
OVER 25 YEARS
OF INVESTING
WORLDWIDE
GT GLOBAL
HIGH INCOME
FUND
SEMIANNUAL REPORT
APRIL 30, 1996
[LOGO]
<PAGE>
TABLE
OF CONTENTS
<TABLE>
<S> <C>
Report from the Fund
Managers and Key
Portfolio Holdings... 1
Report of Independent
Accountants.......... F1
Financial
Statements........... F2
</TABLE>
<PAGE>
GT GLOBAL HIGH INCOME FUND
PORTFOLIO SUMMARY
INVESTMENT OBJECTIVE/ CURRENT STRATEGY
The Fund primarily seeks high current income and, secondarily, capital
appreciation. It invests primarily in debt securities from emerging
markets around the world, where we perceive value through improving
fundamentals.
PERFORMANCE SUMMARY
GT Global High Income Fund
J.P. Morgan EMBI (Brady)
Salomon Brady Bond Index
GT GLOBAL HIGH INCOME J.P. Morgan Salomon Brady
FUND EMBI (Brady) Bond Index
--------------------- ------------ -------------
10.22.92 9525 10000 10000
9525 10105 10101
9508 9970 9887
9684 10209 10108
9743 10316 10189
9991 10451 10305
10645 10996 10868
10887 11217 11107
11283 11598 11493
11747 12003 11872
12290 12504 12383
12596 12755 12601
12723 12922 12776
13681 14011 13870
13848 13871 13694
14678 14718 14543
14895 14758 14586
13615 13530 13386
11578 11982 11768
6.30.94 11413 11988 11767
12236 12815 12416
11722 11783 11590
11930 12073 11935
12640 12936 13031
12952 13063 13241
12799 12693 12878
12840 12822 12969
11854 11968 12160
11315 11554 11935
10948 10952 11152
10604 10643 10811
11489 11785 11949
12370 12824 12932
12577 13073 13223
12509 13082 13274
12828 13391 13508
13205 13852 14093
13159 13710 13938
13512 14190 14343
14248 15265 15405
15474 16609 16762
14594 15442 15726
14755 15838 16093
4.30.96 15283 16635 16872
The chart above shows the performance of the GT Global High Income Fund,
Class A shares, since the Fund's inception versus the J.P. Morgan EMBI
(Brady) and the Salomon Brothers Brady Bond Index. This represents a
cumulative return of 52.83% and an average annual total return of 12.79%.
The chart assumes a hypothetical $10,000 initial investment in the Fund's
Class A shares and reflects all Fund expenses and the maximum 4.75% sales
charge. A $10,000 investment in the Fund's Class B shares at inception on
10/22/92 would have been valued at $15,378 on 4/30/96. This figure
reflects the maximum applicable contingent deferred sales charge (5% in
the first year, decreasing to 0% after six years). A $10,000 investment
in Advisor Class shares at inception on 6/1/95 would have been worth
$12,388. Investors should note that the Fund is a professionally managed
mutual fund while the indices are unmanaged, do not incur expenses and
are not available for investment.
AVERAGE ANNUAL TOTAL RETURNS+
APRIL 30, 1996
SHARE CLASS WITHOUT SALES CHARGE++ WITH SALES CHARGE
------------------------ ----------------------
1 YEAR LIFE OF FUND 1 YEAR LIFE OF FUND
------ ------------ ------ ------------
CLASS A* 33.03 14.36 26.71 12.79
CLASS B* 32.15 13.61 27.15 12.99
ADVISOR CLASS** N/A 23.88 N/A N/A
HISTORICAL PERFORMANCE++
ANNUAL RETURNS
1992* 1993 1994 1995
----- ---- ---- ----
CLASS A 1.67 51.57 -19.24 20.19
CLASS B 1.41 50.60 -19.61 19.27
* 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 GT
Global. Please see the "Alternative Purchase Plan" section in the Fund's
prospectus.
+ Figures assume reinvestment of all dividends and capital gain
distributions at net asset value.
++ The above performance data do not reflect the maximum 4.75% sales
charge and the contingent deferred sales charge (5% in the first year,
decreasing to 0% after six years) for Class A and Class B shares,
respectively, which if included, would have reduced performance quoted.
The above data represent past performance of the Fund's shares, which does
not guarantee future results. The investment return and principal value of an
investment in the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
1
<PAGE>
INTERVIEW WITH THE PORTFOLIO MANAGER SIMON NOCERA
Q HOW DID THE FUND PERFORM?
A For the six months ended April 30, 1996, the Fund's total return was
16.14% for Class A shares (10.62% including the maximum 4.75% sales charge)
and 15.82% for Class B shares (10.82% including the maximum 5% contingent
deferred sales charge). Total return over the same investment period was
21.34% for the J.P. Morgan Emerging Markets Brady Bond Index (EMBI).(1)
Q HOW WOULD YOU CHARACTERIZE THE PERFORMANCE OF
EMERGING FIXED INCOME MARKETS OVER THE SIX
MONTHS ENDING APRIL 30, 1996?
A Overall, these markets have done very well. After the Mexican peso
devaluation in December 1994, the gradual return to stability prompted
investors to move into higher-yielding markets against a backdrop of stable
and rallying U.S. treasuries. Then, toward the end of 1995 a major rally in
emerging fixed income markets occurred, we believe primarily on the basis of
improved emerging market fundamentals; from November 1995 to mid-February
1996, emerging fixed income markets rose close to 25% based on the JPM EMBI.
As the effects of the Mexican crisis have been absorbed, emerging market
fundamentals, in our opinion, have been significantly improved by strict
adherence to critical reform programs. The two economies that suffered the
most, Mexico and Argentina, seem to be demonstrating positive signs of
economic growth. Elsewhere, while some uncertainties remain about Brazil's
commitment to reform, we believe most of the bad news has already been priced
into the market. As a result, with a fairly large spread, many investors are
returning. Finally, a significant event for the emerging fixed income markets
was the rerating of Polish Brady bonds to investment grade.
