<PAGE>
INVESTING
IN THE
INFORMATION
AGE
GT GLOBAL
TELECOMMUNICATIONS
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 Telecommunications Fund's objective is to seek long-term growth
of capital by investing primarily in equity securities of companies throughout
the world engaged in the development, manufacture or sale of telecommunications
services or equipment.
PERFORMANCE REVIEW
The Fund's total return for the 12 months ended October 31, 1995, was -2.88% for
Class A shares (-7.49% including the maximum 4.75% sales charge). Total return
for Class B shares was -3.37% (-7.96% including the maximum effect of the 5%
contingent deferred sales charge). Total return for the Morgan Stanley Capital
International (MSCI) World Index(1) over the investment period was 10.03%. The
MSCI Telecommunications Index(2) posted a return of 13.51%. 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
10.
The Fund underperformed the MSCI Telecommunications Index primarily as a result
of the Fund's higher weighting in emerging market stocks. The index consists of
very few emerging market service providers and does not represent any equipment
makers. It is basically composed of U.S. and other English-speaking service
providers, which had an impressive year.
Currency hedging also affected performance. 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.
This year, for the first time since the Fund opened in early 1992, we saw
markedly different performance from the service and equipment sides of the
telecommunications coin. Telecommunications service companies were weak in the
emerging markets and flat at best in most of the developed world outside the
U.S. American service stocks did reasonably well as investors bought dividend
returns in an environment of declining interest rates. As interest rates go
down, investors
- ------------------
(1) The MSCI World Index is an arithmetic average, weighted by market value, of
the performance of 1,577 securities listed on major world stock exchanges --
the U.S., Europe, Canada, Australia, New Zealand and the Far East. It
includes the effect of reinvested dividends and is measured in U.S. dollars.
(2) The MSCI Telecommunications Index is an arithmetic average, weighted by
market value, of the performance of 28 securities listed on 22 major stock
exchanges. It includes the effect of reinvested dividends and is measured in
U.S. dollars.
1
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frequently turn to stocks such as telecom service companies that historically
have offered steady dividend returns and, as a result, are often treated as
bonds.
Emerging markets equities have remained weak since the Federal Reserve began
increasing U.S. interest rates in February 1994 and the Latin American markets
were hit especially hard in early 1995 after Mexico's December 1994 devaluation
of the peso. Compounding this difficulty for many emerging market telecom
service companies have been worries about increased competition as some
governments have revised their telecommunications regulatory policies and taken
steps to speed the development of their telecom infrastructure. This was
reflected in the -0.16% return of the Salomon Brothers Global Telecommunications
Index,(3) which has a high component of emerging market stocks.
While emerging market telecom service companies were struggling, equipment
manufacturers were having a banner year. Among the strongest equipment areas
were data networking, cellular infrastructure and handset and digital switch
producing companies, some of which doubled or even tripled in value. Virtually
any company that could claim its products were used on the Internet also enjoyed
generous price appreciation. We were fortunate to participate in the strong
performance of many of these stocks, though we reduced our holdings in a number
of the highest fliers early in the fall.
Some equipment stocks have come under pressure as fears have increased about the
passage of telecommunications legislation in the United States. If the proposed
legislation passes, the distinction between local and long-distance service
providers, somewhat unique to the United States, will gradually disappear and
telephone and cable operators will be free to enter one another's markets. Many
analysts have been concerned that spending on equipment will be put on hold
pending resolution of legislative issues. We would emphasize two things: first,
even if legislation does not pass, uncertainty will decrease once the issue is
settled and telecom service companies can decide which markets they want to
pursue; and second, the market opportunity for selling equipment overseas
remains undiminished by any legislative concerns in the U.S., even though many
of the equipment companies are American. We expect the legislation to pass, but
feel that either way we will probably know the answer by the end of first
quarter 1996.
- ------------------
(3) The Salomon Brothers Global Telecommunications Index is an arithmetic
average, weighted by market value, of the performance of 78 securities. It
consists of telecommunications companies with total adjusted market
capitalization of US$100 million or more, including those in emerging
markets. It is denominated in U.S. dollars and includes the effect of
reinvested dividends.
2
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Most importantly, we believe a number of equipment companies now sell at very
attractive valuations relative to their long-term growth potential.
MARKET REVIEW
We focus our investment activities on telecommunications stocks we believe will
benefit from four themes: infrastructure development, privatization,
deregulation and new technologies. While there is, of course, no guarantee that
these trends will continue to benefit the Fund, we believe they offer
significant opportunities over the long term.
INFRASTRUCTURE
We have often commented on the remarkable progress being made in building
telephone networks in emerging markets. In almost all of these cases, private
companies have been the driving force behind rapid change and those companies
have usually raised substantial amounts of capital from foreign investors.
China, however, has pursued a somewhat different path of development,
prohibiting domestic telecom operators from listing shares abroad and delegating
responsibility for building up the country's network to the regional telecoms
operators.
While the central government has banned foreign direct investment in telecom
projects, a few small deals and one major submarine cable deal between the
Ministry of Posts and Telecommunications and Hong Kong Telecom(4) have been
signed. Although many issues remain unresolved, we expect that more and more
deals will be completed and that eventually the government will allow a
significant financial interest to be taken by a foreign firm. We see substantial
opportunity in China over the next decade and beyond, and would certainly look
closely at a well-run regional service provider.
PRIVATIZATION
We mentioned in previous reports that we anticipate an increase in privatization
activity. The past year has seen deals for Portugal Telecom, KPN in the
Netherlands, Telefonica in Spain, and SPT Telecom in the Czech Republic. None of
these was technically an initial public offering (IPO), but each represented a
change, either in control of the respective company or in the government's
ownership stake. Just after the end of the fiscal year, PT Telkom, the
Indonesian domestic telecoms company, was brought public in one of the largest
emerging
- ------------------
(4) There can be no assurance the Fund held, holds or will hold these or any
other securities mentioned in this report.
3
<PAGE>
markets privatizations in some time. Over the next year we expect privatizations
of Korea Telecom and possibly the German telecommunications network, and we may
see privatizations or further privatizations in Greece, Brazil, Uruguay, India
and Australia as well as other nations.
Our fairly simple criteria for investing in privatizations remain the same: the
companies must have flexibility to meet future competition and flexibility in
dividend policy, and their countries must have some political commitment to re-
balancing phone tariffs if local calls are presently subsidized by long-distance
calls. Of course, the deal must also be priced conservatively so that, in our
opinion, it offers an attractive long-term return to our shareholders.
DEREGULATION
We have become slightly more concerned about the pace of European deregulation
in recent months. Temporizing on the part of the new French government, rumors
of slow progress on the Deutsche Telekom privatization and a general reduction
in European Union power on issues such as the European Monetary Union may point
to slower deregulation than we had anticipated. Our view is that any such delay
will mean a reduction in equipment purchases, slower loss of market share for
the protected companies and smaller market share gains for competitive market
telecommunications companies. Even so, we eventually expect to see big changes
in the European telecoms sector, with higher usage, lower prices and,
ultimately, higher valuations for companies that have learned to compete.
In previous reports, we examined the remarkable growth achieved by the Japanese
cellular industry since its deregulation in April 1994. An astounding 438,000
customers signed on for the month of September 1995, contrasted to only 40,000
per month prior to deregulation. In only a-year-and-a-half, Japanese cellular
penetration has gone from under 2% to over 5%. We consider this incontrovertible
proof of the power of deregulation in the established markets and we expect to
see very interesting developments, if somewhat less remarkable numbers, coming
from European landline businesses as they are deregulated.
