<PAGE>
LGT ASSET MANAGEMENT
A PIONEER IN
GLOBAL
INVESTING
GT GLOBAL
STRATEGIC
INCOME FUND
ANNUAL REPORT
OCTOBER 31, 1995
[LOGO]
<PAGE>
TABLE
OF CONTENTS
<TABLE>
<S> <C>
Report from the Fund
Managers and Key
Portfolio Holdings..... 1
Report of Independent
Accountants............ F-1
Financial Statements... F-2
</TABLE>
REPORT FROM THE FUND MANAGERS
The G.T. Global Strategic Income Fund primarily seeks high current income and,
secondarily, capital appreciation. The Fund allocates its assets among debt
securities of issuers in the U.S., established foreign economies and emerging
markets.
PERFORMANCE REVIEW
The Fund's total return for the fiscal year ended October 31, 1995, was 3.06%
for Class A shares (-1.84% including the maximum 4.75% sales charge). Total
return for Class B shares was 2.48% (-2.26 % including the maximum effect of the
5% contingent deferred sales charge). Total return for the J.P. Morgan Global
Government Bond Index(1) over the same period was 15.35%. Total return for the
J.P. Morgan EMBI (Brady) Index(2) over the same period was 8.01%. The indices
are not available for investment and do not include the effects of sales charges
and professional management fees. For more performance information, please see
page 11.
The Fund underperformed the J.P. Morgan Global Government Bond Index for several
reasons. Although the Fund benefited from its position in core global bonds as
these markets rallied, during the first half of the year the Fund's performance
was adversely affected by its emerging markets holdings following the Mexican
peso crisis. The Fund maintained an average weighting of 40% in emerging markets
bonds, while the index has no investments in this asset class. Moreover, we
expected the dollar to recover in early 1995 and employed foreign currency
hedges, as provided for in the prospectus. However, the dollar did not recover
as anticipated and the Fund suffered accordingly when the dollar weakened.
The Fund's underperformance relative to the J.P. Morgan EMBI (Brady) Index is
primarily a reflection of defensive measures we implemented during the period.
While at the time we believed our relatively high cash position was the
- --------------
(1) The J.P. Morgan Global Government Bond Index is an arithmetic average,
weighted by market value, of government bonds from 13 major bond markets. It
includes the effect of reinvested dividends and is measured in U.S. dollars.
(2) The J.P. Morgan EMBI (Brady) Index is an arithmetic average, weighted by
market value, of Brady bonds from nine emerging bond markets. It includes
the effect of reinvested dividends and is measured in U.S. dollars. The Fund
has changed benchmarks from indices provided by Salomon Brothers to indices
provided by J.P. Morgan. Because the J.P. Morgan indices use weightings
based on liquidity, we consider them a better reflection of the investment
opportunities.
1
<PAGE>
correct strategy to shield the Fund from volatility resulting from the Mexican
devaluation, this decision prevented the Fund from benefiting from the
turnaround experienced by the emerging bond markets in March. Over the last six
months of the period, the Fund recovered a significant portion of its losses,
and its emerging markets portion performed nearly in line with the index.
MARKET REVIEW
CORE MARKETS
In the first three months of the year, U.S. Treasuries, German Bunds (government
bonds), Japanese Government Bonds (JGBs), the deutschemark, and the yen
benefited from a flight to quality in the wake of the Mexican peso devaluation.
April's stabilization of the U.S. dollar was accompanied by increased buying in
peripheral European bond markets such as Sweden, Italy and Spain. Expectations
of weaker U.S. growth prompted the Federal Reserve's July interest rate cut, the
first in nearly three years, and resulted in the U.S. bond market rally, causing
a reassessment of the outlook in Europe and prompting European central banks to
follow suit. Following its recent advance, the U.S. bond market has stabilized,
increasing the likelihood that European bond markets will outperform.
U.S. gross domestic product (GDP) growth slowed considerably from 1994's torrid
pace of 4.1% to an estimated 2 1/2% to 3% for 1995, primarily as a result of the
Fed's interest rate hikes initiated in February 1994. Following the July cut, in
recent months, the outlook for inflation has improved slightly and GDP growth
remains moderate, leaving room for possible further cuts. With this favorable
economic backdrop, U.S. long bond yields fell from around 8% a year ago to under
6.5% at the end of October.
In Germany, inflation continued to subside over last year and GDP growth was
weak (estimated 2.3% for 1995). This environment, in conjunction with a strong
currency, allowed the Bundesbank to lower short-term interest rates. We believe
the prospect of further slow growth, combined with weak consumption, leaves
interest rates room to fall.
Plagued by weak growth, a strong yen, banking problems and falling prices,
Japan, also, cut interest rates; it exhibited the weakest growth of the G-6
countries (the U.S., UK, Germany, France, Italy, Japan). This year's GDP growth
is expected to equal 1994's, a mere 0.5%, while inflation is forecasted to be
negative, at -0.1%. Given the environment of falling prices, it is not
surprising that the
2
<PAGE>
Japanese bond market has been the best-performing market this year and one of
the best-performing markets since 1990.
Increased buying in bonds of peripheral economies was primarily driven by a
stabilizing U.S. dollar. Their currencies generally move in line with the U.S.
dollar against the DM and the yen. Interest rates of these countries tend to be
driven by their currencies as a reflection of their past records of monetary and
fiscal shortcomings. Moreover, some of these countries tightened their economic
policies aggressively in late 1994, which is beginning to have an effect on
growth and on their currencies. We've already seen the Swedish krona strengthen
significantly versus the DM.
EMERGING MARKETS
The December 20, 1994 Mexican peso devaluation called into question the
credibility of the Mexican authorities and their willingness to face serious
imbalances, such as a ballooning external trade deficit, without resorting to
inflationary measures. Because Mexico had become the benchmark of emerging
markets, the credibility issue spilled over into all other emerging stock and
bond markets.
Less than six months into the crisis, volatility abated. By the end of October,
the bond market showed resilience by recovering substantially all of the losses
suffered from the Mexican devaluation. To be sure, some remnants of the crisis
remain, including recessions in Mexico and Argentina. However, there is also
increased awareness of the commitment of these economies to continue to
implement sound policies despite recent adversities. In fact, Mexico has
returned to a current account surplus, foreign reserves have grown to US$15
billion and it has secured access to an additional US$10 billion of reserve
funding, leading us to question whether the peso isn't undervalued.
PORTFOLIO STRATEGY
At the end of October, our holdings stood at approximately 40% invested in 15
emerging bond markets and 60% in established bond markets. While these holdings
are subject to change, we expect this allocation to remain relatively stable
over the medium term.
In the core markets, the Fund currently holds long maturity bonds. Real yields
throughout the OECD remain high, ranging from around 4.5% in Germany and Japan
to 8% in Sweden. While the U.S. remains the key market, a sizable portion
3
<PAGE>
of the Fund's assets are invested in the developed European bond markets. Within
Europe, we are more overweighted in Italy, France and Sweden.
We reduced our allocation to emerging markets during the first several months
following the Mexican crisis and moved the portfolio's assets into more liquid
instruments. Within Mexico, in anticipation of a possible further devaluation,
we reallocated assets into dollar-denominated, short-term treasury bills
(tesobonos) from peso-denominated cetes. We also aggressively diversified
geographically and, in particular, increased our position in eastern Europe.
Over the last nine months, the move proved to be correct as the Fund was able to
capture gains in eastern Europe from a tightening spread to U.S. treasuries,
from 1,050 to 770 basis points (100 basis points, or bp, equal one percentage
point).
Since the beginning of October, we have begun to reallocate more credit risk
from eastern Europe back into Latin America. We feel the bearish tone that has
predominated in Latin America is now reflected in the spread, which has
increased from roughly 830 bp before the Mexican devaluation in December 1994 to
1,300 bp at the end of October. Within Latin America, we have moved into more
aggressive, non-collateralized instruments as these countries have proven their
willingness and ability to implement decisive economic reforms. Additionally,
we've moved back into cetes out of tesobonos based on the attractive real
interest rates and our belief that we are unlikely to see a further substantial
drop in the peso from its already weak position.