A FIRST FOR BRADY BONDS
JPM Polish Brady
JPM EMBI
JPM Global Bond
JPM Polish Brady JPM EMBI JPM GLOBAL BOND
---------------- -------- ---------------
11.3.95 0 0 0
-0.89 -2.14 0.64
-0.46 0.54 1.00
-1.28 1.23 1.35
0.37 3.99 1.19
1.13 5.01 1.32
0.74 5.09 1.65
0.73 9.27 1.74
1.72 11.34 2.32
3.78 13.32 1.94
4.44 15.28 2.14
2.2.96 6.00 17.12 1.98
18.35 20.18 0.96
20.57 20.41 1.26
22.91 22.30 1.46
22.46 20.89 1.60
18.77 17.31 1.46
18.13 14.99 1.07
14.39 9.00 -0.19
14.27 10.75 -0.10
17.41 15.53 0.32
18.66 15.53 0.52
19.76 16.55 0.33
21.95 18.61 -0.26
22.64 21.21 0.31
4.26.96 23.28 22.13 0.32
Polish bonds have risen to all-time highs following the January 22
announcement by Moody's that it was awarding an investment-grade rating to
Polish Brady bond issues. This is the first Brady bond issue to achieve this
rating. For the six months ending April 26, 1996, Polish bonds six returned
close to 24%, as investors rewarded Poland for its ability to improve
fundamentals.
Please keep in mind that there are significant risks involved in emerging
fixed income markets. The indices represented above do not reflect the
performance of any GT Global Mutual Fund.
Source: Bloomberg, June 6, 1996.
Q HOW DID THE RECENT CORRECTIONS IN DEVELOPED BOND MARKETS AFFECT THE FUND?
A The February correction in U.S. treasuries of roughly 150 basis points
(100 bps equal 1%) interrupted the rally in emerging fixed income markets.
Another correction took place in March but, once again, emerging fixed income
markets recovered and recouped most of their March losses, despite the fact
that U.S. treasuries were moving up in terms of yield. We believe this
reflects the increasing recognition of the significant value in emerging
fixed income markets. The Fund's performance followed these developments
quite closely and enjoyed increasing returns until mid-February, when gains
were reversed due to the rise in U.S. yields. As investors began to focus on
emerging market fundamentals and recognize the value to be found in these
fixed income markets, the Fund's performance began to strengthen again
beginning mid-March.
Q WERE THERE ANY MARKETS THAT DID NOT LIVE UP TO YOUR EXPECTATIONS?
A Two markets in particular, Bulgaria and South Africa, did not fare well
and adversely affected the Fund. For the last three years, Bulgaria's lack of
political consensus has hindered the implementation of reforms necessary to
bring down inflation, address the fiscal deficit and stabilize the economy.
Accordingly, multilateral agencies have been reluctant to provide assistance.
As the currency weakened, the Bulgarian government intervened in support,
costing the country in reserves and, in turn, giving rise to fears of a
default on its Brady commitments. Recently the government finally agreed to
close down loss- making enterprises and is sitting down with the IMF and
World Bank. The situation remains uncertain and the possibility of a market
pullout is still very real.
Over the last six months of 1995, South African debt was up close to 20%.
South Africa has done well based on declining inflation, tight monetary
policy, solid economic growth and a fairly stable political situation. Also
South Africa's prominence in the IFC Equity Investable Index created quite a
bit of technical demand for its securities, and its currency was fairly well
supported by external capital inflows. From a technical standpoint, then, a
correction was not entirely unexpected.
South Africa also performed poorly on a fundamental basis. As soon as
speculation arose several months ago, investors took a closer look at the
fundamentals, especially the economic and political situation, and started to
feel
CONTINUED P. 3
2
<PAGE>
INTERVIEW WITH THE PORTFOLIO MANAGER CONTINUED
uncomfortable, giving rise to weakness in the domestic economy. Because South
Africa, like Bulgaria, does not have a vast amount of external reserves, the
market felt it could not defend its currency. As a result, the rand lost
close to 20% over two months and the bond yields backed up from 13 1/4% to
nearly 17%. As yet, we do not feel the government has implemented a credible
policy mix and have reduced our position significantly over the last two
months. Nevertheless, the Fund's remaining South African holdings were
impacted.
Q WHY DO YOU THINK EMERGING FIXED INCOME MARKETS
SIGNIFICANTLY OUTPERFORMED EMERGING MARKET
EQUITIES SINCE THE DECEMBER 1994 DEVALUATION OF
THE MEXICAN PESO?
A Prior to the devaluation, many of these countries enjoyed strong foreign
capital inflows, financing their development, but when the peso devalued,
these inflows stopped. At that time, Mexico was considered the benchmark for
emerging markets, meaning that if such an important country could devalue,
other countries might follow. Tremendous credibility issues and considerable
uncertainty about emerging markets in general followed the devaluation. In
order to restabilize the situation and regain investor confidence, very
strong fiscal and monetary policies had to be implemented, which ultimately
translated into slower economic growth.
Under this tightened regime, the real Mexican economy has done very poorly
and, therefore, equity has performed poorly. Fixed income markets, on the
other hand, have done very well because yields started to rise in the
aftermath of the crisis. As investors began to realize these countries were
serious in their commitment to stabilize their economies and pay back debt,
many returned to fixed income markets. Stock markets continued to suffer
because of uncertainty over currency and the degree to which GDP would
decline, making equity valuation very difficult.
That fixed income markets outperformed equity is a very positive development
for one simple reason. Given the crisis created by Mexico, international
investors wanted to see a very strong commitment by authorities to stabilize
the economy, a policy with some costs over the very short period in terms of
growth, but ultimately conducive to long-term stability. While there can be
no guarantee that Mexico will remain committed to these reforms, we remain
very positive on the steps they've taken.
Q HAS YOUR STRATEGY CHANGED SINCE OCTOBER 1995?
A While we decreased our allocations to South Africa and Bulgaria, we have
been increasing our exposure to Russia over March, primarily as a result of
stronger fundamentals. We've seen quite a bit of speculation on Russian debt
recently because people feel that Yeltsin has a good chance of winning July's
runoff presidential election, thereby continuing to make strides toward the
type of policy Russia has been trying to implement over the past three years.
It's one of the reasons Russian debt has been appreciating, but it's not the
only reason we've been buying it. Even in the worse case, if Zyuganov were
to win the election, we feel he would be compelled to be pragmatic over
dogmatic and would continue with stabilization and reform and not try to
default on Russia's debt, or revert to the old Soviet system.
Beyond Russian politics, we like the developments on the fundamental side.
Regardless of how strong the informal economy (self-employed, small-scale
businesses that are excluded from labor statistics) is, statistics on the
official economy indicate that the picture is much improved. Expectations are
that GDP will be flat to a possible increase of up to 3%, compared to a
contraction of 5% in 1995. Inflation is coming down, the ruble is stable, and
a fairly successful fiscal program has been implemented, supported by a
stronger monetary policy. The economy seems to have bottomed and is actually
beginning to rise, and we believe policies are being implemented in a much
more efficient way. Moreover, Russia's external credit indicators are better
than those of some other markets.