It appears the U.S., after lagging in the deregulation race for the last few
years, is about to play very rapid catch-up. Perhaps the most profound change
from the deregulation is that the telephone service industry in America will
likely have real winners and losers in the future. However, we believe it will
be difficult to profit in the stocks of these companies in the next few years
because margins will
4
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diminish as companies compete ferociously for market share in a competitive new
world.
While we are convinced this strategy is the right one for the long term, it has
cost the Fund in terms of relative performance over the past year as the Baby
Bells have traded higher due to the decline in U.S. interest rates and a
perception that legislative change opens new opportunities for the companies. In
contrast, we believe some of the best opportunities to profit from these changes
may be through smaller service companies with special market niches and
equipment providers that will sell the telecommunications behemoths the hardware
they need to compete.
NEW TECHNOLOGIES
While in past reports we have discussed our optimism about the impact of new
technologies on the way people around the world will live their lives, we also
want to emphasize our belief that equipment sales will continue to benefit from
increased competition and infrastructure development around the world. We
continue to concentrate on equipment for wireless communications, networking and
enhanced data and voice transmission, but we have also bought some new stocks we
believe will benefit from the substantial growth in the Internet. Although the
outlook for many technology companies is bright for the coming year, we are
concerned about valuations in certain cases and believe any delay in passage of
U.S. telecommunications legislation will mean relatively flat performance from
equipment stocks.
PORTFOLIO STRATEGY
We remain convinced that the Fund's strategy of investing in faster-growing,
less defensive stocks, including equipment providers, wireless services and
emerging market telecommunications companies, will pay off over time. We have
reduced some investments in newly deregulating telecommunications markets, but
we believe the long-term opportunity remains bright in the service sector as a
whole. In the U.S., we have emphasized cable television operators, competitive
access providers and some broadcasting firms we believe will be the primary
beneficiaries of anticipated telecommunications legislation.
5
<PAGE>
In our opinion, the market is overdiscounting valid concerns about increased
competition as well as general nervousness about economic stability in Latin
America. Some stock prices, notably Telmex in Mexico, Telebras in Brazil, and
the two telephone companies in Argentina, have only begun to recover from the
"tequila effect" of the devaluation. We believe this has resulted in attractive
valuations for many telecommunications companies.
OUTLOOK
While the potential for another surprise, such as the Mexican devaluation,
cannot be ruled out (especially in Brazil), we believe the most attractive
long-term investment in the telecommunications industry remains the considerable
opportunity to provide services in parts of the world, primarily Asia, Latin
America and eastern Europe, which presently have inadequate or non-existent
telephone infrastructure. Although the unfortunate fact is that these markets
can be volatile and are currently out of favor with international investors, we
anticipate a steady, if gradual, improvement as confidence in both the
macroeconomic and telecommunications policies of emerging country governments
grows. We continue to search for companies developing new services and
technologies for both the developed and developing markets with the potential to
offer premium returns.
CHRISTIAN WIGNALL MICHAEL MAHONEY
CHIEF INVESTMENT OFFICER PORTFOLIO MANAGER
GLOBAL EQUITIES SAN FRANCISCO
SAN FRANCISCO DAVID SHERRY
PORTFOLIO MANAGER
SAN FRANCISCO
JAMES ELLMAN
PORTFOLIO MANAGER
SAN FRANCISCO
NOVEMBER 20, 1995
G.T. GLOBAL TELECOMMUNICATIONS FUND
6
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KEY PORTFOLIO HOLDINGS*
NOKIA FINLAND
Nokia has the second-largest global market share in cellular hand sets and is
also second in the manufacture of European digital-standard cellular systems.
The company is in the final stages of transforming itself from a Finnish
conglomerate to a leading telecommunications equipment provider. Analysts expect
industry growth in Nokia's core wireless markets to expand at rates exceeding
20%; we believe Nokia may be able to grow faster than its market. We also feel
the stock is undervalued, trading at only about 13 times estimated 1996
earnings.
DAINI DENDEN INC. (DDI) JAPAN
As Japan's second-largest provider of cellular phone services, DDI has benefited
from the liberalization of domestic cellular services and cellular hand set
sales. The company also has more than 10% of the domestic long-distance market,
which we expect to show respectable growth when the Japanese economy eventually
recovers and Japanese consumers gradually increase their spending. We expect the
market for cellular phone services to continue to grow at a healthy pace for the
rest of the decade.
KYOCERA CORP. JAPAN
Kyocera is a dominant player in the world's market for ceramic
integrated-circuit packaging. Its divisions are broken down into semiconductor
parts, electronic components and optical precision equipment. The company counts
communication equipment, audio, and personal computers among its consumer goods,
with production facilities in the U.S., Mexico, Brazil, France, the United
Kingdom, Singapore and Hong Kong. It is also a major shareholder in DDI and one
of the principal suppliers of chip sets for telephone handsets used by DDI.
MFS COMMUNICATIONS INC. UNITED STATES
MFS Communications is the largest provider of local competitive access (CAP)
telecommunications services in the U.S. CAPs, also known as "bypassers," provide
various long-distance voice and data transmission services, primarily to
business customers. Although uncertainties still exist, we believe this
fast-growing market will be further expanded by pending U.S. telecommunications
legislation, and we expect the company to increase its profit margins over the
next several years by expanding usage within its current customer base and by
attracting new
- --------------
* The Fund may or may not continue to hold these or any other securities
mentioned in this report.
7
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customers. Its subsidiary, MFS Datanet, is a leading provider of transmission
facilities for Internet traffic.
ERICSSON SWEDEN
Ericsson is one of the world's premier telecommunications equipment companies.
Its revenues derive primarily from its fast-growing radio communications
division where it enjoys leadership in wireless technology (used primarily in
cellular mobile phone systems). The remainder of its revenues come from its
public telecommunications division (mostly switching systems for the major
telephone companies of the world) and other telecommunications and
defense-related businesses. We view Ericsson as one of the best-positioned
equipment companies and believe it will be able to maintain its high margins in
the wireless business for at least the medium term and, over time, increase its
sales and margins in the wireless area. The company has long been a leader in
research and development, though we believe R&D as a percentage of sales should
decline over the next few years, further enhancing profitability.
COMCAST CORP. UNITED STATES
Comcast is the third-largest cable television system operator in the U.S. In
addition, it operates a large cellular network in the Northeast and is the
majority owner of the QVC home shopping network. We believe the cable TV
business will benefit if pending telecommunications legislation is enacted,
which would allow companies to raise prices more rapidly than is presently
permitted and eventually enable them to offer some telephone services over their
networks. We think Comcast is well positioned by virtue of its participation in
the Sprint-cable joint venture, which will offer wireline services over the
cable companies' networks and wireless services over spectrum, purchased in the
recent PCS auctions (FCC auctions for licensing frequencies). All such services
will be marketed under the Sprint name. We anticipate this will be a successful
offering of services and that Comcast will benefit substantially.
ECI TELECOM ISRAEL
ECI produces advanced telecommunications equipment for commercial uses. It has
the dominant market share in digital circuit multiplication equipment (DCME)
products, which increase the transmission capacity of existing
telecommunications systems by filling "empty conversation space" with other
calls. ECI is also a leader in the development of products for the SDH
fiberoptic environment that multiplex, monitor and manage high-speed digital
transmission
8
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of voice and data. We believe this area will show significant growth if the
technology becomes more fully adopted by carriers in the next few years, as
expected. ECI trades about 16 times to 17 times 1996 estimated earnings, and we
think the company may be able to grow earnings at well above the 20% per annum
rate in coming years.
STET DI RISP ITALY
Stet is the government-controlled holding company of a telecommunications group
of some 67 consolidated subsidiaries. The company provides a wide range of
telecommunications services and is also involved in production of equipment and
systems for the industry and the design and construction of telephone networks.