In the wake of the volatility caused by the Mexican devaluation, we have
maintained a small allocation to Asian emerging markets, where bonds have
historically provided stable, although relatively low, returns.
OUTLOOK
Over the coming years, we expect returns from European bonds will be superior to
those of the U.S. The economies of continental Europe are still lagging the
U.S., and it appears unlikely export-led growth, a significant feature in
Europe, will fuel inflation. The presence of spare capacity is one reason; the
inability of producers to pass higher prices on to consumers is another.
Moreover, the likelihood of higher tax rates suggests that a European
consumption boom is improbable. Consistent with our bullish outlook, the
maturity and duration of our developed markets' bonds are longer than that of
the J.P. Morgan Global Government Bond Index (longer maturity bonds are more
sensitive to interest rate movements).
4
<PAGE>
On balance, as core European economic factors and government policy suggest
declining yields in these markets, we foresee an investor shift to the
peripheral markets in search of higher yields. Overall, peripheral markets
respond favorably to greater investor confidence and a strong dollar. In
particular, as inflation fundamentals continue to improve across Italy and
Sweden, and if their governments continue down the path of monetary reform and
fiscal restraint, we believe their bond markets may do well.
While there is no question that emerging markets have been volatile and economic
activity may be lower than expected a year ago, we believe emerging economies
continue to provide considerable value and good growth potential in light of the
easing global interest rate environment. The Mexican crisis actually contributed
to adjusting the overvalued currencies that existed in some emerging economies,
and reinforced the need for vigilant policy on growth and inflation.
This has resulted in improving fundamental conditions and a generally positive
outlook in our three largest emerging markets' holdings. We believe bonds appear
attractive in Argentina at a time of recession, and Brazil and Mexico offer good
value.
GARY KREPS SIMON NOCERA
CHIEF INVESTMENT PORTFOLIO MANAGER
OFFICER SAN FRANCISCO
GLOBAL FIXED INCOME NIKOS PAPPAYLIOU
INVESTMENTS PORTFOLIO MANAGER
SAN FRANCISCO SAN FRANCISCO
DECEMBER 5, 1995
G.T. GLOBAL STRATEGIC INCOME FUND
5
<PAGE>
KEY MARKETS*
CORE MARKETS
U.S.
The U.S. economy has been growing steadily while enjoying low and stable
inflation. Although growth has been weak in the last few months, there are no
signs of a serious slowdown. Even if growth continues to slow, the Federal
Reserve has plenty of room to ease rates because inflation is very low and there
is virtually no inflationary pressure in the economy. There has been no
significant increase in consumer prices this year, despite the strong economic
growth of last year. Core inflation has stayed around 3% for several months now.
Wages are under control and the industrial capacity utilization rate (one
measure of economic overheating) has been falling since the beginning of the
year.
The economic environment is favorable for the bond market but at the current
level of yields, we believe the market is already pricing in most of the good
news. Two-year bond yields are below the Federal funds rate (the overnight
lending rate among banks), indicating that the market is expecting the Fed to
lower rates. Real yields (the difference between market yields and inflation)
are low compared to the range they have traded in over the past few years. Value
is not as attractive as it was at the end of 1994, when real yields were at
their highs.
In the short term, the market could be vulnerable to any sign of a pickup in
growth, but we believe the underlying trend to lower inflation will keep the
overall downtrend in bond yields in place.
AUSTRALIA/CANADA
The economic cycles of Australia and Canada are very closely tied to the U.S.,
and their interest rates have tended to move generally in line with U.S. rates.
In 1994, both central banks followed the Federal Reserve's lead to raise rates,
but the Reserve Bank of Australia acted after the Bank of Canada. As a result,
economic growth in Australia has remained much stronger over the last few months
than in the U.S. or Canada. Consequently, Australian inflation is still rising,
while inflation in Canada has stabilized at approximately 2.5%. Over the first
10 months of 1995, both bond markets have followed the U.S. but, in our opinion,
there is a risk that Australian bonds could underperform unless that economy
slows. However, bond yields in Australia are one percentage point higher than in
Canada, so there is some relative value in the Australian market.
- --------------
* The Fund may or may not continue to hold securities from these countries.
6
<PAGE>
Both economies have deficit problems. Canada has a large budget deficit (around
4% of GDP) and Australia has a large current account deficit (nearly 5% of GDP).
These situations are slowly improving. The deficit problems, combined with
volatile inflation histories, mean that bond yields in both markets trade at a
pre-
mium to the U.S. We believe that over the short term both markets are unlikely
to outperform the U.S., but have the potential to do so over the longer run.
JAPAN
Japan is experiencing unique economic conditions of weak growth and negative
inflation. This environment, combined with a very strong yen earlier in the
year, has forced the Bank of Japan to cut interest rates to below 0.5%, which
has held bond yields down to 3%. Over the next few months, we expect that
deflation and low short-term interest rates will probably result in yields
staying low.
However, government efforts to reflate the economy by loosening monetary policy
and running a large budget deficit will, in our opinion, mean deteriorating
long-term fundamentals for Japanese bonds. After several years of strong
performance relative to other major markets, the Japanese bond market could soon
start to underperform.
CORE EUROPEAN MARKETS: GERMANY, FRANCE, HOLLAND, BELGIUM, DENMARK
German economics continue to guide core European markets, with the notable
exception of France. Because the economies of France, Holland, Belgium and
Denmark are closely integrated with the German economy and their currencies are
tied to the German DM, their interest rates generally follow those in Germany.
The German economy continues to grow, although the rate of growth has slowed.
Personal consumption, which is a large component of the economy, has been weak
for almost three years and inflation continues to trend down. Since the
beginning of 1994, the German mark has been strong against the U.S. dollar and
on a trade-weighted basis. For these reasons, the Bundesbank has continued to
lower short-term interest rates. The combination of falling short rates and
declining U.S. bond yields has underpinned the German bond market.
With no signs of any significant increase in growth, the Bundesbank can probably
lower rates further and German bond yields should continue to fall. If, however,
U.S. bond yields were to rise, the likelihood of a reversal in the German bond
market would, in our opinion, become significant. We believe that U.S. bond
7
<PAGE>
yields have heavily influenced the direction of the German market over the last
two years.
From late August to late October, the French market significantly underperformed
other European markets as a result of investor disappointment over the French
government's budget. Analysts were concerned France would not meet the fiscal
criteria for the initial phase of European Monetary Union. The market has
rebounded strongly since President Chirac reaffirmed that the priority of his
economic policy is to cut government spending.
PERIPHERAL EUROPEAN MARKETS: ITALY, SPAIN, SWEDEN
These markets have been extremely volatile this year and performed poorly in
late 1994 and the first quarter of 1995 as a result of movements of the dollar
against the DM and yen. The dollar's weakness caused the peripheral European
currencies to fall against the mark, putting upward pressure on interest rates
in these markets. Since March, the DM has stabilized against the dollar,
allowing peripheral currencies to recover and their bond markets to rally.
Within these broad trends, Sweden has performed significantly better than the
southern European markets. Swedish inflation has remained relatively lower by a
consider-
able margin, and there has been a sharp drop in the budget deficit this year.
Going forward, we believe these markets offer significant value. We find the
underlying fundamentals are improving, while real yields remain high. Although
these economies have had severe fiscal problems in recent years, their
governments have undertaken to reduce spending, reform entitlement programs and
raise taxes where necessary. Monetary policies have been tightened in response
to rising inflation rates, which have risen more than the rest of Europe.
Moreover, their currencies are still undervalued, as evidenced by strong export
growth and expanding trade surpluses. While we believe the economic fundamentals
of these markets are a long way from being on par with the core European
markets, current valuation levels do not appear to reflect the improvements that
have occurred in the last several months.