Based on where Russia is trading now, the implied spread over U.S. treasuries
is 2400 bps, while Bulgaria (a country with negative economic growth) is
trading at 1400 bps. Given that type of value, we have raised our position
from 5% to approximately 10% over the last month.
We also increased our allocation to Brazilian debt. Despite Brazil's slow
progress toward political and economic reform, we believe it is poised for
outperformance compared to other Latin American countries, particularly since
the market has already priced in much of the bad news. We believe that a
long-term sustainable growth rate does not necessarily need to be achieved
overnight; the government has other options and means at its disposal. So,
given progress made toward privatization and the decline in inflation, which
means real interest rates are coming down (thereby lessening the government's
burden to service their ballooning debt), we feel the fiscal situation is
going to improve. In our opinion, Brazil will continue to grow and maintain
low inflation, making it an attractive country for fixed income investments.
CONTINUED P. 4
3
<PAGE>
INTERVIEW WITH THE PORTFOLIO MANAGER CONTINUED
Q. GIVEN THE INCREASING POSSIBILITY OF A HIKE IN U.S.
INTEREST RATES OVER THE COMING MONTHS, HOW ARE
EMERGING BOND MARKETS LIKELY TO BE AFFECTED?
A. Unfortunately, we expect the U.S. market to continue to have a major
impact on emerging fixed income markets. However, by no means is good
performance by emerging fixed income markets dependent on a rally in the U.S.
market. We believe the value of these countries, based on the policies being
implemented and the growth potential, is outstanding. In other words, the
spread between yields in this market and U.S. treasuries is very appealing
and, in our view, fully prices in any risk that these economies could turn
sour. Most importantly, we are trying to capture spread and not necessarily
the absolute level of yield.
Therefore, in our opinion, we don't need a rallying U.S. treasury, but a
stable U.S. treasury. Even if U.S. markets rise to 7 1/4% or even 7 3/4%, as
long as they do so in a moderate fashion, then we think emerging markets
should still do extremely well. There may be hiccups along the way, but
investors ultimately return to value, and value is the fundamental story in
emerging markets as long as they continue their current paths of reform.
EMERGING MARKETS DEBT YIELD
Emerging Markets Bond Index
U.S. 30-Year Treasury
15%
969 bp
10%
484bp
592 bp
234 bp
5%
Dec. 90 June 93 Feb. 96
Source: Datastream and J.P. Morgan, December 1995.
Please keep in mind that there are significant risks involved in emerging
fixed income markets. The indices represented above do not reflect the
performance of any GT Global Mutual Fund.
ABOUT THE PORTFOLIO MANAGER
SIMON E. NOCERA - Chief Investment Officer of Emerging Market Debt for LGT
Asset Management since 1996; Portfolio Manager and Economist since 1992.
Previous to working for LGT Asset Management, Mr. Nocera was Senior Vice
President, and Director of Global Fixed Income Research for the Putnam
Companies from 1991-1992 and Economist for the International Monetary Fund
from 1986-1991.
(1) The J.P. Morgan EMBI (Brady) 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 actual investment
opportunities.
The index is not available for investment and does not incur sales charges
and professional management fees.
ASSET ALLOCATION
Structured Notes 1.0%
Corporate Bonds 6.6%
Short-Term & Other 7.4%
Sovereign Debt 12.4%
Government & Gov't Agency Obligations 72.6%
GEOGRAPHIC ALLOCATION
Other 1.3%
Asia-Pacific 8.4%
U.S. 9.1%
Africa 9.5%
Europe 17.8%
Latin America 53.9%
Allocations will change based on current market conditions.
4
<PAGE>
GT GLOBAL
HIGH INCOME
FUND
FINANCIAL
STATEMENTS
<PAGE>
GT GLOBAL HIGH INCOME FUND
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
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 April 30, 1996, the related statement of
operations for the six months then ended, the statement of changes in net assets
for the six months then ended and for the year ended October 31, 1995, and the
financial highlights for the six months ended April 30, 1995, for each of the
three years in the period ended October 31, 1995 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 April
30, 1996 by correspondence with the custodians 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 April 30, 1996, the results of its operations for
the six months then ended, the changes in its net assets for the six months then
ended and for the year ended October 31, 1995, and the financial highlights for
the six months ended April 30, 1996, for each of the three years in the period
ended October 31, 1995 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
JUNE 14, 1996
F1
<PAGE>
GT GLOBAL HIGH INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in Global High Income Portfolio (cost $380,776,977) (Note 1)........... $396,601,917
Receivable for Fund shares sold.................................................... 1,082,109
Unamortized organizational costs (Note 1).......................................... 45,519
------------
Total assets..................................................................... 397,729,545
------------
Liabilities:
Payable for Fund shares repurchased................................................ 2,165,516
Payable for service and distribution expenses (Note 2)............................. 236,040
Payable for printing and postage expenses.......................................... 146,476
Payable for administration fees (Note 1)........................................... 80,147
Payable for transfer agent fees (Note 2)........................................... 50,513
Payable for professional fees...................................................... 27,353
Payable for registration and filing fees........................................... 21,577
Payable for fund accounting fees (Note 2).......................................... 7,947
Payable for Directors' fees and expenses (Note 2).................................. 2,549
Other accrued expenses............................................................. 15,150
------------
Total liabilities................................................................ 2,753,268
------------
Net assets........................................................................... $394,976,277
------------
------------
Class A:
Net asset value and redemption price per share
($154,562,503 DIVIDED BY 11,934,461 shares outstanding)............................. $ 12.95
------------
------------
Maximum offering price per share
(100/95.25 of $12.95) *............................................................. $ 13.60
------------
------------
Class B:+
Net asset value and offering price per share
($237,021,413 DIVIDED BY 18,310,597 shares outstanding)............................. $ 12.94
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share
($3,392,361 DIVIDED BY 262,248 shares outstanding).................................. $ 12.94
------------
------------
Net assets consist of:
Paid in capital (Note 3)........................................................... $408,549,930
Undistributed net investment income................................................ 2,200,691
Accumulated net realized loss on investments and foreign currency transactions..... (31,599,284)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies -- Global High Income Portfolio........................................ (72,958)
Net unrealized appreciation of investments -- Global High Income Portfolio......... 15,897,898
------------
Total -- representing net assets applicable to capital shares outstanding............ $394,976,277
------------
------------
<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.