The telecommunications sector in Italy is in the midst of a major restructuring
that we believe offers the prospect of significant improvement in Stet's
operating and financial performance. In addition, the company's capital
expenditure cycle appears to have peaked, and the stock continues to sell at
less than 3 times expected 1996 cash flow.
DSC COMMUNICATIONS CORP. UNITED STATES
The company is a leading manufacturer of digital switching, transmission, access
and private network system products. DSC is one of the more diversified
suppliers of communications equipment with strong offerings in the
fastest-growing areas of the industry, including wireless, intelligent networks,
fiber optics and broadband switching. The company has diversified its customer
base and now sells to local, long-distance, cellular, cable and competitive
access service providers in the U.S. and an increasing number of international
wireline and wireless carriers. The stock was hurt recently when quarterly
earnings fell slightly short of analyst expectations, and we believe it is
attractively valued at approximately 16 times expected 1996 earnings.
MANNESMANN GERMANY
Mannesmann is a diversified industrial conglomerate involved in
telecommunications, machinery, plant construction, automotive technology, tubes
and pipes. Mannesmann is the majority owner of Germany's second-largest cellular
company, whose rapid growth has exceeded expectations and will deliver profits
to the parent this year. The company also has investments in Italian cellular
and Spanish and French paging companies, and is exploring a joint venture in
Germany that would compete with Deutsche Telecom.
9
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO SUMMARY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE SUMMARY
<S> <C> <C>
Month G.T. Global Telecommunications Fund MSCI World Index
1/27/92 9,525 10,000
1/31/92 9,467 9,976
2/29/92 9,617 9,805
3/31/92 9,533 9,345
4/30/92 9,608 9,477
5/31/92 9,767 9,856
6/30/92 9,342 9,528
7/31/92 9,467 9,554
8/31/92 9,300 9,788
9/30/92 9,050 9,700
10/31/92 9,300 9,439
11/30/92 9,733 9,609
12/31/92 9,987 9,689
1/31/93 10,266 9,723
2/28/93 10,527 9,955
3/31/93 10,696 10,534
4/30/93 10,865 11,024
5/31/93 11,355 11,280
6/30/93 11,827 11,187
7/31/93 12,258 11,420
8/31/93 13,364 11,945
9/30/93 13,583 11,726
10/31/93 14,284 12,051
11/30/93 13,549 11,371
12/31/93 14,746 11,930
1/31/94 15,399 12,719
2/28/94 14,944 12,556
3/31/94 14,025 12,017
4/30/94 14,257 12,390
5/31/94 14,179 12,424
6/30/94 13,819 12,392
7/31/94 14,480 12,630
8/31/94 15,253 13,012
9/30/94 14,892 12,673
10/31/94 15,287 13,036
11/30/94 14,617 12,473
12/31/94 14,097 12,596
1/31/95 13,400 12,409
2/28/95 13,129 12,592
3/31/95 13,074 13,202
4/30/95 13,572 13,664
5/31/95 13,789 13,891
6/30/95 14,594 13,890
7/31/95 15,653 14,588
8/31/95 15,997 14,265
9/30/95 16,024 14,684
10/31/95 14,848 14,455
*Index return without dividends before Dec 93, with dividends after Dec
93
<CAPTION>
PERFORMANCE SUMMARY
<S> <C>
Month MSCI Telecommunications Index*
1/27/92 10,000
1/31/92 9,940
2/29/92 9,805
3/31/92 9,563
4/30/92 10,194
5/31/92 10,275
6/30/92 10,209
7/31/92 10,556
8/31/92 10,543
9/30/92 10,353
10/31/92 10,117
11/30/92 10,477
12/31/92 10,903
1/31/93 10,975
2/28/93 11,452
3/31/93 11,816
4/30/93 11,599
5/31/93 12,079
6/30/93 12,348
7/31/93 12,469
8/31/93 13,199
9/30/93 12,990
10/31/93 13,559
11/30/93 12,845
12/31/93 13,077
1/31/94 13,671
2/28/94 12,781
3/31/94 12,397
4/30/94 12,818
5/31/94 12,910
6/30/94 12,867
7/31/94 13,271
8/31/94 13,708
9/30/94 13,334
10/31/94 13,649
11/30/94 12,738
12/31/94 12,727
1/31/95 13,037
2/28/95 13,052
3/31/95 13,334
4/30/95 13,532
5/31/95 13,716
6/30/95 13,970
7/31/95 14,330
8/31/95 14,685
9/30/95 15,591
10/31/95 15,439
*Index return without dividends before Dec 93, with dividends after Dec
93
</TABLE>
THE CHART AT RIGHT SHOWS THE PERFORMANCE OF THE G.T. GLOBAL
TELECOMMUNICATIONS FUND CLASS A SHARES SINCE THE FUND'S INCEPTION VERSUS THE
MSCI WORLD INDEX AND MSCI TELECOMMUNICATIONS INDEX. THIS REPRESENTS A CUMULATIVE
RETURN OF 48.48% AND AN AVERAGE ANNUAL TOTAL RETURN OF 11.08%. THE CHART ASSUMES
A HYPOTHETICAL $10,000 INITIAL INVESTMENT IN THE FUND'S CLASS A SHARES AND
REFLECTS ALL FUND EXPENSES AND THE MAXIMUM 4.75% SALES CHARGE. INVESTORS SHOULD
NOTE THAT THE FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND WHILE THE INDICES ARE
UNMANAGED, DO NOT INCUR EXPENSES AND ARE NOT AVAILABLE FOR INVESTMENT. THE
PERFORMANCE OF OTHER CLASSES WILL BE GREATER OR LESS THAN THE LINE SHOWN BASED
ON THE DIFFERENCES IN CHARGES AND FEES PAID BY SHAREHOLDERS INVESTING IN
DIFFERENT CLASSES.
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* -2.88% N/A 12.53% -7.49% N/A 11.08%
CLASS B** -3.37% N/A 12.43% -7.96% N/A 11.97%
ADVISOR
CLASS*** N/A N/A 7.94% N/A N/A N/A
</TABLE>
* The Fund began operations on January 27, 1992.
** The Fund began offering Class B shares on April 1, 1993.
*** 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 "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>
ASIA - PACIFIC 31.8%
UNITED STATES 26.7%
EUROPE 26.6%
LATIN AMERICA 8.1%
CANADA 2.6%
SHORT-TERM & OTHER 4.2%
SECTOR ALLOCATION OF NET ASSETS AS OF OCTOBER 31, 1995
TELECOM EQUIPMENT 18.8%
WIRELESS COMMUNICATION 16.5%
TELEPHONE NETWORKS 14.2%
BROADCASTING & PUBLISHING 7.8%
CABLE TELEVISION 7.1%
TELEPHONE - REGIONAL/LOCAL 3.9%
SEMICONDUCTORS 3.8%
CONGLOMERATES 3.4%
TELEPHONE - LONG DISTANCE 3.3%
TELECOM TECHNOLOGY 3.2%
MACHINERY & ENGINEERING 2.1%
CONSUMER ELECTRONICS 2.0%
SHORT-TERM & OTHER 13.9%
</TABLE>
ALLOCATIONS WILL CHANGE BASED ON CURRENT MARKET CONDITIONS.