8
<PAGE>
EMERGING MARKETS
ARGENTINA
Apart from Mexico, Argentina has experienced the most severe and long-term
effects from the Mexican peso crisis. GDP is expected to contract by some 1.6%
this year and political uncertainties continue to depress the economy. Although
the Mexican peso devaluation appears to have ceased influencing the value of the
Argentine peso, its effects can still be detected in interest rates. Despite
declining inflation in Argentina, interest rates are still one to two percentage
points higher than before the Mexican devaluation. They have been kept high by
bankers' reluctance to lend to companies adversely affected by the recession and
the resultant outflow of deposits triggered by the Mexican devaluation.
While high interest rates severely worsened the recession, which was already in
progress prior to the crisis, the Mexican debacle has ultimately led to a
turnaround in Argentina's trade account via a collapse in imports and an
increase in exports. The resulting US$500 million trade surplus was in large
part attributable both to Brazil's newfound enthusiasm for imports, thanks to a
stable currency and the ensuing economic boom, as well as competitive pricing
and higher primary commodity prices. It is our view that Argentina still has
fundamental value though its risk is substantial enough for us to underweight
its position in the portfolio.
BRAZIL
Brazil celebrated its first anniversary of stable currency but continued to be
plagued by serious issues. Its traditional ebullience was inhibited by concerns
over the budget and trade deficit, inflation, a crisis in banking and the slow
progress of constitutional reform. On the positive side, the Brazilian economy
has been growing at a rapid rate (though there are signs of a slowdown),
inflation has plunged from several thousand percent a year to less than 30%,
unemployment has fallen to its lowest point in a decade, and foreign investment
has surged.
It would appear, however, that despite these major gains, there remains
considerable risk that President Cardoso may not be able to pass Social Security
and fiscal reforms, thereby leaving the prospects for a low-inflation,
high-growth economy at risk. The current level of Brazilian securities,
particularly Brady bonds, in our view, seems to have already priced in this
risk, minimizing the downside risk. On the other hand, if these reforms are
passed within the next few months, we anticipate that Brazilian bonds should
rally sharply.
9
<PAGE>
MEXICO
As expected, the Mexican economy has contracted sharply in reaction to the
austere monetary and fiscal measures implemented by authorities in the wake of
the crisis. Third quarter GDP fell by 9.6% from the same period in 1994, though
GDP rose 1% to 2% on a quarter-to-quarter basis. The contraction has been broad
based, with construction experiencing by far the largest decline. Mexico
continues to suffer from the persistent fragility of the banking system, further
exacerbated by the sharp decline in economic activity and the social
consequences of high unemployment and declining real wages.
Despite this, the government's policy mix has actually been admirable thus far,
highlighted by a remarkable turnaround in the external sector. The balance of
trade has benefited most from the reform process, and is estimated to add about
9% to domestic growth this year. In light of the comfortable real premium on
domestic interest rates and the significant spread of Mexican Brady bonds over
U.S. Treasuries, we would argue that the risk/reward environment is certainly
attractive.
POLAND
In June of this year, Poland, another market that had suffered from the events
in Mexico, saw its reform process fully rewarded. It became the first Brady bond
country to receive an investment grade rating from Moody's. GDP growth has made
impressive strides, from -7% in 1990 to close to 6% forecasted for 1995. This
was built on both investment (foreign investment flows were particularly strong
throughout the first half of the year) and external demand growth. Nonetheless,
as the Polish currency, the zloty, continued to appreciate, imports surged and
the trade account widened. Although, inflation and high unemployment are still
to be dealt with, Poland remains our core eastern European holding.
10
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
PORTFOLIO SUMMARY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MONTH G.T. GLOBAL STRATEGIC INCOME FUND JP MORGAN GLOBAL GOVERNMENT BOND INDEX SALOMON WORLD GOVERNMENT BOND
<S> <C> <C> <C>
03/29/88 9,525 10,000 10,000
03/31/88 9,525 10,022 10,027
04/30/88 9,542 9,975 9,978
05/31/88 9,525 9,869 9,884
06/30/88 9,425 9,780 9,669
07/31/88 9,346 9,705 9,610
08/31/88 9,279 9,635 9,502
09/30/88 9,414 9,876 9,748
10/31/88 9,705 10,265 10,198
11/30/88 9,713 10,354 10,353
12/31/88 9,636 10,292 10,248
01/31/89 9,592 10,190 10,099
02/28/89 9,416 10,174 10,106
03/31/89 9,461 10,087 9,965
04/30/89 9,630 10,255 10,097
05/31/89 9,755 10,143 9,884
06/30/89 10,043 10,374 10,082
07/31/89 10,389 10,787 10,542
08/31/89 10,134 10,469 10,188
09/30/89 10,116 10,633 10,380
10/31/89 10,366 10,771 10,467
11/30/89 10,440 10,867 10,563
12/31/89 10,616 10,993 10,692
01/31/90 10,247 10,829 10,552
02/28/90 10,172 10,713 10,389
03/31/90 10,200 10,647 10,286
04/30/90 10,103 10,606 10,254
05/31/90 10,190 10,945 10,596
06/30/90 10,443 11,143 10,790
07/31/90 10,846 11,470 11,127
08/31/90 10,629 11,381 11,040
09/30/90 10,677 11,488 11,163
10/31/90 11,229 11,943 11,662
11/30/90 11,429 12,152 11,856
12/31/90 11,506 12,287 11,973
01/31/91 11,772 12,565 12,272
02/28/91 11,721 12,576 12,276
03/31/91 11,429 12,183 11,831
04/30/91 11,597 12,330 12,013
05/31/91 11,545 12,341 11,997
06/30/91 11,229 12,176 11,872
07/31/91 11,446 12,434 12,126
08/31/91 11,683 12,692 12,361
09/30/91 12,239 13,156 12,845
10/31/91 12,095 13,285 12,980
11/30/91 12,239 13,502 13,182
12/31/91 13,322 14,184 13,868
01/31/92 13,027 13,905 13,622
02/29/92 12,856 13,865 13,546
03/31/92 12,494 13,738 13,403
04/30/92 12,401 13,852 13,497
05/31/92 12,864 14,245 13,912
06/30/92 13,110 14,634 14,301
07/31/92 13,334 14,956 14,635
08/31/92 13,686 15,354 15,045
09/30/92 13,572 15,339 15,195
10/31/92 13,440 14,955 14,782
11/30/92 13,237 14,691 14,547
12/31/92 13,490 14,830 14,634
01/31/93 13,666 15,081 14,888
02/28/93 14,210 15,324 15,181
03/31/93 14,735 15,559 15,414
04/30/93 15,096 15,843 15,739
05/31/93 15,435 15,944 15,897
06/30/93 16,127 15,956 15,863
07/31/93 16,694 15,963 15,908
08/31/93 17,293 16,436 16,387
09/30/93 17,427 16,609 16,581
10/31/93 18,410 16,601 16,553
11/30/93 18,357 16,480 16,434
12/31/93 19,419 16,648 16,574
01/31/94 19,589 16,805 16,708
02/28/94 17,588 16,621 16,598
03/31/94 15,893 16,544 16,575
04/30/94 15,603 16,532 16,594
05/31/94 16,129 16,395 16,448
06/30/94 15,880 16,590 16,685
07/31/94 16,034 16,745 16,818
08/31/94 16,280 16,702 16,760
09/30/94 16,483 16,786 16,881
10/31/94 16,489 17,037 17,152
11/30/94 16,292 16,822 16,916
12/31/94 15,370 16,861 16,963
01/31/95 15,017 17,202 17,319
02/28/95 14,986 17,645 17,762
03/31/95 15,020 18,543 18,817
04/30/95 15,743 18,839 19,166
05/31/95 16,424 19,365 19,705
06/30/95 16,424 19,485 19,821
07/31/95 16,423 19,578 19,867
08/31/95 16,439 19,034 19,185
09/30/95 16,830 19,463 19,613
10/31/95 16,993 19,653 19,759
</TABLE>
THE CHART AT LEFT SHOWS THE PERFORMANCE OF THE G.T. GLOBAL
STRATEGIC INCOME FUND CLASS A SHARES SINCE THE FUND'S INCEPTION VERSUS THE J.P.