F2
<PAGE>
GT GLOBAL HIGH INCOME FUND
STATEMENT OF OPERATIONS
Six months ended April 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income:
Interest income -- Global High Income Portfolio............................................ $24,307,702
-----------
Total investment income.................................................................. 24,307,702
-----------
Operating expenses:
Expenses -- Global High Income Portfolio................................................... 1,585,362
Service and distribution expenses: (Note 2)
Class A..................................................................... $ 261,789
Class B..................................................................... 1,140,976 1,402,765
-----------
Administration fees (Note 2)............................................................... 476,658
Transfer agent fees (Note 2)............................................................... 307,944
Printing and postage expenses.............................................................. 100,534
Fund accounting fees (Note 2).............................................................. 47,840
Audit fees................................................................................. 27,300
Registration and filing fees............................................................... 25,480
Amortization of organization costs (Note 1)................................................ 14,860
Legal fees................................................................................. 13,286
Directors' fees and expenses (Note 2)...................................................... 8,452
Other expenses............................................................................. 3,094
-----------
Total operating expenses................................................................. 4,013,575
-----------
Interest expense -- Global High Income Portfolio....................................... 163,819
-----------
Total expenses........................................................................... 4,177,394
-----------
Net investment income........................................................................ 20,130,308
-----------
Net realized and unrealized gain on investments and foreign currencies: (Note 1)
Net realized gain on investments -- Global High Income Portfolio.............. 26,990,676
Net realized gain on foreign currency transactions -- Global High Income
Portfolio.................................................................... 217,832
-----------
Net realized gain during the period...................................................... 27,208,508
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies --
Global High Income Portfolio................................................. (79,193)
Net change in unrealized appreciation of investments -- Global High Income
Portfolio.................................................................... 6,795,287
-----------
Net unrealized appreciation during the period............................................ 6,716,094
-----------
Net realized and unrealized gain on investments and foreign currencies....................... 33,924,602
-----------
Net increase in net assets resulting from operations......................................... $54,054,910
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL HIGH INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31, 1995
---------------- ----------------
Increase (Decrease) in net assets
Operations:
Net investment income......................................................... $ 20,130,308 $ 39,491,435
Net realized gain (loss) on investments and foreign currency transactions --
Global High Income Portfolio................................................. 27,208,508 (62,112,954)
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies -- Global High Income Portfolio........................ (79,193) (302)
Net change in unrealized appreciation of investments -- Global High Income
Portfolio.................................................................... 6,795,287 24,969,833
---------------- ----------------
Net increase in net assets resulting from operations........................ 54,054,910 2,348,012
---------------- ----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income.................................................... (7,369,918) (12,528,224)
From net realized gain on investments......................................... -- (474,126)
Return of capital............................................................. -- (737,846)
Class B:
Distributions to shareholders: (Note 1)
From net investment income.................................................... (10,370,613) (17,274,071)
From net realized gain on investments......................................... -- (622,059)
Return of capital............................................................. -- (1,015,555)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income.................................................... (189,086) (54,186)
Return of capital............................................................. -- (3,075)
---------------- ----------------
Total distributions......................................................... (17,929,617) (32,709,142)
---------------- ----------------
Capital share transactions: (Note 3)
Increase from capital shares sold and reinvested.............................. 236,151,954 418,666,106
Decrease from capital shares repurchased...................................... (235,663,297) (430,339,278)
---------------- ----------------
Net increase (decrease) from capital share transactions..................... 488,657 (11,673,172)
---------------- ----------------
Total increase (decrease) in net assets......................................... 36,613,950 (42,034,302)
Net assets:
Beginning of period........................................................... 358,362,327 400,396,629
---------------- ----------------
End of period................................................................. $ 394,976,277* $ 358,362,327**
---------------- ----------------
---------------- ----------------
<FN>
- --------------
* Includes undistributed net investment income of $2,200,691.
** Includes undistributed net investment income of $0.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
-----------------------------------------------------------------
OCTOBER 22,
1992
SIX MONTHS (COMMENCEMENT
ENDED YEAR ENDED OCTOBER 31, OF OPERATIONS)
APRIL 30, ---------------------------------- TO OCTOBER 31,
1996 1995 1994 (E) 1993 (E) 1992
------------ ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.70 $ 12.56 $ 14.92 $ 11.43 $ 11.43
------------ ---------- ---------- ---------- ---------------
Income from investment operations:
Net investment income................. 0.68 1.35 0.94 0.78 --
Net realized and unrealized gain
(loss) on investments................ 1.18 (1.09) (1.87) 3.92 --
------------ ---------- ---------- ---------- ---------------
Net increase (decrease) from
investment operations.............. 1.86 0.26 (0.93) 4.70 --
------------ ---------- ---------- ---------- ---------------
Distributions to shareholders:
From net investment income............ (0.61) (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) -- --
Return of capital..................... -- (0.06) -- -- --
From sources other than net investment
income............................... -- -- -- (0.43) --
------------ ---------- ---------- ---------- ---------------
Total distributions................. (0.61) (1.12) (1.43) (1.21) --
------------ ---------- ---------- ---------- ---------------
Net asset value, end of period.......... $ 12.95 $ 11.70 $ 12.56 $ 14.92 $ 11.43
------------ ---------- ---------- ---------- ---------------
------------ ---------- ---------- ---------- ---------------
Total investment return (d)............. 16.14 %(a) 2.81% (6.45)% 43.6% --% (a)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 154,563 $ 142,002 $ 167,974 $ 143,171 $ 207
Ratio of net investment income to
average net assets..................... 10.94 %(b) 11.85% 7.00% 6.4% --(c)
Ratio of operating expenses to average
net assets............................. 1.73 %(b) 1.75% 1.57% 2.2% --(c)
Ratio of interest expense to average net
assets................................. 0.08 %(b) 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 are not meaningful due to short period of operation.
(d) Total investment return does not include sales charges.
(e) These selected per share operating data were calculated based upon
weighted average shares outstanding during the year.