10
<PAGE>
GT GLOBAL
TELECOMMUNICATIONS
FUND
FINANCIAL
STATEMENTS
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of G.T. Global Telecommunications 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 Telecommunications 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 three years in the period
then ended and for the period from January 27, 1992 (commencement of operations)
to October 31, 1992. These financial statements and the financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
G.T. Global Telecommunications Fund as of October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the three years in the period then ended and for the period from January 27,
1992 (commencement of operations) to October 31, 1992, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1995
F-1
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Telecom Equipment (18.8%)
Nokia AB "A" ............................................ FIN 2,452,160 $ 140,430,534 5.7
L.M. Ericsson Telephone Co.: ........................... SWDN -- -- 3.8
ADR{\/} ............................................... -- 3,509,300 74,956,437 --
"B" Free .............................................. -- 871,200 18,518,007 --
ECI Telecommunications Ltd.{\/} ......................... ISRL 3,003,500 57,066,500 2.3
DSC Communications Corp.-/- ............................. US 1,500,000 55,500,000 2.3
ANTEC Corp.{::} -/- ..................................... US 2,068,800 25,601,400 1.0
Mitel Corp.-/- {\/} ..................................... CAN 3,776,000 20,768,000 0.8
Andrew Corp.-/- ......................................... US 465,200 19,654,700 0.8
Spectrian Corp.{::} -/- ................................. US 750,000 16,312,500 0.7
Scientific-Atlanta, Inc. ................................ US 925,000 11,446,875 0.5
Champion Technology Holdings ............................ HK 73,439,163 9,404,073 0.4
BroadBand Technologies, Inc.-/- ......................... US 487,300 8,527,750 0.3
Netas Telekomunik-/- .................................... TRKY 17,820,000 6,166,992 0.2
--------------
464,353,768
--------------
Wireless Communications (16.5%)
DDI Corp. ............................................... JPN 15,049 122,058,712 4.9
Advanced Info. Service - Foreign ........................ THAI 2,386,050 37,934,022 1.5
Shinawatra Computer Company, Ltd.: ...................... THAI -- -- 1.4
Foreign ............................................... -- 1,399,100 34,254,595 --
Local ................................................ -- 31,100 761,431 --
Millicom International Cellular S.A.{::} -/- {\/} ....... LUX 1,057,000 34,881,000 1.4
AirTouch Communications, Inc.-/- ........................ US 1,000,000 28,500,000 1.2
United Communication Industry - Foreign ................. THAI 1,967,800 24,871,240 1.0
Vodafone Group PLC ...................................... UK 5,795,000 23,951,201 1.0
Grupo Iusacell, S.A. de C.V. "L" - ADR-/- {\/} .......... MEX 1,601,900 19,022,563 0.8
Telecom Italia Mobile Di Risp S.p.A.-/- ................. ITLY 16,230,000 17,892,943 0.7
Korea Mobile Telecom-/- ................................. KOR 16,500 15,947,915 0.6
Telecom Italia Mobile S.p.A. ............................ ITLY 8,365,001 14,079,965 0.6
Telephone and Data Systems, Inc. ........................ US 258,500 10,340,000 0.4
Total Access Communication Public Co., Ltd. ............. THAI -- -- 0.4
Common-/- {\/} ........................................ -- 1,125,000 6,806,250 --
144A{.} -/- {\/} ...................................... -- 286,400 1,732,720 --
Rogers Cantel Mobile Communications "B"-/- .............. CAN 382,000 7,950,609 0.3
Tele 2000 S.A.{::} -/- .................................. PERU 6,386,222 6,287,539 0.3
American Satellite Network .............................. US 65,825 -- --
--------------
407,272,705
--------------
Telephone Networks (14.2%)
Nippon Telegraph & Telephone Corp. ...................... JPN 6,120 50,236,572 2.0
Stet Di Risp ............................................ ITLY 16,820,000 36,717,190 1.5
SPT Telecom-/- ......................................... CZCH 368,000 36,244,024 1.5
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ......... MEX 1,246,750 34,285,625 1.4
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR{\/} ................................................ BRZL 677,800 27,027,275 1.1
Frontier Corp. .......................................... US 1,000,000 27,000,000 1.1
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Telephone Networks (Continued)
Pakistan Telecommunications Co., Ltd. - 144A GDR{.} -/-
{\/} ................................................... PAK 225,437 $ 21,078,360 0.9
Telefonica de Argentina S.A. - ADR{\/} .................. ARG 993,000 20,604,750 0.8
Stet Societa' Finanziaria Telefonica S.p.A. ............. ITLY 6,750,000 19,099,856 0.8
Telecom Italia - Di Risp ................................ ITLY 16,230,000 19,064,748 0.8
Telecom Argentina S.A. - ADR{\/} ........................ ARG 387,100 14,854,963 0.6
Telecom Italia S.p.A. ................................... ITLY 8,365,001 12,824,794 0.5
Russian Telecommunications Development Corp.: ........... US -- -- 0.3
Non-Voting(.) -/- ..................................... -- 453,000 4,530,000 --
Voting(.) -/- ........................................ -- 331,000 3,310,000 --
Orient Telecom & Technology Holdings Ltd.-/- ............ HK 24,682,000 7,582,232 0.3
Atlantic Tele-Network, Inc.{::} -/- ..................... US 660,100 7,261,100 0.3
TelecomAsia Corp. - Foreign-/- .......................... THAI 1,257,000 3,846,940 0.2
Jasmine International Public Co., Ltd. - Foreign ........ THAI 560,400 3,207,377 0.1
--------------
348,775,806
--------------
Broadcasting & Publishing (7.8%)
Time Warner, Inc. ....................................... US 1,150,400 41,989,600 1.7
News Corp., Ltd.: ....................................... AUSL -- -- 1.2
Common ............................................... -- 3,824,342 19,278,970 --
Preferred ............................................ -- 1,920,750 8,775,891 --
Pearson PLC ............................................. UK 1,800,000 17,923,186 0.7
Granada Group PLC ....................................... UK 1,500,000 16,050,261 0.7
Evergreen Media Corp. "A"-/- ............................ US 571,100 15,562,475 0.6
Canal Plus .............................................. FR 84,390 14,587,205 0.6
Grupo Televisa, S.A. de C.V. - GDR{\/} .................. MEX 800,000 13,700,000 0.6
Tele-Communications Liberty Media Group, Inc. "A"-/- .... US 531,800 13,095,575 0.5
Sistem Televisyen Malaysia Bhd. ......................... MAL 3,718,000 11,707,932 0.5
EchoStar Communications Corp. "A" ....................... US 605,700 8,782,650 0.4
Home Shopping Network, Inc.-/- .......................... US 568,200 4,616,625 0.2
International Broadcasting Corp., Ltd. - Foreign-/- ..... THAI 1,741,900 3,669,344 0.1
Medya Holding AS ........................................ TRKY 37,932,160 1,220,278 --
--------------
190,959,992
--------------
Cable Television (7.1%)
Comcast Corp. "A" ....................................... US 3,404,300 60,851,863 2.5
Nynex CableComms Group: ................................. UK -- -- 1.5
Units-/- ............................................. -- 15,134,000 30,617,228 --
ADR-/- {\/} ........................................... -- 306,900 6,214,725 --
TCI Group "A"-/- ........................................ US 2,127,200 36,162,400 1.5
Rogers Communications, Inc. "B"-/- ...................... CAN 2,376,400 23,288,472 0.9