MORGAN GLOBAL GOVERNMENT BOND INDEX AND THE SALOMON BROTHERS WORLD GOVERNMENT
BOND INDEX. THIS REPRESENTS A CUMULATIVE RETURN OF 69.93% AND AN AVERAGE ANNUAL
TOTAL RETURN OF 7.23%. THE CHART ASSUMES A HYPOTHETICAL $10,000 INITIAL
INVESTMENT IN THE FUND'S CLASS A SHARES AND REFLECTS ALL FUND EXPENSES AND THE
MAXIMUM 4.75% SALES CHARGE. INVESTORS SHOULD NOTE THAT THE FUND IS A
PROFESSIONALLY MANAGED MUTUAL FUND WHILE THE INDEX IS UNMANAGED, DOES NOT INCUR
EXPENSES AND IS NOT AVAILABLE FOR INVESTMENT. THE PERFORMANCE OF THE CLASSES
WILL BE GREATER OR LESS THAN THE LINE SHOWN BASED ON THE DIFFERENCES IN CHARGES
AND FEES PAID BY SHAREHOLDERS INVESTING IN DIFFERENT CLASSES.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
AVERAGE ANNUAL TOTAL RETURNS+
OCTOBER 31, 1995
<TABLE>
<CAPTION>
WITHOUT SALES CHARGE WITH SALES CHARGE++
--------------------------- ---------------------------
SHARE LIFE OF LIFE OF
CLASS 1 YEAR 5 YEAR FUND 1 YEAR 5 YEAR FUND
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A* 3.06% 8.64% 7.92% -1.84% 7.59% 7.23%
CLASS B** 2.48% N/A 7.08% -2.26% N/A 6.55%
ADVISOR
CLASS*** N/A N/A 3.72% N/A N/A N/A
</TABLE>
* The Fund began operations on March 29, 1988.
** The Fund began offering Class B shares on October 22, 1992.
*** The Fund began offering Advisor Class shares on June 1, 1995. Advisor Class
shares are not sold directly to the general public and are only available
through certain employee benefit plans, financial institutions and other
entities that have entered into specific agreements with G.T. Global. Please
see the "Alternative Purchase Plan" section in the Fund's prospectus.
+ Figures assume reinvestment of all dividends and capital gains distributions
at net asset value.
++ The performance of the Class A and Class B shares reflects the effects of
the maximum 4.75% sales charge or the maximum applicable contingent deferred
sales charge (5% in first year, decreasing to 0% after six years).
THE DATA ABOVE REPRESENT PAST PERFORMANCE OF THE FUND'S SHARES, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GEOGRAPHIC ALLOCATION OF NET ASSETS AS OF OCTOBER 31, 1995
<S> <C>
EUROPE 38.2%
LATIN AMERICA 23.8%
UNITED STATES 22.2%
ASIA/PACIFIC 8.1%
AFRICA 7.7%
</TABLE>
ALLOCATIONS WILL CHANGE BASED ON CURRENT MARKET CONDITIONS.
11
<PAGE>
GT GLOBAL
STRATEGIC
INCOME FUND
FINANCIAL
STATEMENTS
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of G.T. Global Strategic
Income Fund and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of G.T.
Global Strategic Income Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1995, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
G.T. Global Strategic Income Fund as of October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1995
The accompanying notes are an integral part of the financial statements.
F-1
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (88.2%)
Argentina (4.8%)
Republic of Argentina:
Discount Bond, 6.875% due 3/31/23+ ............... USD 22,500,000 $ 12,684,375 2.3
Par Bond, 5% due 3/31/23=/= ....................... USD 15,600,000 7,449,000 1.4
Floating Rate Bond, 6.8125% due 3/31/05+ .......... USD 7,500,000 4,443,750 0.8
BOCON Pre 2, 5.83% due 4/1/01[.] + ................ USD 2,150,000 1,751,713 0.3
Central Bank of Argentina, BONEX, 5.9375% due
12/28/99+ .......................................... USD 78,125 73,250 --
Australia (1.9%)
Australian Government, 7.5% due 7/15/05 ............. AUD 14,900,000 10,401,748 1.9
Brazil (4.8%)
Federal Republic of Brazil:
Par Z-L Bond, 4.25% due 4/15/24=/= ................ USD 31,000,000 15,035,000 2.8
C Bond, 4% due 4/15/14 (Effective rate at year end
is 6.035%, including "payment-in-kind" bonds.)[.]
=/ = ............................................. USD 14,114,066 7,180,531 1.3
Debt Conversion Bond Series L, 6.875% due
4/15/12+ ......................................... USD 6,800,000 3,731,500 0.7
Earned Interest Bond, 6.8125% due 4/15/06+ ........ USD 400,000 265,000 --
Bulgaria (3.1%)
Bulgaria:
Discount Bond Series A, 6.75% due 7/28/24 -
EURO+ ............................................ USD 13,000,000 6,548,750 1.2
Discount Bond Series A, 6.75% due 7/28/24 - 144A+
{.} .............................................. USD 10,164,755 5,120,495 0.9
Past Due Interest Bond (IAB), 6.75% due 7/28/11 -
144A+ {.} ........................................ USD 8,146,553 3,599,758 0.7
Discount Bond Series B, 7.25% 7/28/24+ ............ USD 3,000,000 1,518,750 0.3
Canada (1.8%)
Canadian Government, 8.75% due 12/1/05 .............. CAD 12,200,000 9,856,194 1.8
Costa Rica (1.3%)
Banco Central de Costa Rica:
Principal Bond Series A, 6.25% due 5/21/10 ........ USD 6,300,000 3,685,500 0.7
Interest Bond Series A, 6.76563% due 5/21/05+ ..... USD 3,986,872 3,169,563 0.6
Denmark (2.0%)
Kingdom of Denmark, 7% due 12/15/04 ................. DKK 63,600,000 11,042,799 2.0
Ecuador (3.2%)
Ecuador:
Par Bond, 3% due 2/28/25 - 144A=/= {.} ............ USD 17,999,000 5,984,668 1.1
Discount Bond, 6.8125% due 2/28/25 - EURO+ ........ USD 11,000,000 5,472,500 1.0
Past Due Interest Bond, 3% due 2/27/15 - 144A
(Effective yield at year end is 4.27%, including
"payment-in-kind" bonds.)[.] + {.} ............... USD 9,989,113 3,321,380 0.6
Par Bond, 3% due 2/28/25 - EURO=/= ................ USD 5,000,000 1,662,500 0.3
Earned Interest Bond, 6.75% due 12/21/04 - 144A+
{.} .............................................. USD 2,067,975 1,251,125 0.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
France (5.3%)
French Treasury Bond (BTAN), 7% due 10/12/00 ........ FRF 73,900,000 $ 15,366,544 2.8
France O.A.T., 7.25% due 4/25/06 .................... FRF 66,250,000 13,450,573 2.5
Germany (3.7%)
Deutschland Republic, 6.25% due 1/4/24 .............. DEM 32,000,000 20,104,313 3.7
Ireland (1.0%)
Irish Gilts, 6.25% due 10/18/04 ..................... IEP 3,800,000 5,472,836 1.0
Italy (7.9%)
Italian Buoni Poliennali del Tesoro (BTPS):
8.5% due 4/1/04 ................................... ITL 23,090,000,000 12,119,786 2.2
8.5% due 1/1/04 ................................... ITL 11,650,000,000 6,138,412 1.1
9.5% due 1/1/05 ................................... ITL 10,750,000,000 5,953,062 1.1
8.5% due 8/1/99 ................................... ITL 10,000,000,000 5,776,306 1.1
Republic of Italy:
5.125% due 7/29/03 ................................ JPY 1,194,000,000 13,273,481 2.4
Mexico (4.1%)
United Mexican States:
Par Bond Series B, 6.25% due 12/31/19+/+ ......... USD 20,900,000 12,317,938 2.3
Par Bond Series A, 6.25% due 12/31/19+/+ .......... USD 16,250,000 9,577,344 1.8
New Zealand (2.0%)
New Zealand Government:
6.5% due 2/15/00 ................................. NZD 8,625,000 5,544,377 1.0
8% due 11/15/06 ................................... NZD 7,815,000 5,450,752 1.0
Nigeria (2.3%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20=/= +/+ .................................... USD 26,000,000 12,171,250 2.2
Nigeria Promissory Notes, 5.092% due 1/5/10=/= ...... USD 2,000,000 730,000 0.1
Philippines (2.1%)
Central Bank of the Philippines, Par Bond Series B,
5.75% due 12/1/17=/= ............................... USD 15,600,000 11,446,500 2.1
Poland (4.2%)
Poland:
Past Due Interest Bond, 3.75% due 10/27/14 - 144A=/
= {.} ............................................ USD 21,990,000 13,908,675 2.5
Discount Bond, 6.875% due 10/27/24 - EURO+ ........ USD 9,000,000 6,896,250 1.3
Par Bond, 2.75% due 10/27/24 - 144A=/= {.} ........ USD 4,318,000 1,921,510 0.4
Par Bond, 2.75% due 10/27/24 - EURO=/= ............ USD 81,000 36,045 --
Portgual (1.0%)
Portuguese Government Bond, 11.875% due 2/23/05 ..... PTE 773,000,000 5,393,278 1.0
South Africa (0.6%)
Republic of South Africa, 9.625% due 12/15/99 ....... USD 2,880,000 3,067,200 0.6
Spain (3.8%)
Kingdom of Spain:
5.75% due 3/23/02 ................................. JPY 1,325,000,000 15,403,882 2.8
10% due 2/28/05 ................................... ESP 676,800,000 5,278,496 1.0
Sweden (4.0%)
Swedish Government, 13% due 6/15/01 ................. SEK 124,700,000 22,041,832 4.0
United Kingdom (2.2%)
United Kingdom Treasury, 7% due 11/6/01 ............. GBP 8,000,000 12,284,659 2.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
United States (17.3%)
United States Treasury Note:
6.875% due 3/31/00 ................................ USD 29,000,000 $ 30,169,077 5.5
7.75% due 11/30/99 ................................ USD 15,000,000 16,035,945 2.9
6.5% due 8/15/05 ................................. USD 5,400,000 5,583,940 1.0
United States Treasury Bond, 6.875% due 8/15/25 ..... USD 40,400,000 43,291,145 7.9
Uruguay (0.2%)
Banco Central del Uruguay, Par Bond Series A, 6.75%
due 2/18/21+/+ ..................................... USD 1,370,000 856,250 0.2
Venezuela (3.6%)
Republic of Venezuela:
Par Bond Series A, 6.75% due 3/31/20+/+ ........... USD 29,000,000 14,989,375 2.7
Debt Conversion Bond, 6.8125% due 12/18/07+ ....... USD 7,500,000 3,703,125 0.7
Discount Bond Series B, 6.9375% due 3/31/20+ +/
+ ................................................ USD 2,500,000 1,325,000 0.2
------------
Total Government & Government Agency Obligations (cost
$471,956,479) .......................................... 482,329,007
------------
Sovereign Debt (6.5%)
Morocco (4.8%)
Kingdom of Morocco, Tranche A Loan Agreement, 6.6875%
due 1/1/09+ ........................................ USD 43,500,000 25,964,063 4.8
Russia (1.7%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement ** -/- .............................. USD 28,500,000 9,226,163 1.7