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, 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,
1992
SIX MONTHS (COMMENCEMENT
ENDED YEAR ENDED OCTOBER 31, OF OPERATIONS)
APRIL 30, ---------------------------------- TO OCTOBER 31,
1996 1995 1994 (E) 1993 (E) 1992
----------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.69 $ 12.56 $ 14.90 $ 11.43 $ 11.43
----------- ---------- ---------- ---------- ---------------
Income from investment operations:
Net investment income................. 0.64 1.27 0.86 0.70 --
Net realized and unrealized gain
(loss) on investments................ 1.18 (1.09) (1.85) 3.90 --
----------- ---------- ---------- ---------- ---------------
Net increase (decrease) from
investment operations.............. 1.82 0.18 (0.99) 4.60 --
----------- ---------- ---------- ---------- ---------------
Distributions to shareholders:
From net investment income............ (0.57) (0.96) (0.86) (0.70) --
From net realized gain on
investments.......................... -- (0.03) (0.27) -- --
In excess of net realized gain on
investments.......................... -- -- (0.22) -- --
Return of capital..................... -- (0.06) -- -- --
From sources other than net investment
income............................... -- -- -- (0.43) --
----------- ---------- ---------- ---------- ---------------
Total distributions................. (0.57) (1.05) (1.35) (1.13) --
----------- ---------- ---------- ---------- ---------------
Net asset value, end of period.......... $ 12.94 $ 11.69 $ 12.56 $ 14.90 $ 11.43
----------- ---------- ---------- ---------- ---------------
----------- ---------- ---------- ---------- ---------------
Total investment return (d)............. 15.82%(a) 2.07% (6.99)% 42.6% --% (a)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 237,021 $ 214,897 $ 232,423 $ 127,035 $ 53
Ratio of net investment income to
average net assets..................... 10.29%(b) 11.20% 6.35% 5.8% N/A(c)
Ratio of operating expenses to average
net assets............................. 2.38%(b) 2.40% 2.22% 2.8% N/A(c)
Ratio of interest expense to average net
assets................................. 0.08%(b) N/A 0.22% N/A N/A
<CAPTION>
ADVISOR CLASS+++
-------------------------
SIX MONTHS JUNE 1, 1995
ENDED TO
APRIL 30, OCTOBER 31,
1996 1995
---------- ------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.71 $ 11.44
---------- ------------
Income from investment operations:
Net investment income................. 0.69 0.57
Net realized and unrealized gain
(loss) on investments................ 1.18 0.17
---------- ------------
Net increase (decrease) from
investment operations.............. 1.87 0.74
---------- ------------
Distributions to shareholders:
From net investment income............ (0.64) (0.44)
From net realized gain on
investments.......................... -- --
In excess of net realized gain on
investments.......................... -- --
Return of capital..................... -- (0.03)
From sources other than net investment
income............................... -- --
---------- ------------
Total distributions................. (0.64) (0.47)
---------- ------------
Net asset value, end of period.......... $ 12.94 $ 11.71
---------- ------------
---------- ------------
Total investment return (d)............. 16.28%(a) 6.54% (a)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 3,392 $ 1,463
Ratio of net investment income to
average net assets..................... 11.29%(b) 12.20% (b)
Ratio of operating expenses to average
net assets............................. 1.38%(b) 1.40% (b)
Ratio of interest expense to average net
assets................................. 0.08%(b) 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 are not meaningful due to short period of operation.
(d) Total investment return does not include sales charges.
(e) These selected per share operating data were calculated based upon
weighted average shares outstanding during the year.
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL HIGH INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
April 30, 1996
- --------------------------------------------------------------------------------
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. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of the financial statements. The
policies are in conformity with generally accepted accounting principles, and
the financial statements may include certain estimates made by management.
(A) 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") is the Fund's administrator. The Fund pays
administration fees to LGT 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, Inc. ("GT Global"), an affiliate of LGT, serves as the Fund's
distributor. The Fund offers Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the period ended April 30, 1996, GT Global retained $30,675
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 no such CDSCs
for the period ended April 30, 1996. GT Global also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the period ended April 30, 1996, GT Global collected CDSCs in
the amount of $666,597. In addition, GT Global makes on-going shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
F7
<PAGE>
GT GLOBAL HIGH INCOME FUND
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 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
of administration fees, waivers by GT Global of payments under the Class A Plan
and/or Class B Plan and/or reimbursements by LGT or GT Global of portions of the
Fund's other operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of LGT and GT
Global, is the transfer agent of the Fund.
LGT is the pricing and accounting agent for the Fund. The monthly fee for these
services to LGT is a percentage, not to exceed 0.03% annually, of the Fund's
average daily net assets. The annual fee rate is derived by applying 0.03% to
the first $5 billion of assets of all registered mutual funds advised by LGT and
0.02% to the assets in excess of $5 billion and allocating the result according
to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of LGT, GT Global or GT Services $5,000 per year plus $300 for each
meeting of the board or any committee thereof attended by the Director.
3. CAPITAL SHARES
At April 30, 1996, there were 6,000,000,000 shares of the Company's common stock
authorized, at $0.0001 par value. Of this amount, 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
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:
F8
<PAGE>
GT GLOBAL HIGH INCOME FUND
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31, 1995
--------------------------- ---------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold................... 10,392,088 $ 132,819,338 25,003,318 $ 280,486,242
Shares issued in connection
with reinvestment of
distributions............... 314,156 3,931,704 682,971 7,764,542
----------- ------------- ----------- -------------
10,706,244 136,751,042 25,686,289 288,250,784
Shares repurchased............ (10,904,515) (137,801,142) (26,927,729) (301,862,112)
----------- ------------- ----------- -------------
Net decrease.................. (198,271) $ (1,050,100) (1,241,440) $ (13,611,328)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31, 1995
--------------------------- ---------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold................... 6,829,974 $ 86,724,167 10,582,935 $ 119,426,735
Shares issued in connection
with reinvestment of
distributions............... 406,374 5,081,637 826,797 9,372,626
----------- ------------- ----------- -------------
7,236,348 91,805,804 11,409,732 128,799,361
Shares repurchased............ (7,304,802) (91,925,520) (11,542,431) (128,317,008)
----------- ------------- ----------- -------------
Net increase (decrease)....... (68,454) $ (119,716) (132,699) $ 482,353
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
JUNE 1, 1995
SIX MONTHS ENDED (COMMENCEMENT OF SALE OF
APRIL 30, 1996 SHARES) TO OCTOBER 31, 1995
--------------------------- ---------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold................... 591,841 $ 7,411,169 133,919 $ 1,558,699
Shares issued in connection
with reinvestment of
distributions............... 14,589 183,939 4,923 57,262
----------- ------------- ----------- -------------
606,430 7,595,108 138,842 1,615,961
Shares repurchased............ (469,179) (5,936,635) (13,845) (160,158)
----------- ------------- ----------- -------------