Bell Cablemedia PLC - ADR{::} -/- {\/} .................. UK 738,300 10,982,213 0.4
International CableTel, Inc.-/- ......................... US 307,333 8,144,325 0.3
--------------
176,261,226
--------------
Telephone - Regional/Local (3.9%)
MFS Communications Co., Inc.-/- ........................ US 1,924,000 77,681,500 3.1
Intermedia Communications of Florida, Inc.{::} -/- ...... US 873,900 11,032,988 0.4
IntelCom Group, Inc.-/- ................................. US 974,300 10,595,513 0.4
--------------
99,310,001
--------------
Semiconductors (3.8%)
Kyocera Corp. ........................................... JPN 1,151,000 94,368,261 3.8
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Conglomerates (3.4%)
Grupo Carso, S.A. de C.V. "A1"-/- ...................... MEX 9,745,000 $ 51,051,756 2.1
Hutchison Whampoa ....................................... HK 4,800,000 26,448,675 1.1
Alfa, S.A. de C.V. ...................................... MEX 524,000 5,961,236 0.2
--------------
83,461,667
--------------
Telephone - Long Distance (3.3%)
WorldCom, Inc.-/- ....................................... US 1,107,259 36,124,325 1.5
Call-Net Enterprises, Inc.: ............................ CAN -- -- 0.6
"B"-/- ................................................ -- 1,036,700 8,514,672 --
"A"-/- ................................................ -- 519,400 4,362,913 --
144A{.} -/- ........................................... -- 379,400 3,116,105 --
LCI International, Inc.-/- .............................. US 670,000 12,060,000 0.5
GN Store Nord AS ....................................... DEN 134,166 9,946,773 0.4
Philippine Long Distance Telephone Co. ................. PHIL 86,404 4,822,394 0.2
Petersburg Long Distance, Inc.-/- {\/} ................. RUS 510,000 3,187,500 0.1
--------------
82,134,682
--------------
Telecom Technology (3.2%)
Kyushu-Matsushita Electric Co., Ltd. .................... JPN 2,557,000 40,777,908 1.7
Murata Manufacturing Co., Ltd. .......................... JPN 542,000 19,037,081 0.8
DSP Communications, Inc. ................................ US 361,800 13,115,250 0.5
Dialogic Corp.-/- ....................................... US 200,000 5,800,000 0.2
--------------
78,730,239
--------------
Machinery & Engineering (2.1%)
Mannesmann AG ........................................... GER 160,900 52,970,205 2.1
--------------
Consumer Electronics (2.0%)
Amcol Holdings Ltd. ..................................... SING 10,644,000 23,510,995 1.0
Three-Five Systems, Inc.{::} -/- ........................ US 749,000 13,575,625 0.6
Himachal Futuristic Communications Ltd. - 144A GDR{.} -/-
{\/} ................................................... IND 1,613,000 8,871,500 0.4
--------------
45,958,120
--------------
Office Equipment (1.6%)
Canon Inc. .............................................. JPN 1,600,000 27,394,580 1.1
Olivetti Group-/- ....................................... ITLY 16,413,000 12,324,176 0.5
--------------
39,718,756
--------------
Industrial Components (1.4%)
Oak Industries, Inc.-/- ................................. US 597,800 12,479,075 0.5
Alcatel Cable ........................................... FR 133,813 7,801,310 0.3
BICC PLC ................................................ UK 1,500,000 6,211,475 0.3
PT Kabelmetal Indonesia - Local-/- ...................... INDO 5,100,000 4,718,062 0.2
PT Kabelindo Murni - Local{::} .......................... INDO 4,316,000 1,901,322 0.1
PT Voksel Electronics - Foreign ......................... INDO 1,106,700 1,218,833 --
--------------
34,330,077
--------------
Aerospace/Defense (1.2%)
Orbital Sciences Corp.{::} -/- .......................... US 2,095,500 29,860,875 1.2
--------------
Real Estate (1.0%)
Wharf (Holdings) Ltd. ................................... HK 7,298,000 24,637,547 1.0
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Multi-Industry (0.9%)
Compagnie Generale des Eaux ............................. FR 142,874 $ 13,283,468 0.5
Tadiran Ltd.{\/} ........................................ ISRL 455,600 9,966,250 0.4
--------------
23,249,718
--------------
Automobiles (0.9%)
Edaran Otomobil Nasional Bhd. ........................... MAL 2,926,000 23,034,836 0.9
--------------
Software (0.9%)
Quarterdeck Corp.-/- .................................... US 1,000,000 21,375,000 0.9
--------------
Value Added Telephone Service (0.8%)
International Engineering PLC - Foreign{::} ............. THAI 3,057,700 14,583,625 0.6
Sapura Telecommunications Bhd. ......................... MAL 4,730,000 5,417,949 0.2
--------------
20,001,574
--------------
Networking (0.3%)
Cisco Systems, Inc.-/- .................................. US 85,000 6,587,500 0.3
--------------
Other Financial (0.2%)
Phatra Thanakit Co., Ltd. - Foreign ..................... THAI 619,500 4,850,616 0.2
--------------
Banks-Regional (0.2%)
Grupo Financiero Banamex Accival, S.A. de C.V. "B" ...... MEX 2,576,000 4,413,933 0.2
--------------
Computers & Peripherals (0.2%)
NEC Corp. ............................................... JPN 300,000 3,962,430 0.2
--------------
Telecom - Other (0.1%)
Radiotronica S.A.{::} -/- .............................. SPN 185,454 1,475,600 0.1
--------------
Retailers-Other (0.0%)
Gran Cadena de Almacenes Colombianos S.A. ............... COL 64,000 71,885 --
Grupo Mexicano de Video - 144A ADR{::} {.} {\/} ......... MEX 122,000 61,000 --
--------------
132,885
-------------- -----
TOTAL EQUITY INVESTMENTS (cost $2,249,438,890) ............ 2,362,188,019 95.8
-------------- -----
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Structured Notes (0.4%)
Russia (0.4%)
Credit Suisse Synthetic Equity Medium Term Note, 3.25%
due 4/29/97 (This is an equity linked note. The value
of this note is linked to the underlying value of
Rostelecom.) ......................................... USD 7,000,000 8,530,200 0.4
--------------
Corporate Bonds (0.0%)
Malaysia (0.0%)
Sapura Telecommunications Bhd., Convertible Bond, 2%
due 9/14/00 ......................................... MYR 3,547,500 1,064,739 --
-------------- -----
TOTAL FIXED INCOME INVESTMENTS (cost $8,399,408) .......... 9,594,939 0.4
-------------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
Market % of Net
Repurchase Agreement (4.0%) 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:
$99,070,000 U.S. Treasury Bill, due 3/28/96 (market
value of collateral is $96,900,890, including accrued
interest). ........................................... $ 95,015,305 3.8
$4,770,000 U.S. Treasury Bill, due 2/8/96 (market value
of collateral is $4,699,643, including accrued
interest). ........................................... 4,598,741 0.2
-------------- -----
TOTAL REPURCHASE AGREEMENT (cost $99,614,046) ............ 99,614,046 4.0
-------------- -----
TOTAL INVESTMENTS (cost $2,357,452,344) .................. 2,471,397,004 100.2
Other Assets and Liabilities .............................. (5,473,913) (0.2)
-------------- -----
NET ASSETS ............................................... $2,465,923,091 100.0
-------------- -----
-------------- -----
<FN>
- ----------------
{d} Percentages indicated are based on net assets of $2,465,923,091.
-/- Non-income producing security.
{::} See Note 6 of Notes to Financial Statements.
{\/} U.S. currency denominated.
{.} 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.
(.) Restricted securities -- At October 31, 1995, the Fund owned the
following restricted securities constituting 0.3% of net assets
which may not be publicly sold without registration under the
Securities Act of 1933 (Note 1).