------------
Total Sovereign Debt (cost $40,522,635) ................. 35,190,226
------------
Corporate Bonds (0.9%)
Brazil (0.5%)
Banco BCN - BCN Leasing, 11% due 6/9/97 - 144A{.} ... USD 2,500,000 2,462,500 0.5
Hong Kong (0.1%)
Pacific Concord Finance Ltd., Convertible Bond, 4.75%
due 12/10/98 ....................................... USD 1,000,000 795,000 0.1
India (0.1%)
Reliance Industries Ltd., 8.125% due 9/27/05 -
144A{.} ............................................ USD 700,000 705,250 0.1
Indonesia (0.2%)
Asia Pulp & Paper International Finance Co., Ltd.,
11.75% due 10/1/05 ................................. USD 850,000 872,048 0.2
------------
Total Corporate Bonds (cost $4,767,553) ................. 4,834,798
------------
Other Security (0.8%)
Argentina (0.8%)
Argentina Local Markets Trust 1994-1 Pre 2, 13.375%
due 4/15/01 - 144A{.} (cost $5,000,000) ........... USD 5,000,000 4,612,500 0.8
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $522,246,667) ...... 526,966,531 96.4
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Principal Market % of Net
Short-Term Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Treasury Bills (0.5%)
Mexico (0.5%)
Mexican Cetes, effective yield 45.14%, due
9/26/96 ............................................ MXN 25,600,000 $ 2,543,209 0.5
------------ -----
(cost $2,852,738)
<CAPTION>
Market % of Net
Repurchase Agreement Value Assets {d}
- --------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1995 with State Street Bank & Trust
Company, due November 1, 1995, for an effective yield
of 5.80% collateralized by $14,470,000 U.S. Treasury
Strips, due 5/15/05 (market value of collateral is
$8,089,969, including accrued interest). (cost
$7,902,273) ........................................ 7,902,273 1.4
------------ -----
TOTAL INVESTMENTS (cost $533,001,678) ................... 537,412,013 98.3
Other Assets and Liabilities ............................ 9,047,586 1.7
------------ -----
NET ASSETS .............................................. $546,459,599 100.0
------------ -----
------------ -----
</TABLE>
- ----------------
{d} Percentages indicated are based on net assets of $546,459,599.
+ The coupon rate shown on floating rate note represents the rate at
period end.
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
[.] Bond pays stated or additional interest with "payment-in-kind"
(PIK) bonds.
=/= The coupon rate shown on step-up coupon bond represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
* For Federal income tax purposes, cost is $535,702,133 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 16,996,004
Unrealized depreciation: (15,286,124)
-------------
Net unrealized appreciation: $ 1,709,880
-------------
-------------
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Market Value Unrealized
(U.S. Contract Delivery Appreciation
Contracts to Buy: Dollars) Price Date (Depreciation)
- ------------------------------------------------------------------------------ ------------ ----------- --------- -------------
<S> <C> <C> <C> <C>
Australian Dollars............................................................ 5,899,101 1.32674 01/18/96 $ 80,344
Canadian Dollars.............................................................. 849,618 1.33990 12/18/95 (1,192)
Danish Kroner................................................................. 5,766,273 5.69380 11/14/95 233,939
Deutsche Marks................................................................ 12,097,061 1.45700 11/30/95 429,251
Deutsche Marks................................................................ 8,334,580 1.42383 11/30/95 108,468
Deutsche Marks................................................................ 16,409,308 1.41600 11/30/95 123,997
Deutsche Marks................................................................ 782,751 1.42380 11/30/95 10,171
Deutsche Marks................................................................ 11,741,265 1.42704 11/30/95 178,870
Deutsche Marks................................................................ 1,067,388 1.39500 11/30/95 (7,881)
Deutsche Marks................................................................ 5,457,909 1.39797 11/30/95 (28,618)
Deutsche Marks................................................................ 7,628,489 1.39266 01/24/96 (47,469)
Deutsche Marks................................................................ 5,066,630 1.38179 01/24/96 (71,633)
French Francs................................................................. 385,274 4.95845 12/04/95 5,186
Irish Punts................................................................... 323,785 0.61637 11/29/95 (695)
Italian Lira.................................................................. 538,717 1,608.60000 01/26/96 (851)
Japanese Yen.................................................................. 655,646 99.70000 12/18/95 (11,355)
Japanese Yen.................................................................. 2,741,883 99.64300 12/18/95 (49,081)
Japanese Yen.................................................................. 2,735,968 99.16200 12/18/95 (62,483)
Japanese Yen.................................................................. 2,721,179 98.89100 12/18/95 (69,773)
Pounds Sterling............................................................... 4,014,648 0.63788 01/16/96 17,013
Swedish Krona................................................................. 146,879 6.72800 01/05/96 1,330
Swedish Krona................................................................. 2,018,882 6.64000 01/05/96 (8,227)
------------ -------------
Total Contracts to Buy (Payable amount $96,553,923)......................... 97,383,234 829,311
------------ -------------
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF NET ASSETS IS 17.82%
<CAPTION>
Contracts to Sell:
<S> <C> <C> <C> <C>
Danish Kroner................................................................. 5,766,273 5.51880 11/14/95 (58,510)
Danish Kroner................................................................. 11,713,546 5.54454 11/17/95 (173,003)
Deutsche Marks................................................................ 1,231,054 1.47210 11/30/95 (55,862)
Deutsche Marks................................................................ 14,395,503 1.47736 11/30/95 (702,158)
Deutsche Marks................................................................ 17,320,145 1.47716 11/30/95 (842,580)
Deutsche Marks................................................................ 2,264,701 1.40745 11/30/95 (3,460)
French Francs................................................................. 16,275,420 4.90645 12/04/95 (48,891)
French Francs................................................................. 6,602,150 5.08000 12/13/95 (243,882)
French Francs................................................................. 6,249,558 5.07865 12/13/95 (229,257)
French Francs................................................................. 838,044 4.93700 12/13/95 (7,580)
French Francs................................................................. 217,074 4.88700 12/13/95 237
Irish Punts................................................................... 5,698,615 0.63418 11/29/95 (148,103)
Italian Lira.................................................................. 2,860,910 1,634.55000 01/11/96 (46,680)
Italian Lira.................................................................. 1,138,145 1,609.60000 01/11/96 (1,216)
Italian Lira.................................................................. 5,131,731 1,637.27600 01/26/96 (81,910)
Italian Lira.................................................................. 5,474,686 1,628.90000 01/26/96 (59,682)
Japanese Yen.................................................................. 4,338,111 100.88000 12/18/95 23,507
Japanese Yen.................................................................. 5,718,419 102.15850 12/18/95 (40,967)
Japanese Yen.................................................................. 739,451 97.21000 12/18/95 32,075
New Zealand Dollars........................................................... 5,365,302 1.54086 11/29/95 (82,523)
Portuguese Escudos............................................................ 5,829,365 156.00000 11/20/95 (284,493)
Pounds Sterling............................................................... 220,412 0.63355 01/16/96 564
Spanish Pesetas............................................................... 5,446,641 120.17500 11/07/95 78,635
Swedish Krona................................................................. 10,904,362 7.03330 01/05/96 (567,820)
Swedish Krona................................................................. 3,146,703 6.80770 01/05/96 (65,009)
------------ -------------
Total Contracts to Sell (Receivable amount $141,277,753).................... 144,886,321 (3,608,568)
------------ -------------
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF NET ASSETS IS 26.51%
Total Open Forward Foreign Currency Contracts, Net.......................... $(2,779,257)
-------------
-------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $533,001,678)
(Note 1)............................................... $537,412,013
U.S. currency.............................. $ 440
Foreign currencies (cost $554,748)......... 555,044 555,484
--------
Receivable for securities sold.......................... 56,097,535