Net increase.................. 137,251 $ 1,658,473 124,997 $ 1,455,803
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
F9
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
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 April 30,
1996, the related statement of operations for the six months then ended, the
statement of changes in net assets for the six months then ended and for the
year ended October 31, 1995, and the supplementary data for the six months ended
April 30, 1996, for each of the three years in the period ended October 31, 1995
and for the period from October 22, 1992 (commencement of operations) to October
31, 1992. These financial statements and the supplementary data are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the supplementary data based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the
supplementary data are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of April 30, 1996 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 April 30, 1996, the results of its operations for
the six months then ended, the changes in its net assets for the six months then
ended and for the year ended October 31, 1995 and the supplementary data for the
six months ended April 30, 1996, for each of the three years in the period ended
October 31, 1995, 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
JUNE 14, 1996
F10
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
April 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT VALUE ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (72.6%)
Argentina (8.5%)
Republic of Argentina:
Floating Rate Bond, 6.3125% due 3/31/05+ ............ USD 18,800,100 $ 14,382,077 3.6
Par Bond, 5.25% due 3/31/23++ ....................... USD 17,725,000 9,660,125 2.4
BOCON Pre 4, 5.42188% due 9/1/02+ ................... USD 7,345,000 6,671,096 1.7
Discount Bond, 6.5625% due 3/31/23+ ................. USD 4,330,000 2,998,525 0.8
Brazil (11.7%)
Federal Republic of Brazil:
Earned Interest Bond, 6.5% due 4/15/06+ ............. USD 25,531,000 19,419,517 4.9
Discount Bond, 6.5% due 4/15/24+ .................... USD 20,729,000 14,043,898 3.5
C Bond, 4.5% due 4/15/14 (Effective rate at period
end is 6.6044%, including "payment-in-kind"
bonds.)[.] ++ ...................................... USD 22,129,199 13,305,181 3.3
Bulgaria (2.6%)
Bulgaria:
Past Due Interest Bond (IAB), 6.25% due 7/28/11 -
Euro+ .............................................. USD 11,660,000 5,247,000 1.3
Discount Bond Series A, 6.25% due 7/28/24 - Euro+ ... USD 10,400,000 5,226,000 1.3
Colombia (0.3%)
Republic of Colombia, 8.7% due 2/15/16 ................ USD 1,500,000 1,381,425 0.3
Costa Rica (2.0%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.09375% due 5/21/05+ ....... USD 6,939,344 6,210,713 1.6
Principal Bond Series A, 6.25% due 5/21/10 .......... USD 2,700,000 1,795,500 0.4
Ecuador (4.8%)
Ecuador:
Past Due Interest Bond, 3% due 2/27/15 - Euro
(Effective rate at period end is 4.34%, including
"payment-in-kind" bonds.)[.] + ..................... USD 37,411,790 16,350,204 4.1
Past Due Interest Bond, 3% due 2/27/15 - Registered
(Effective rate at period end is 4.34%, including
"payment-in-kind" bonds.)[.] + ..................... USD 5,987,303 2,619,445 0.7
Mexico (8.9%)
United Mexican States:
Discount Bond Series C, 6.60938% due 12/31/19+
+/+ ................................................ USD 26,200,000 20,976,375 5.3
Par Bond Series B, 6.25% due 12/31/19+/+ ............ USD 11,350,000 7,491,000 1.9
Par Bond Series A, 6.25% due 12/31/19+/+ ............ USD 10,050,000 6,633,000 1.7
Nigeria (5.0%)
Central Bank of Nigeria, Par Bond, 6.25% due 11/15/20++
+/+ .................................................. USD 38,000,000 19,926,250 5.0
Panama (4.5%)
Panama:
Interest Reduction Bond, When-issued - 3.5% in first
year of issue, due 6/30/14 - 144A{.} -/- ........... USD 21,250,000 11,129,688 2.8
Interest Reduction Bond, When-issued - Floating Rate,
due
6/30/16 - 144A{.} -/- .............................. USD 12,500,000 6,796,875 1.7
Philippines (4.1%)
Central Bank of the Philippines:
Par Bond Series B, 6.25% due 12/1/17++ .............. USD 17,250,000 13,649,063 3.4
Front Loaded Interest Reduction Bond Series B, 5% due
6/1/08++ ........................................... USD 3,000,000 2,617,500 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL MARKET % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT VALUE ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Poland (5.4%)
Poland:
Discount Bond, 6.4375% due 10/27/24 - Euro+ ......... USD 15,300,000 $ 14,219,438 3.6
Past Due Interest Bond, 3.75% due 10/27/14 -
Euro++ ............................................. USD 9,250,000 7,093,594 1.8
Russia (1.9%)
Ministry Finance of Russia, 3% due 5/14/99 ............ USD 10,500,000 7,356,563 1.9
United States (5.6%)
United States Treasury Note:
6.25% due 4/30/01 ................................... USD 13,800,000 13,709,438 3.5
6.125% due 3/31/98 {z} .............................. USD 8,200,000 8,212,813 2.1
Uruguay (1.5%)
Banco Central del Uruguay:
New Money Bond, 6.5625% due 2/18/06+ ................ USD 3,750,000 3,084,375 0.8
Par Bond Series A, 6.75% due 2/18/21+/+ ............. USD 2,290,000 1,591,550 0.4
Par Bond Series B, 6.75% due 2/18/21+/+ ............. USD 1,500,000 1,042,500 0.3
Venezuela (5.8%)
Republic of Venezuela:
Debt Conversion Bond, 6.5625% due 12/18/07+ ......... USD 28,750,000 18,831,250 4.7
Discount Bond Series A, 6.375% due 3/31/20+ +/+ ..... USD 7,000,000 4,471,250 1.1
------------
Total Government & Government Agency Obligations
(cost $275,880,717) ..................................... 288,143,228
------------
Sovereign Debt (12.4%)
Morocco (4.5%)
Kingdom of Morocco, Tranche A Loan Agreement, 6.5938%
due 1/1/09+ .......................................... USD 25,000,000 17,968,750 4.5
Peru (2.1%)
Peru Loan Agreement ** -/- ............................ USD 9,200,000 7,406,000 1.9
Peru Loan Agreement (Citibank Issued) ** -/- .......... USD 1,000,000 805,000 0.2
Russia (5.8%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement ** -/- ................................ USD 56,635,000 22,901,778 5.8
------------
Total Sovereign Debt (cost $44,600,100) ................... 49,081,528
------------
Corporate Bonds (6.6%)
Argentina (0.5%)
Industrias Metallurgicas Pescarmona S.A. (IMPSA),
11.75% due
3/27/98 - 144A{.} .................................... USD 1,950,000 1,959,750 0.5
Brazil (0.8%)
Banco BCN - BCN Leasing, 11% due 6/9/97 - 144A{.} ..... USD 3,000,000 3,030,000 0.8
Colombia (0.5%)
Oleoducto Central S.A. (OCENSA), 9.35% due 9/1/05 -
144A{.} .............................................. USD 1,500,000 1,469,130 0.4
Transgas, 9.79% due 11/01/2010 - 144A{.} .............. USD 500,000 481,250 0.1
Indonesia (3.0%)
Dharmala Sakti Sejahtera Promissory Note, effective
yield 22.59%, due 6/9/97 ............................. IDR 9,000,000,000 3,086,155 0.8
PT Indah Kiat International Finance, Series B, 11.875%
due 6/15/02 .......................................... USD 2,924,000 3,004,410 0.8
PT Tjiwi Kimia, 13.25% due 8/1/01 ..................... USD 2,500,000 $ 2,743,750 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL MARKET % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT VALUE ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
PT Polysindo Eka Perkasa, effective yield 22.55%, due
7/27/97 .............................................. IDR 6,000,000,000 2,010,373 0.5
Rapp International Finance, 13.25% due 12/15/05 ....... USD 950,000 958,313 0.2
Malaysia (0.2%)
Aokam Perdana Bhd., Convertible Bond, 3.5% due
6/13/04 .............................................. USD 1,000,000 820,000 0.2
Mexico (0.8%)
Grupo Irsa, S.A. de C.V., 8.375% due 7/15/98 .......... USD 3,300,000 3,196,875 0.8
Philippines (0.8%)
Philippine Long Distance Telephone Co., 9.875% due
8/1/05 ............................................... USD 2,000,000 2,085,000 0.5
Philippine National Power, 9% due 7/5/02 .............. USD 1,000,000 1,035,000 0.3
------------
Total Corporate Bonds (cost $26,512,526) .................. 25,880,006
------------
Structured Notes (1.0%)
Argentina (1.0%)
Stripped Republic of Argentina Par Spread Linked Note,
6% due 1/23/97 - 144A (Issued by Internationale
Nederlanden Capital Holdings Corp. The principal of
the Note is linked to the spread between the internal
rate of return of the Republic of Argentina Par Bond
due 3/31/23, minus the yield to maturity of U.S.