Additional information on restricted securities is as follows:
Acquisition Acquisition Market Value
Description Dates Shares Cost Per Share
- --------------------------------------------------------------------------- ----------- ------- ----------- ------------
Russian Telecommunications Development Corporation:
Non-voting............................................................... 12/22/93 453,000 $ 4,530,000 $10.00
Voting................................................................... 12/22/93 331,000 3,310,000 10.00
* For Federal income tax purposes, cost is $2,362,871,101 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 402,432,461
Unrealized depreciation: (293,906,558)
-------------
Net unrealized appreciation: $ 108,525,903
-------------
-------------
</TABLE>
<TABLE>
<C> <S>
Abbreviations:
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
The Fund's Portfolio of Investments at October 31, 1995, was concentrated in the
following countries:
<TABLE>
<CAPTION>
Percentage of Net Assets {d}
--------------------------------------------
Fixed Income,
Rights & Short-Term
Country(Country Code/Currency Code) Equity Warrants & Other Total
- -------------------------------------- ------ ------------- ---------- ------
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) ................. 1.4 1.4
Australia (AUSL/AUD) ................. 1.2 1.2
Brazil (BRZL/BRL) .................... 1.1 1.1
Canada (CAN/CAD) ..................... 2.6 2.6
Czech Republic (CZCH/CSK) ........... 1.5 1.5
Denmark (DEN/DKK) .................... 0.4 0.4
Finland (FIN/FIM) .................... 5.7 5.7
France (FR/FRF) ...................... 1.4 1.4
Germany (GER/DEM) .................... 2.1 2.1
Hong Kong (HK/HKD) ................... 2.8 2.8
India (IND/INR) ...................... 0.4 0.4
Indonesia (INDO/IDR) ................. 0.3 0.3
Israel (ISRL/ILS) .................... 2.7 2.7
Italy (ITLY/ITL) ..................... 5.4 5.4
Japan (JPN/JPY) ...................... 14.5 14.5
Korea (KOR/KRW) ...................... 0.6 0.6
Luxembourg (LUX/ECU) ................. 1.4 1.4
Malaysia (MAL/MYR) ................... 1.6 1.6
Mexico (MEX/MXN) ..................... 5.3 5.3
Pakistan (PAK/PKR) .................. 0.9 0.9
Peru (PERU/PES) ...................... 0.3 0.3
Philippines (PHIL/PHP) ............... 0.2 0.2
Russia (RUS/SUR) ..................... 0.1 0.4 0.5
Singapore (SING/SGD) ................. 1.0 1.0
Spain (SPN/ESP) ...................... 0.1 0.1
Sweden (SWDN/SEK) .................... 3.8 3.8
Thailand (THAI/THB) .................. 5.5 5.5
Turkey (TRKY/TRL) .................... 0.2 0.2
United Kingdom (UK/GBP) .............. 4.6 4.6
United States (US/USD) ............... 26.7 3.8 30.5
------ --- --- ------
Total ............................... 95.8 0.4 3.8 100.0
------ --- --- ------
------ --- --- ------
<FN>
- ----------------
{d} Percentages indicated are based on net assets of $2,465,923,091.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Unrealized
Market Value Delivery Appreciation
Contracts to Buy: (U.S. Dollars) Contract Price Date (Depreciation)
-------------- -------------- --------- -------------
<S> <C> <C> <C> <C>
French Francs........................................................... 10,584,003 5.06313 11/16/95 $ 364,830
Japanese Yen............................................................ 23,899,325 100.21000 11/08/95 (474,066)
Japanese Yen............................................................ 26,320,810 100.17800 11/08/95 (533,889)
Japanese Yen............................................................ 7,631,347 100.17800 11/08/95 (154,793)
Japanese Yen............................................................ 518,540 97.97300 11/14/95 (22,425)
-------------- -------------
Total Contracts to Buy (Payable amount $69,774,368)................. 68,954,025 (820,343)
-------------- -------------
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF NET ASSETS IS 2.80%
<CAPTION>
Contracts to Sell:
<S> <C> <C> <C> <C>
French Francs........................................................... 35,888,057 4.90035 11/16/95 (86,023)
Italian Lira............................................................ 59,513,181 1,605.60000 11/16/95 (465,747)
Japanese Yen............................................................ 50,220,135 90.16900 11/08/95 6,706,303
Japanese Yen............................................................ 43,762,841 96.69750 11/08/95 2,494,818
Japanese Yen............................................................ 72,693,474 89.90000 11/09/95 9,953,912
Japanese Yen............................................................ 72,204,285 91.70000 11/14/95 8,275,542
-------------- -------------
Total Contracts to Sell (Receivable amount $361,160,778)............ 334,281,973 26,878,805
-------------- -------------
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF NET ASSETS IS 13.56%
Total Open Forward Foreign Currency Contracts, Net.................. $26,058,462
-------------
-------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $2,357,452,344)
(Note 1)................................................. $2,471,397,004
U.S. currency.............................. $ 961
Foreign currencies (cost $1,379,989)....... 1,426,729 1,427,690
----------
Receivable for open forward foreign currency contracts,
net (Note 1)............................................. 26,058,462
Receivable for securities sold............................ 22,785,737
Receivable for Fund shares sold........................... 7,809,807
Dividends and dividend withholding tax reclaims
receivable............................................... 3,462,722
Receivable for forward foreign currency contracts --
closed (Note 1).......................................... 1,266,060
Interest receivable....................................... 117,769
Unamortized organizational costs.......................... 12,074
Cash held as collateral for securities loaned (Note 1).... 151,557,635
--------------
Total assets............................................ 2,685,894,960
--------------
Liabilities:
Payable for Fund shares repurchased....................... 35,184,262
Payable for securities purchased.......................... 28,518,300
Payable for investment management and administration fees
(Note 2)................................................. 2,043,619
Payable for service and distribution expenses (Note 2).... 1,592,725
Payable for transfer agent fees (Note 2).................. 545,407
Payable for printing and postage expenses................. 322,690
Payable for custodian fees (Note 1)....................... 62,674
Payable for fund accounting fees (Note 2)................. 55,425
Payable for professional fees............................. 39,053
Payable for registration and filing fees.................. 25,202
Payable for Directors' fees and expenses (Note 2)......... 7,904
Other accrued expenses.................................... 16,973
Collateral for securities loaned (Note 1)................. 151,557,635
--------------
Total liabilities....................................... 219,971,869
--------------
Net assets.................................................. $2,465,923,091
--------------
--------------
Class A:
Net asset value and redemption price per share
($1,353,722,073 DIVIDED BY 82,457,608 shares
outstanding)............................................... $ 16.42
--------------
--------------
Maximum offering price per share
(100/95.25 of $16.42) *.................................... $ 17.24
--------------
--------------
Class B:+
Net asset value and offering price per share
($1,111,520,240 DIVIDED BY 68,621,620 shares
outstanding)............................................... $ 16.20
--------------
--------------
Advisor Class: (Notes 1 & 4)
Net asset value, offering price per share, and redemption
price per share
($680,778 DIVIDED BY 41,371 shares outstanding)............ $ 16.46
--------------
--------------
Net assets consist of:
Paid in capital (Note 4).................................. $2,238,611,664
Accumulated net realized gain on investments and foreign
currency transactions.................................... 87,129,699
Net unrealized appreciation on translation of assets and
liabilities in foreign currencies........................ 26,237,068
Net unrealized appreciation of investments................ 113,944,660
--------------
Total -- representing net assets applicable to capital
shares outstanding......................................... $2,465,923,091
--------------
--------------
<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-9
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of
$2,932,991)................................................. $ 25,666,862
Interest income.............................................. 7,204,936
-------------
Total investment income.................................... 32,871,798
-------------
Expenses:
Investment management and administration fees (Note 2)....... 23,861,460
Service and distribution expenses: (Note 2)
Class A.................................. $ 7,238,541
Class B.................................. 11,199,568 18,438,109
-------------
Transfer agent fees (Note 2)................................. 6,735,000
Custodian fees (Note 1)...................................... 1,462,916
Printing and postage expenses................................ 1,071,067
Fund accounting fees (Note 2)................................ 654,836
Registration and filing fees................................. 101,000
Directors' fees and expenses (Note 2)........................ 43,535
Legal fees................................................... 35,450
Insurance expenses........................................... 33,304
Amortization of organization costs (Note 1).................. 17,750
Audit fees................................................... 13,700
Other expenses............................................... 37,165
-------------
Total expenses before reductions........................... 52,505,292
-------------
Expense reductions (Notes 1 & 7)......................... (1,379,807)
-------------
Total net expenses......................................... 51,125,485
-------------
Net investment loss............................................ (18,253,687)
-------------
Net realized and unrealized gain (loss) on
investments and foreign currencies: (Note 1)