Interest receivable..................................... 13,665,276
Receivable for Fund shares sold......................... 236,106
Cash held as collateral for securities loaned (Note
1)..................................................... 43,729,013
------------
Total assets.......................................... 651,695,427
------------
Liabilities:
Payable for securities purchased........................ 56,250,305
Payable for open forward foreign currency contracts, net
(Note 1)............................................... 2,779,257
Payable for Fund shares repurchased..................... 1,410,456
Payable for service and distribution expenses (Note
2)..................................................... 361,364
Payable for investment management and administration
fees (Note 2).......................................... 338,404
Payable for printing and postage expenses............... 151,751
Payable for transfer agent fees (Note 2)................ 83,499
Payable for professional fees........................... 33,962
Payable for registration and filing fees (Note 2)....... 31,146
Payable for custodian fees (Note 1)..................... 25,818
Distribution payable.................................... 19,666
Payable for fund accounting fees (Note 2)............... 11,792
Payable for Directors' fees and expenses (Note 2)....... 5,451
Other accrued expenses.................................. 3,944
Collateral for securities loaned (Note 1)............... 43,729,013
------------
Total liabilities..................................... 105,235,828
------------
Net assets................................................ $546,459,599
------------
------------
Class A:
Net asset value and redemption price per share
($188,164,713 DIVIDED BY 18,225,463 shares
outstanding)............................................. $ 10.32
------------
------------
Maximum offering price per share
(100/95.25 of $10.32) *.................................. $ 10.83
------------
------------
Class B:+
Net asset value and offering price per share
($357,852,132 DIVIDED BY 34,647,303 shares
outstanding)............................................. $ 10.33
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption
price per share
($442,754 DIVIDED BY 42,881 shares outstanding).......... $ 10.33
------------
------------
Net assets consist of:
Paid in capital (Note 4)................................ $697,904,342
Accumulated net investment loss......................... (68,169)
Accumulated net realized loss on investments and foreign
currency transactions.................................. (152,991,131)
Net unrealized depreciation on translation of assets and
liabilities in foreign currencies...................... (2,795,778)
Net unrealized appreciation of investments.............. 4,410,335
------------
Total -- representing net assets applicable to capital
shares outstanding....................................... $546,459,599
------------
------------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income (net of foreign withholding tax of
$181,612).................................................. $ 65,875,609
------------
Total investment income................................... 65,875,609
------------
Expenses:
Service and distribution expenses: (Note 2)
Class A.................................. $ 746,208
Class B.................................. 3,820,587 4,566,795
------------
Investment management and administration fees (Note 2)...... 4,293,053
Transfer agent fees (Note 2)................................ 1,218,500
Custodian fees (Note 1)..................................... 318,141
Printing and postage expenses............................... 289,500
Fund accounting fees (Note 2)............................... 150,989
Registration and filing fees................................ 123,758
Audit fees.................................................. 64,970
Legal fees.................................................. 36,500
Directors' fees and expenses (Note 2)....................... 20,950
Insurance expenses.......................................... 8,785
------------
Total expenses before reductions.......................... 11,091,941
------------
Expense reductions (Note 1)............................. (135,405)
------------
Total net expenses........................................ 10,956,536
------------
Net investment income......................................... 54,919,073
------------
Net realized and unrealized gain (loss) on
investments and foreign currencies: (Note 1)
Net realized loss on investments........... (69,013,143)
Net realized loss on foreign currency
transactions.............................. (13,662,464)
------------
Net realized loss during the year......................... (82,675,607)
Net change in unrealized depreciation on
translation of assets and liabilities in
foreign currencies........................ (3,747,114)
Net change in unrealized appreciation of
investments............................... 35,939,954
------------
Net unrealized appreciation during the year............... 32,192,840
------------
Net realized and unrealized loss on investments and foreign
currencies................................................... (50,482,767)
------------
Net increase in net assets resulting from operations.......... $ 4,436,306
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
Increase (Decrease) in net assets
<S> <C> <C>
Operations:
Net investment income...................... $ 54,919,073 $ 47,861,136
Net realized loss on investments and
foreign currency transactions............. (82,675,607) (79,354,248)
Net change in unrealized depreciation on
translation of assets and liabilities in
foreign currencies........................ (3,747,114) (9,380)
Net change in unrealized appreciation
(depreciation) of investments............. 35,939,954 (66,692,413)
----------------- -----------------
Net increase (decrease) in net assets
resulting from operations............... 4,436,306 (98,194,905)
Class A:
Distributions to shareholders: (Note 1)
From net investment income................. (16,844,112) (21,322,221)
From net realized gain on investments...... -- (8,450,873)
Return of capital.......................... (852,171) (4,442,690)
Class B:
Distributions to shareholders: (Note 1)
From net investment income................. (27,777,018) (29,594,068)
From net realized gain on investments...... -- (10,411,111)
Return of capital.......................... (1,405,284) (5,633,875)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income................. (14,952) --
Return of capital.......................... (756) --
----------------- -----------------
Total distributions...................... (46,894,293) (79,854,838)
----------------- -----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested................................ 194,343,201 654,688,923
Decrease from capital shares repurchased... (339,216,716) (341,148,524)
----------------- -----------------
Net increase (decrease) from capital
share transactions...................... (144,873,515) 313,540,399
----------------- -----------------
Total increase (decrease) in net assets...... (187,331,502) 135,490,656
Net assets:
Beginning of year.......................... 733,791,101 598,300,445
----------------- -----------------
End of year................................ $ 546,459,599 $ 733,791,101
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share
outstanding, total investment return, ratios and supplemental data. This
information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
1995(E) 1994 1993(E) 1992 1991
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20
----------- ----------- ----------- ---------- ----------
Income from investment operations:
Net investment income................. 0.97 0.79 0.96 0.86 0.84**
Net realized and unrealized gain
(loss) on investments................ (0.69) (2.14) 2.85 0.31 (0.02)
----------- ----------- ----------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.28 (1.35) 3.81 1.17 0.82
----------- ----------- ----------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.80) (0.79) (0.96) (0.83) (0.60)
From net realized gain on
investments.......................... -- (0.38) (0.37) -- (0.51)
Return of capital..................... (0.04) (0.21) -- -- --
From sources other than net investment
income............................... -- -- (0.12) -- --
----------- ----------- ----------- ---------- ----------
Total distributions................. (0.84) (1.38) (1.45) (0.83) (1.11)
----------- ----------- ----------- ---------- ----------
Net asset value, end of period.......... $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
Total investment return (c)............. 3.06% (10.44)% 37.0% 11.1% 7.7%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 188,165 $ 275,241 $ 287,870 $ 83,849 $ 55,967
Ratio of net investment income to
average net assets..................... 9.64% 6.74% 7.2% 7.6% 7.2%**
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.42% 1.40% 1.7% 1.8% 1.9%**
Without expense reductions............ 1.45% --%* --%* --%* --%*
Ratio of interest expense to average net
assets................................. N/A 0.10% N/A N/A N/A
Portfolio turnover rate++++............. 238% 583% 310% 418% 630%
</TABLE>
- ----------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) Ratios not meaningful due to short period of operation of Class B
shares.