Treasury Bond, 6.5% due 8/15/05. The initial spread
was 8.9%.) (cost $4,000,000){.} ...................... USD 4,000,000 4,138,640 1.0
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $350,993,343) ........ 367,243,402 92.6
------------ -----
<CAPTION>
UNDERLYING
NOMINAL MARKET % OF NET
OPTIONS CURRENCY AMOUNT VALUE ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Republic of Brazil Par Bond Call Option, strike 56.9375,
expires 5/6/96 ......................................... USD 7,500,000 -- --
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
Republic of Venezuela Debt Conversion Bond Call Option,
strike 64, expires 6/17/96 ............................. USD 28,000,000 822,080 0.2
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
------------ -----
TOTAL OPTIONS (cost $883,000) ............................. 822,080 0.2
------------ -----
<CAPTION>
PRINCIPAL MARKET % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT VALUE ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Indexed (1.2%)
United Kingdom (1.2%)
National Westminster Bank PLC, Currency-linked CD,
14.0165% due 8/20/96 (cost $5,000,000) ............... USD 5,000,000 4,729,590 1.2
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL MARKET % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT VALUE ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Treasury Bills (0.9%)
Poland (0.9%)
Polish Treasury Bill, effective yield 22.45%, due
7/31/96
(cost $3,584,376) ................................... PLZ 10,000,000 $ 3,562,829 0.9
------------
Commercial Paper - Discounted (0.3%)
Thailand (0.3%)
Multi Credit Corp. (Bill of Exchange), effective yield
9.2% due 7/18/96 (cost $970,293) ..................... THB 25,000,000 971,009 0.3
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $9,554,669) ............ 9,263,428 2.4
------------ -----
<CAPTION>
MARKET % OF NET
REPURCHASE AGREEMENT VALUE ASSETS
- ----------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated April 30, 1996, with State Street Bank & Trust
Company, due May 1, 1996, for an effective yield of 5.3%
collateralized by $14,505,000 U.S. Treasury Bills,
effective yield 5.2% due 9/26/96 (market value of
collateral is $14,203,020, including accrued interest).
(cost $13,922,049) .................................... 13,922,049 3.5
------------ -----
TOTAL INVESTMENTS (cost $375,353,061) * ................... 391,250,959 98.7
Other Assets and Liabilities .............................. 5,351,058 1.3
------------ -----
NET ASSETS ................................................ $396,602,017 100.0
------------ -----
------------ -----
</TABLE>
- --------------
+ 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.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
[.] Bond pays stated or additional interest with "payment-in-kind"
(PIK) bonds.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{z} Security is segregated as collateral for when-issued securities.
See Note 1 of Notes to Financial Statements.
* For Federal income tax purposes, cost is $379,835,428 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 14,863,028
Unrealized depreciation: (3,447,497)
-------------
Net unrealized appreciation: $ 11,415,531
-------------
-------------
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $375,353,061) (Note 1).................... $391,250,959
U.S. currency................................................................. $664
Foreign currencies (cost $230)................................................ 224 888
----
Segregated cash (Note 1)............................................................ 9,000,000
Receivable for securities sold...................................................... 33,818,094
Interest receivable................................................................. 7,954,270
Unamortized organizational costs (Note 1)........................................... 7,395
------------
Total assets...................................................................... 442,031,606
------------
Liabilities:
Payable for securities purchased.................................................... 45,051,916
Payable for investment management and administration fees (Note 2).................. 248,394
Payable for printing and postage expenses........................................... 22,733
Payable for professional fees....................................................... 16,509
Payable for custodian fees.......................................................... 3,969
Payable for Trustees' fees and expenses (Note 2).................................... 2,573
Other accrued expenses.............................................................. 83,495
------------
Total liabilities................................................................. 45,429,589
------------
Net assets............................................................................ $396,602,017
------------
------------
Net assets consist of:
Paid in capital (Note 2)............................................................ $305,083,957
Accumulated net investment income................................................... 101,141,287
Accumulated net realized loss on investments and foreign currency transactions...... (25,448,167)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies......................................................................... (72,958)
Net unrealized appreciation of investments.......................................... 15,897,898
------------
Total -- representing net assets applicable to shares of beneficial interest
outstanding.......................................................................... $396,602,017
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
STATEMENT OF OPERATIONS
Six months ended April 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income............................................................................ $24,307,702
-----------
Total investment income.................................................................. 24,307,702
-----------
Operating expenses:
Investment management and administration fees (Note 2)..................................... 1,477,886
Custodian fees............................................................................. 90,622
Legal fees................................................................................. 7,826
Trustees' fees and expenses (Note 2)....................................................... 3,458
Audit fees................................................................................. 3,078
Amortization of organization costs (Note 1)................................................ 2,492
-----------
Total operating expenses................................................................. 1,585,362
-----------
Interest expense (Note 1).............................................................. 163,819
-----------
Total expenses........................................................................... 1,749,181
-----------
Net investment income........................................................................ 22,558,521
-----------
Net realized and unrealized gain on investments and foreign currencies: (Note 1)
Net realized gain on investments.............................................. $26,990,676
Net realized gain on foreign currency transactions............................ 217,832
-----------
Net realized gain during the period...................................................... 27,208,508
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies........................................................ (79,193)
Net change in unrealized appreciation of investments.......................... 6,795,287
-----------
Net unrealized appreciation during the period............................................ 6,716,094
-----------
Net realized and unrealized gain on investments and foreign currencies....................... 33,924,602
-----------
Net increase in net assets resulting from operations......................................... $56,483,123
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 OCTOBER 31, 1995
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income......................................................... $ 22,558,521 $ 44,137,109