Net realized gain on investments........... 139,255,816
Net realized loss on foreign currency
transactions.............................. (26,974,212)
-------------
Net realized gain during the year.......................... 112,281,604
Net change in unrealized appreciation on
translation of assets and liabilities in
foreign currencies........................ 20,055,808
Net change in unrealized appreciation of
investments............................... (203,028,268)
-------------
Net unrealized depreciation during the year................ (182,972,460)
-------------
Net realized and unrealized loss on investments and foreign
currencies.................................................... (70,690,856)
-------------
Net decrease in net assets resulting from operations........... $ (88,944,543)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS 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 (loss)...................... $ (18,253,687) $ (5,008,280)
Net realized gain on investments and
foreign currency transactions............. 112,281,604 137,990,064
Net change in unrealized appreciation on
translation of assets and liabilities in
foreign currencies........................ 20,055,808 3,578,825
Net change in unrealized appreciation
(depreciation) of investments............. (203,028,268) 27,259,645
----------------- -----------------
Net increase (decrease) in net assets
resulting from operations............... (88,944,543) 163,820,254
Class A:
Distributions to shareholders: (Note 1)
From net investment income................. 0 (1,139,864)
From net realized gain on investments...... (78,594,102) (20,482,527)
Class B:
Distributions to shareholders: (Note 1)
From net investment income................. 0 (511,428)
From net realized gain on investments...... (58,563,435) (9,209,255)
----------------- -----------------
Total distributions...................... (137,157,537) (31,343,074)
----------------- -----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested................................ 1,799,851,047 1,678,630,071
Decrease from capital shares repurchased... (1,936,308,797) (661,298,601)
----------------- -----------------
Net increase (decrease) from capital
share transactions...................... (136,457,750) 1,017,331,470
----------------- -----------------
Total increase (decrease) in net assets...... (362,559,830) 1,149,808,650
Net assets:
Beginning of year.......................... 2,828,482,921 1,678,674,271
----------------- -----------------
End of year................................ $2,465,923,091 $2,828,482,921
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS 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+
----------------------------------------------------------------
JANUARY 27, 1992
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
-------------------------------------------- TO OCTOBER 31,
1995 1994(C) 1993 1992
------------ ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.80 $ 16.92 $ 11.16 $ 11.43
------------ ------------- ------------- -----------------
Income from investment operations:
Net investment income (loss).......... (0.09) (0.01) 0.08 0.14*
Net realized and unrealized gain
(loss) on investments................ (0.43) 1.17 5.83 (0.41)
------------ ------------- ------------- -----------------
Net increase (decrease) from
investment operations.............. (0.52) 1.16 5.91 (0.27)
------------ ------------- ------------- -----------------
Distributions to shareholders:
From net investment income............ 0.00 (0.01) (0.15) 0.00
From net realized gain on
investments.......................... (0.86) (0.27) 0.00 0.00
------------ ------------- ------------- -----------------
Total distributions................. (0.86) (0.28) (0.15) 0.00
------------ ------------- ------------- -----------------
Net asset value, end of period.......... $ 16.42 $ 17.80 $ 16.92 $ 11.16
------------ ------------- ------------- -----------------
------------ ------------- ------------- -----------------
Total investment return (d)............. (2.88)% 7.02% 53.60% (2.40)%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $1,353,722 $1,644,402 $1,223,340 $442,862
Ratio of net investment income (loss) to
average net assets..................... (0.49)% (0.02)% 0.8% 2.1%*(b)
Ratio of expenses to average net assets
With expense reductions (Notes 1 &
7)................................... 1.77% 1.8% 2.0% 2.3%*(b)
Without expense reductions............ 1.83% --%** --%** --%**
Portfolio turnover rate++++............. 62% 57% 41% 4%(b)
</TABLE>
- ----------------
+ All capital shares issued and outstanding March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, 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.
* Includes reimbursement by G.T. Capital Management, Inc. of Fund
operating expenses of less than $0.01. Without such reimbursement, the
annualized expense ratio would have been 2.30% and the annualized
ratio of net investment income average net assets would have been
2.04% (See Note 2).
** Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
(a) Not annualized.
(b) Annualized.
(c) These per share operating performance data were calculated based upon
weighted average shares outstanding during the year.
(d) Total investment return does not include sales charge.
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS 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>
ADVISOR
CLASS+++
---------
CLASS B++ JUNE 1,
--------------------------------------------- 1995
APRIL 1, 1993 TO
YEAR ENDED OCTOBER 31, TO OCTOBER
---------------------------- OCTOBER 31, 31,
1995 1994(C) 1993 1995
------------ ------------- -------------- ---------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.66 $ 16.87 $ 12.68 $15.24
------------ ------------- -------------- ---------
Income from investment operations:
Net investment income (loss).......... (0.17) (0.10) 0.01 0.00
Net realized and unrealized gain
(loss) on investments................ (0.43) 1.17 4.18 1.22
------------ ------------- -------------- ---------
Net increase (decrease) from
investment operations.............. (0.60) 1.07 4.19 1.22
------------ ------------- -------------- ---------
Distributions to shareholders:
From net investment income............ 0.00 (0.01) 0.00 0.00
From net realized gain on
investments.......................... (0.86) (0.27) 0.00 0.00
------------ ------------- -------------- ---------
Total distributions................. (0.86) (0.28) 0.00 0.00
------------ ------------- -------------- ---------
Net asset value, end of period.......... $ 16.20 $ 17.66 $ 16.87 $16.46
------------ ------------- -------------- ---------
------------ ------------- -------------- ---------
Total investment return (d)............. (3.37)% 6.50% 33.00%(a) 7.94%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $1,111,520 $1,184,081 $455,335 $ 681
Ratio of net investment income (loss) to
average net assets..................... (0.99)% (0.52)% 0.3%(b) 0.01%(b)
Ratio of expenses to average net assets
With expense reductions (Notes 1 &
7)................................... 2.27% 2.3% 2.5%(b) 1.27%(b)
Without expense reductions............ 2.33% --%** --%** 1.33%(b)
Portfolio turnover rate++++............. 62% 57% 41% 62%
</TABLE>
- ----------------
+ All capital shares issued and outstanding March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, 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.
* Includes reimbursement by G.T. Capital Management, Inc. of Fund
operating expenses of less than $0.01. Without such reimbursement, the
annualized expense ratio would have been 2.30% and the annualized
ratio of net investment income average net assets would have been
2.04% (See Note 2).
** Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
(a) Not annualized.
(b) Annualized.
(c) These per share operating performance data were calculated based upon
weighted average shares outstanding during the year.
(d) Total investment return does not include sales charge.
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
G.T. Global Telecommunications 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 diversified, open-end management investment company.
The Company has twelve series of shares in operation, each series corresponding
to a distinct portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. The Fund
commenced sale of Advisor Class shares on June 1, 1995. Investment income,
realized and unrealized capital gains and losses, and the common expenses of the
Fund are allocated on a pro rata basis to each class based on the relative net
assets of each class to the total net assets of the Fund. Each class of shares
differs in its respective service and distribution expenses, and may differ in
its transfer agent, registration, and certain other class-specific fees and
expenses.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of the financial statements. The
policies are in conformity with generally accepted accounting principles.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by 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-14
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS 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
of the last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the Fund 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
stock 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 a
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange of which the
contract is traded. Pursuant to the contract, the Fund
F-15
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed. The potential risk to the Fund is that the
change in value of the underlying securities may not correlate to the change in
value of the contracts. The Fund may use futures contracts to manage its
exposure to the stock market and to fluctuations in currency values or interest
rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1995, securities with an aggregate value of approximately
$137,286,521 were on loan to brokers. The loans were secured by cash collateral
of $151,557,635. 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 the loan. For
the year ended October 31, 1995, the Fund received $1,141,607 of income from
securities lending which was used to offset the Fund's custody expenses.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains.