(e) These selected per share data were calculated based upon weighted
average shares outstanding during the period.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
** Includes reimbursement by G.T. Capital Management, Inc. of Fund
operating expenses of $0.01 for the year ended October 31, 1991.
Without such reimbursement, the expense ratio would have been 1.92%
and the ratio of net investment income to average net asssets would
have been 7.16% for the year ended October 31, 1991.
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (CONT'D)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share
outstanding, total investment return, ratios and supplemental data. This
information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++ ADVISOR
------------------------------------------------------- CLASS+++
-------------
YEAR ENDED OCTOBER 22, 1992 JUNE 1, 1995
OCTOBER 31, TO TO
------------------------------------ OCTOBER 31, OCTOBER 31,
1995(E) 1994 1993(E) 1992 1995(E)
--------- ---------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.88 $ 13.60 $ 11.24 $11.36 $ 10.32
--------- ---------- ----------- ------- -------------
Income from investment operations:
Net investment income................. 0.91 0.73 0.89 0.01 0.41
Net realized and unrealized gain
(loss) on investments................ (0.69) (2.14) 2.85 (0.13) (0.04)
--------- ---------- ----------- ------- -------------
Net increase (decrease) from
investment operations.............. 0.22 (1.41) 3.74 (0.12) 0.37
--------- ---------- ----------- ------- -------------
Distributions to shareholders:
From net investment income............ (0.73) (0.72) (0.89) -- (0.34)
From net realized gain on
investments.......................... -- (0.38) (0.37) -- --
Return of capital..................... (0.04) (0.21) -- -- (0.02)
From sources other than net investment
income............................... -- -- (0.12) -- --
--------- ---------- ----------- ------- -------------
Total distributions................. (0.77) (1.31) (1.38) -- (0.36)
--------- ---------- ----------- ------- -------------
Net asset value, end of period.......... $ 10.33 $ 10.88 $ 13.60 $11.24 $ 10.33
--------- ---------- ----------- ------- -------------
--------- ---------- ----------- ------- -------------
Total investment return (c)............. 2.48% (11.02)% 36.2% (1.1)%(b) 3.72%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $357,852 $458,550 $310,431 $ 533 $ 443
Ratio of net investment income to
average net assets..................... 8.99% 6.09% 6.5% N/A(d) 9.99%(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.07% 2.05% 2.4% N/A(d) 1.07%(a)
Without expense reductions............ 2.10% --%* --%* --%* 1.10%(a)
Ratio of interest expense to average net
assets................................. N/A 0.10% N/A N/A N/A
Portfolio turnover rate++++............. 238% 583% 310% 418% 238%
</TABLE>
- ----------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) Ratios not meaningful due to short period of operation of Class B
shares.
(e) These selected per share data were calculated based upon weighted
average shares outstanding during the period.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
** Includes reimbursement by G.T. Capital Management, Inc. of Fund
operating expenses of $0.01 for the year ended October 31, 1991.
Without such reimbursement, the expense ratio would have been 1.92%
and the ratio of net investment income to average net asssets would
have been 7.16% for the year ended October 31, 1991.
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
G.T. Global Strategic Income Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as a non-diversified, open-end management investment
company. The Company has twelve series of shares in operation, each series
corresponding to a distinct portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. The Fund
commenced sale of Advisor Class shares on June 1, 1995. Investment income,
realized and unrealized capital gains and losses, and the common expenses of the
Fund are allocated on a pro rata basis to each class based on the relative net
assets of each class to the total net assets of the Fund. Each class of shares
differs in its respective service and distribution expenses, and may differ in
its transfer agent, registration, and certain other class-specific fees and
expenses.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of the financial statements. The
policies are in conformity with generally accepted accounting principles.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or in the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by G.T. Capital Management,
Inc. ("G.T. Capital") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when G.T.
Capital deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with a maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, and other assets and
liabilities are recorded in the books and records of the Fund after translation
to U.S. dollars based on the exchange rates on that day. The cost of each
security is determined using historical exchange rates. Income and withholding
taxes are translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized
F-12
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
between the trade and settlement dates on securities transactions, and the
difference between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains or losses arise
from changes in the value of assets and liabilities other than investments in
securities at year end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. Forward Contracts involve market risk in excess of the
amount shown in the Fund's "Statement of Assets and Liabilities." The Fund could
be exposed to risk if a counterparty is unable to meet the terms of the contract
or if the value of the currency changes unfavorably. The Fund may enter into
Forward Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option. The
current market value of an option listed on a traded exchange is valued at its
last bid price, or, in the case of an over-the-counter option, is valued at the
average last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the portfolio hold the underlying
security and, for a put, requires the Fund to set aside cash, U.S. government
securities, or other liquid, high-grade debt securities in an amount not less
than the exercise price or otherwise provide adequate cover at all times while
the put option is outstanding. The Fund may use options to manage its exposure
to the bond market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount
F-13
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
of cash equal to the daily fluctuation in value of the contract. Such receipts
or payments are known as "variation margin" and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. The potential
risk to the Fund is that the change in value of the underlying securities may
not correlate to the change in value of the contracts. The Fund may use futures
contracts to manage its exposure to the bond market and to fluctuations in
currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1995, stocks with an aggregate value of approximately $39,303,687
were on loan to brokers. The loans were secured by cash collateral of
$43,729,013 received by the Fund. For international securities, cash collateral
is received by the Fund against loaned securities in an amount at least equal to
105% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 103% of the market value of
the loaned securities during the period of the loan. For domestic securities,
cash collateral is received by the Fund against loaned securities in an amount
at least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of each loan. For
the period ended October 31, 1995, the Fund received fees of $135,405 which were
used to reduce the Fund's custodian fees.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$151,873,284, of which $77,456,193 expires in 2002 and $74,417,091 expires in
2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(L) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currences, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(M) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
2. RELATED PARTIES
G.T. Capital is the Fund's investment manager and administrator. The Fund pays
investment management and administration fees to G.T. Capital at the annualized
rate of 0.725% on the first $500 million of average daily net assets of the
Fund; 0.70% on the next $1 billion; 0.675% on the next $1 billion and
F-14
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
0.65% on amounts thereafter. These fees are computed daily and paid monthly, and
are subject to reduction in any year to the extent that the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, distribution-related
expenses and extraordinary expenses) exceed the most stringent limits prescribed
by the laws or regulations of any state in which the Fund's shares are offered
for sale, based on the average total net asset value of the Fund.