Net realized gain (loss) on investments and foreign currency transactions..... 27,208,508 (62,112,954)
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies........................................................ (79,193) (302)
Net change in unrealized appreciation of investments.......................... 6,795,287 24,969,840
---------------- ----------------
Net increase in net assets resulting from operations........................ 56,483,123 6,993,693
---------------- ----------------
Beneficial interest transactions:
Contributions................................................................. 125,184,997 322,934,028
Withdrawals................................................................... (143,746,869) (372,158,223)
---------------- ----------------
Net decrease from beneficial interest transactions.......................... (18,561,872) (49,224,195)
---------------- ----------------
Total increase (decrease) in net assets......................................... 37,921,251 (42,230,502)
Net assets:
Beginning of period........................................................... 358,680,766 400,911,268
---------------- ----------------
End of period................................................................. $ 396,602,017 $ 358,680,766
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F17
<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>
SIX MONTHS OCTOBER 22, 1992
ENDED YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
APRIL 30, ---------------------------------- OPERATIONS) TO
1996 1995 1994 1993 OCTOBER 31, 1992
----------- ---------- ---------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 396,602 $ 358,681 $ 400,911 $ 256,740 $ 200
Ratio of net investment income to
average net assets..................... 11.67%(b) 12.80% 7.93% 8.0% N/A(a)
Ratio of operating expenses to average
net assets............................. 0.82%(b) 0.78% 0.72% 0.9% N/A(a)
Ratio of interest expense to average net
assets................................. 0.08%(b) N/A 0.22% N/A N/A
Portfolio turnover rate................. 315%(b) 213% 178% 195% None
</TABLE>
- ----------------
(a) Ratios are not meaningful due to short period of operation.
(b) Annualized
The accompanying notes are an integral part of the financial statements.
F18
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
NOTES TO
FINANCIAL STATEMENTS
April 30, 1996
- --------------------------------------------------------------------------------
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, and the financial
statements may include certain estimates made by management.
(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") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when LGT
deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments with a maturity of 60 days
or less are valued at amortized cost adjusted for foreign exchange translation
and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
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 period 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
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
F19
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
case of an over-the-counter option, is valued at the average of the last bid
prices obtained from brokers, unless a quotation from only one broker is
available, in which case only that broker's price will be used. If an option
expires on its stipulated expiration date or if the 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 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. At April 30, 1996, there were no securities on loan to brokers.
(I) TAXES
It is the policy of the Portfolio to meet the requirements of the Internal
Revenue Code of 1986, as amended ("Code"). Therefore, no provision has been made
for Federal taxes on income, capital gains, or unrealized appreciation of
securities held.
(J) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Portfolio in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $25,000. These expenses
are being amortized on a straightline basis over a five-year period.
(K) LINE OF CREDIT
For the period ended April 30, 1996, the Portfolio periodically borrowed amounts
from a bank at a base or Eurodollar rate. The arrangement with the bank allows
the Portfolio to borrow a maximum amount of $25,000,000. On February 28 & 29,
1996, the Portfolio borrowed $24,000,000, all of which was repaid on April 18,
1996.
For the period ended April 30, 1996, the weighted average outstanding daily
balance of bank loans
F20
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
(based on the number of days the loans were outstanding) was $17,800,000 with a
weighted average interest rate of 6.63%. Interest expense for the period ended
April 30, 1996 was $163,819.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent with
investments of domestic origin. The Portfolio's investment in emerging market
countries may involve greater risks than investments in more developed markets
and the price of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Portfolio may invest in indexed securities whose value is linked either
directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
(N) 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.
(O) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
The Portfolio may trade securities on a when-issued or forward commitment basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund will generally purchase these securities with the intention of acquiring
such securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Portfolio of Investments. The
Portfolio has set aside sufficient cash or liquid high grade debt securities as
collateral for these purchase commitments.
2. RELATED PARTIES
LGT is the Portfolio's investment manager and administrator. The Portfolio pays
investment management and administration fees to LGT 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, 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 April 30, 1996, all of the shares of beneficial interest of the Portfolio
were owned either by GT Global High Income Fund or LGT.
3. PURCHASES AND SALES OF SECURITIES
For the period ended April 30, 1996, purchases and sales of investment
securities by the Portfolio, other than U.S. government obligations and
short-term investments, aggregated $516,088,485 and $535,809,455, respectively.
Purchases and sales of U.S. government obligations by the Portfolio aggregated
$39,359,640 and $17,254,078, respectively.
4. WRITTEN OPTIONS:
The Portfolio's written options contract activity for the period ended April 30,
1996 was as follows:
COVERED CALL AND PUT OPTIONS WRITTEN
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT PREMIUMS
------------- -----------
<S> <C> <C>
Options outstanding at October 31, 1995.................................... 0 $ 0
Options written............................................................ 7,000,000 101,500
Options cancelled in closing purchase transactions......................... 0 0
Options expired prior to exercise.......................................... (7,000,000) (101,500)
Options exercised.......................................................... 0 0
------------- -----------
Options outstanding at April 30, 1996...................................... 0 $ 0
------------- -----------
------------- -----------
</TABLE>
F21
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL HIGH INCOME FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR INVESTMENT COUNSELOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580. THE PROSPECTUS CONTAINS MORE COMPLETE
INFORMATION, INCLUDING CHARGES, EXPENSES AND RISKS. INVESTORS SHOULD READ
THE PROSPECTUS CAREFULLY BEFORE INVESTING.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA GROWTH FUND
Concentrates on small and medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
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THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS.
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[LOGO]
GT Global, Inc.
Fifty California Street
27th Floor
San Francisco, California
94111-4624
DATED MATERIAL
PLEASE EXPEDITE
GT GLOBAL HIGH INCOME FUND
HIGSAR606027M