(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) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its initial
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $88,750. These expenses
are being amortized on a straightline basis over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the price of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
In addition, the Fund may focus its investments in certain related
telecommunication industries, subjecting the Fund to greater risk than a fund
that is more diversified.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) 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
F-16
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
and expense, and prompt sale at an acceptable price may be difficult. At the end
of the period, restricted securities (excluding 144A issues) are shown at the
end of the Fund's Portfolio of Investments.
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 0.975% on the first $500 million of average daily net assets of the
Fund; 0.95% on the next $500 million; 0.925% on the next $500 million and 0.90%
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
$578,450 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 $49,798 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 $4,770,375. 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 distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses G.T. Global for a portion of its shareholder servicing and
distribution expenses. Under the Class A Plan, the Fund may pay G.T. Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for G.T. Global's expenditures incurred in
servicing and maintaining shareholder accounts, and may pay G.T. Global a
distribution fee at the annualized rate of up to 0.50% 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
expense) to the maximum annual rate of 2.40%, 2.90%, and 1.90% 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
F-17
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
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 $170,297 to G.T. Capital.
The Company pays each of its Directors who is not an employee, officer or
director of G.T. Capital, G.T. Global or G.T. Services $5,000 per year plus $300
for each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$1,521,325,782 and $1,784,269,521, respectively. There were no purchases or
sales of U.S. government obligations by the Fund for the year ended October 31,
1995.
4. CAPITAL SHARES
At October 31, 1995, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 400,000,000 were
classified as shares of the Fund; 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
Strategic Income 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; 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 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............................................................. 83,031,164 $ 1,357,464,500 49,183,489 $ 833,820,941
Shares issued in connection with reinvestment of distributions.......... 3,938,085 63,284,987 1,050,827 17,160,181
----------- --------------- ----------- -------------
86,969,249 1,420,749,487 50,234,316 850,981,122
Shares repurchased...................................................... (96,901,218) (1,584,327,366) (30,135,506) (509,780,043)
----------- --------------- ----------- -------------
Net increase (decrease)................................................. (9,931,969) $ (163,577,879) 20,098,810 $ 341,201,079
----------- --------------- ----------- -------------
----------- --------------- ----------- -------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
---------------------------- --------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................. 20,348,248 $ 330,809,778 48,594,410 $ 819,697,227
Shares issued in connection with reinvestment of distributions.......... 2,988,078 47,599,706 488,736 7,951,722
----------- --------------- ----------- -------------
23,336,326 378,409,484 49,083,146 827,648,949
Shares repurchased...................................................... (21,776,751) (351,935,028) (9,006,454) (151,518,558)
----------- --------------- ----------- -------------
Net increase............................................................ 1,559,575 $ 26,474,456 40,076,692 $ 676,130,391
----------- --------------- ----------- -------------
----------- --------------- ----------- -------------
<CAPTION>
JUNE 1, 1995
(COMMENCEMENT OF SALE OF
SHARES) TO OCTOBER 31, 1995
----------------------------
ADVISOR CLASS: SHARES AMOUNT
----------- ---------------
<S> <C> <C> <C> <C>
Shares sold............................................................. 44,033 $ 692,076
Shares repurchased...................................................... (2,662) (46,403)
----------- ---------------
Net increase............................................................ 41,371 $ 645,673
----------- ---------------
----------- ---------------
</TABLE>
F-18
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
5. WRITTEN OPTIONS
The Fund's written options contracts activity for the year ended October 31,
1995, was as follows:
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL AMOUNT
IN USD PREMIUMS
-------------- -----------
<S> <C> <C>
Options outstanding at October 31, 1994........................................................ 300,000,000 $ 8,430,000
Options written................................................................................ 0 0
Options cancelled in closing purchase transactions (loss of $4,965,000 realized)............... (300,000,000) (8,430,000)
Options expired prior to exercise.............................................................. 0 0
Options exercised.............................................................................. 0 0
-------------- -----------
Options outstanding at October 31, 1995........................................................ 0 $ 0
-------------- -----------
-------------- -----------
</TABLE>
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by the
Fund are defined in the Investment Company Act of 1940 as an affiliated company.
Investments in affiliated companies at October 31, 1995 amounted to
$173,816,787, at value.
Transactions with affiliated companies are as follows:
<TABLE>
<CAPTION>
PURCHASES NET REALIZED DIVIDEND
AFFILIATES COST SALES COST GAIN INCOME
- ----------------------------------------------------------------------------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
ANTEC Corp................................................................... $39,881,349 $ 744,751 $ (149,661) $ --
Atlantic Tele-Network, Inc................................................... 216,146 -- -- --
Bell Cablemedia PLC - ADR.................................................... 12,833,179 -- -- --
Grupo Mexicano de Video - 144A ADR........................................... -- -- -- --
Intermedia Communications of Florida, Inc.................................... -- -- -- --
International Engineering PLC - Foreign...................................... 10,064,198 -- -- --
Millicom International Cellular S.A.......................................... 4,175,625 1,186,241 316,004 --
Orbital Sciences Corp........................................................ 11,705,749 809,678 333,306 --
PT Kabelindo Murni - Local................................................... 2,403,079 -- -- 185,052
Radiotronica S.A............................................................. -- 1,291,051 (516,772) --
Spectrian Corp............................................................... 19,582,900 -- -- --
Tele 2000 S.A................................................................ 173,893 -- -- --
Three-Five Systems, Inc...................................................... 17,650,046 -- -- --
</TABLE>
7. EXPENSE REDUCTIONS
G.T. Capital has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1995, the Fund's expenses
were reduced by $238,200 under these arrangements.
8. 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 investment manager and
administrator, currently named G.T. Capital Management, Inc., will be changed to
"LGT Asset Management, Inc.", and G.T. Global Financial Services, Inc., which
serves as the Fund's distributor, will be known as "GT Global, Inc."
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For its fiscal year ended October 31, 1995, the total amount of income received
by the Fund from sources within foreign countries and possessions of the United
States was approximately $0.173 per share (representing an approximate total of
$25,368,596). The total amount of taxes paid by the Fund to such countries was
approximately $0.031 per share (representing an approximate total of
$4,523,548).
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$79,742,755 as capital gain dividends for the fiscal year ended October 31,
1995.
F-19
<PAGE>
G.T. GLOBAL TELECOMMUNICATIONS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
[LOGO]
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR INVESTMENT COUNSELOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580. THE PROSPECTUS CONTAINS MORE COMPLETE
INFORMATION, INCLUDING CHARGES, EXPENSES AND RISKS. INVESTORS SHOULD READ
THE PROSPECTUS CAREFULLY BEFORE INVESTING.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture, or sell
telecommunications services or equipment
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve, or maintain a country's infrastructure
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore, or develop natural resources
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA GROWTH FUND
Concentrates on small and medium-sized companies in the U.S.
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. domiciled companies
GT GLOBAL AMERICA VALUE FUND
Concentrates on large cap equity securities of U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS.
<PAGE>
[LOGO]
GT Global Financial Services, Inc.
Fifty California Street
27th Floor
San Francisco, California
94111-4624
DATED MATERIAL
PLEASE EXPEDITE