G.T. Global Financial Services, Inc. ("G.T. Global"), an affiliate of G.T.
Capital, serves as the Fund's distributor. The Fund offers Class A, Class B, and
Advisor Class shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. G.T. Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1995, G.T. Global retained
$68,458 of such sales charges. Purchases of Class A Shares exceeding $500,000
may be subject to a contingent deferred sales charge ("CDSC") upon redemption,
in accordance with the Fund's current prospectus. G.T. Global collected CDSCs in
the amount of $88,302 for the year ended October 31, 1995. G.T. Global also
makes ongoing shareholder servicing and trail commission payments to dealers
whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, G.T. Global from its own resources pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the year ended October 31, 1995, G.T. Global collected CDSCs in
the amount of $2,355,668. In addition, G.T. Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate plans of distribution with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses G.T. Global for a portion of its shareholder servicing and
distribution expenses. Under the Class A Plan, the Fund may pay G.T. Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for G.T. Global's expenditures incurred in
servicing and maintaining shareholder accounts, and may pay G.T. Global a
distribution fee at the annualized rate of up to 0.35% of the average daily net
assets of the Fund's Class A shares, less any amounts paid by the Fund as the
aforementioned service fee, for G.T. Global's expenditures incurred in providing
services as distributor. All expenses for which G.T. Global is reimbursed under
the Class A Plan will have been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay G.T. Global a service fee
at the annualized rate of up to 0.25% of the average daily net assets of the
Fund's Class B shares for G.T. Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay G.T. Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for G.T. Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
G.T. Capital and G.T. Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 1.85%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by G.T.
Capital of investment management and administration fees, waivers by G.T. Global
of payments under the Class A Plan and/or Class B Plan and/or reimbursements by
G.T. Capital or G.T. Global of portions of the Fund's other operating expenses.
G.T. Global Investor Services, Inc. ("G.T. Services"), an affiliate of G.T.
Capital and G.T. Global, is the transfer agent of the Fund.
Effective May 1, 1995, G.T. Capital has assumed the role of pricing and
accounting agent for the Fund. The monthly fee for these services to G.T.
Capital is a percentage, not to exceed 0.03% annually, of the Fund's average
daily net assets. The annual fee rate is derived by applying 0.03% to the first
$5 billion of assets of all registered mutual funds advised by G.T. Capital
("G.T. Funds") and 0.02% to the assets in excess of $5 billion and dividing the
result by the aggregate assets of the G.T. Funds. For the period ended October
31, 1995, the Fund paid fund accounting fees of $34,980 to G.T. Capital.
The Company pays each of its Directors who is not an employee, officer or
director of G.T. Capital, G.T. Global or G.T. Services $5,000 per year plus
F-15
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
$300 for each meeting of the board or any committee thereof attended by the
Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $1,084,339,117 and $1,234,939,423, respectively.
Purchases and sales of U.S. government obligations by the Fund aggregated
$247,139,247 and $184,605,981, respectively.
4. CAPITAL SHARES
At October 31, 1995, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of G.T.
Global Government Income Fund; 200,000,000 were classified as shares of G.T.
Global Health Care Fund; 200,000,000 were classified as shares of G.T. Global
Emerging Markets Fund; 200,000,000 were classified as shares of G.T. Global
Currency Fund (inactive); 200,000,000 were classified as shares of G.T. Global
Growth & Income Fund; 200,000,000 were classified as shares of G.T. Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of G.T. Latin
America Growth Fund; 400,000,000 were classified as shares of G.T. Global
Telecommunications Fund; 200,000,000 were classified as shares of G.T. Global
High Income Fund; 200,000,000 were classified as shares of G.T. Global Financial
Services Fund; 200,000,000 were classified as shares of G.T. Global Natural
Resources Fund; 200,000,000 were classified as shares of G.T. Global
Infrastructure Fund; and 200,000,000 were classified as shares of G.T. Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fourteen series of
the Company and designated as Advisor Class common stock. 1,400,000,000 shares
remain unclassified. Transactions in capital shares of the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
-------------------------- --------------------------
CLASS A: SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 10,413,395 $ 105,118,727 19,809,908 $ 246,272,141
Shares issued in connection with reinvestment of distributions............ 1,180,205 11,913,775 1,971,428 23,827,880
----------- ------------- ----------- -------------
11,593,600 117,032,502 21,781,336 270,100,021
Shares repurchased........................................................ (18,672,585) (187,700,412) (17,632,683) (210,355,215)
----------- ------------- ----------- -------------
Net increase (decrease)................................................... (7,078,985) $ (70,667,910) 4,148,653 $ 59,744,806
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
-------------------------- --------------------------
CLASS B: SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 5,950,544 $ 60,333,373 28,502,079 $ 357,951,389
Shares issued in connection with reinvestment of distributions............ 1,633,228 16,496,489 2,229,217 26,637,513
----------- ------------- ----------- -------------
7,583,772 76,829,862 30,731,296 384,588,902
Shares repurchased........................................................ (15,079,063) (151,484,130) (11,406,753) (130,793,309)
----------- ------------- ----------- -------------
Net increase (decrease)................................................... (7,495,291) $ (74,654,268) 19,324,543 $ 253,795,593
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
<CAPTION>
JUNE 1, 1995
(COMMENCEMENT OF SALE OF
SHARES) TO OCTOBER 31,
1995
--------------------------
ADVISOR CLASS: SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 44,461 $ 465,129
Shares issued in connection with reinvestment of distributions............ 1,535 15,708
----------- -------------
45,996 480,837
Shares repurchased........................................................ (3,115) (32,174)
----------- -------------
Net increase.............................................................. 42,881 $ 448,663
----------- -------------
----------- -------------
</TABLE>
F-16
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
5. WRITTEN OPTIONS:
The Fund's written option contracts activity for the year ended October 31,
1995, was as follows:
COVERED CALL AND PUT OPTIONS WRITTEN
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT PREMIUMS
------------- ----------
<S> <C> <C>
Options outstanding at October 31, 1994................. 0 $ 0
Options written......................................... 27,250,000 284,000
Options cancelled in closing purchase transactions
($52,000 gain realized)................................ (16,000,000) (192,000)
Options expired prior to exercise....................... (11,250,000) (92,000)
Options exercised....................................... 0 0
------------- ----------
Options outstanding at October 31, 1995................. 0 $ 0
------------- ----------
------------- ----------
</TABLE>
6. SUBSEQUENT EVENT:
Effective January 1, 1996, as part of a unified corporate identity effort, the
name of the BIL GT Group (of which G.T. Capital is a member) will be changed to
Liechtenstein Global Trust ("LGT"). The Fund's (or Portfolio's) investment
manager and administrator, currently named G.T. Capital Management, Inc., will
be changed to "LGT Asset Management, Inc.", and G.T. Global Financial Services,
Inc., which serves as the Fund's distributor, will be known as "GT Global, Inc."
F-17
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
[LOGO]
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR INVESTMENT COUNSELOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580. THE PROSPECTUS CONTAINS MORE COMPLETE
INFORMATION, INCLUDING CHARGES, EXPENSES AND RISKS. INVESTORS SHOULD READ
THE PROSPECTUS CAREFULLY BEFORE INVESTING.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture, or sell
telecommunications services or equipment
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve, or maintain a country's infrastructure
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore, or develop natural resources
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA GROWTH FUND
Concentrates on small and medium-sized companies in the U.S.
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. domiciled companies
GT GLOBAL AMERICA VALUE FUND
Concentrates on large cap equity securities of U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS.
<PAGE>
[LOGO]
GT Global, Inc.
Fifty California Street
27th Floor
San Francisco, California
94111-4624
DATED MATERIAL
PLEASE EXPEDITE
G.T. GLOBAL STRATEGIC INCOME FUND
