<PAGE>
CHANCELLOR LGT
ASSET MANAGEMENT
OVER 25 YEARS
OF INVESTING
WORLDWIDE
GT GLOBAL
INCOME FUNDS
ANNUAL REPORT
OCTOBER 31, 1996
[LOGO]
<PAGE>
GT GLOBAL
INCOME FUNDS
TABLE OF CONTENTS
Message from the Chairman.............1
Market Review and Outlook.............2
GT Global
Government Income Fund................4
GT Global
High Income Fund......................7
GT Global
Strategic Income Fund................10
Report of
Independent Accountants.............F-1
Financials..........................F-2
Inside Back
List of Funds.....................Cover
The views of the Funds' management are as
of the date of the letter and portfolio hold-
ings described in this annual report are as of
October 31, 1996; these views and portfolio
holdings may have changed subsequent to
this date.
<PAGE>
GT GLOBAL INCOME FUND
MESSAGE FROM THE CHAIRMAN
Dear Investor,
Fiscal 1996 has been a year of economic strengthening, and the Funds have
benefited from low inflation and low interest rates worldwide. We're proud of
their performance over the past year and remain enthusiastic about their long-
term potential.
Consistent, above-average performance of GT Global Funds is our priority. To
that end, we enhanced the breadth and depth of our investment capabilities this
fall when Liechtenstein Global Trust (LGT), the parent company of GT Global,
acquired a premier institutional money manager, Chancellor Capital Management.
On October 31, Chancellor merged with LGT Asset Management, the Funds' advisor,
and the combined entities are now known as Chancellor LGT Asset Management. This
acquisition increased assets entrusted to LGT to over $80 billion.
We are confident about the partnership's success because both firms share a
commitment to providing investors around the world with solutions to their
investment needs through combined, top-notch expertise. Individual investors
will now have access to the same high-quality management services enjoyed by
over 320 institutional investors, including some of the country's largest
organizations.
Chancellor's strengths-disciplined U.S. equity and fixed income processes and
professionals, coupled with proven fundamental and quantitative investment
capabilities-represent an ideal complement to LGT's advantages as an experienced
global investment manager with an extensive global infrastructure. Chancellor
LGT Asset Management's global investment team includes 12 economists, 98
portfolio managers, 72 analysts and 19 traders located in 9 regional offices.
Warren Shaw, LGT's new Chief Investment Officer, has been the principal
architect of Chancellor's investment policies, with excellent results. The
disciplined, repeatable process he created leverages the effectiveness of a
strong investment team approach.
Another exciting change, part of our ongoing commitment to provide the highest-
quality shareholder communications, is the enhanced content and redesigned
format of our Income Funds annual report. We've changed the format to highlight
important aspects of your investments, and made the report more readable and
informative. We have also organized the Funds into one report to give you the
opportunity to familiarize yourself with additional investment options.
As always, we appreciate your continued confidence. Should you and your adviser
have any questions regarding the GT Global Income Funds, please call us at 800-
824-1580. One of our registered representatives will be happy to assist you.
Sincerely,
/s/ David A. Minella
David A. Minella
CHAIRMAN
GT GLOBAL MUTUAL FUNDS
1
<PAGE>
MARKET REVIEW AND OUTLOOK
ESTABLISHED MARKETS
Major markets around the world have seen their long-term yields decline
dramatically. In the U.S., economic growth has been moderate to weak, fears of
inflation have subsided and, as a result, the Fed has kept interest rates
stable. This environment has provided a benign background for generally larger
bond rallies elsewhere in the world.
Canada, for example, has enjoyed an excellent bond market rally over the last
several months, on the back of much weaker growth relative to the U.S., lower
inflation and a vastly improved current account deficit. Going forward, we
believe Canada will continue to provide good value, and our outlook remains
positive.
Europe has presented a similar profile of limited or subpar economic activity.
Germany and France, for example, are experiencing growth of roughly 1%, versus a
potential of 2.5% or 3%. As a result, the DM has been weak and the Bundesbank
was prompted to cut the repo rate again in August, providing the catalyst for a
Europe-wide bond rally. The exception has been the UK, mainly because the
economy is operating on a different economic cycle than continental Europe and
has actually been enjoying reasonable growth.
Another very important trend in Europe, the steady tightening of spreads, has
produced some spectacular returns in higher-yielding markets this year. This
convergence has occurred as emphasis has shifted from economic fundamentals to a
strengthening political will to participate in the first stage of European
Monetary Union. The resulting surge in bond prices has been driven by the
possibility that economies such as those of Spain and Italy will be willing and
able to join the EMU in 1999. Consequently, yields have fallen in many of these
economies to a level we feel may not be justified by their economic fundamentals
at the moment. However, markets have been driven by technical factors, not
fundamentals, and based on our technical models we are comfortable with the
uptrends in Spain and Italy unless we witness signs of weakness.
Adding to the bullish sentiment are the large liquidity flows out of Japan. The
monetary authorities of Japan are keeping interest rates low to aid its weak
economic recovery and banking sector. Record low yields in Japanese bonds and
the lackluster performance of the stock market led investors to seek better
yields overseas. We do not expect this to change within the next six months.
EMERGING MARKETS
Against this background of stable and declining global bond yields, a benign
inflationary environment and improving emerging markets fundamentals, emerging
market debt has enjoyed an outstanding year. In general, the GT Global High and
Strategic Income Funds benefited from holdings in Latin America. Early on, we
recognized the attractiveness of Mexican debt and the contribution a recovery in
the economy would make to the government's fiscal standing. The Funds also
maintain holdings in, among other countries, Argentina and Brazil. In the
former, the financial credibility of the government is growing as it becomes
clearer that the worst of the recent recession is past. In the latter case, we
believe interest rates should continue to fall as progress is made towards
fiscal reform.
A key element of the Funds' strategy has also been the recognition of
outstanding value in Russian debt. Over the past 12 months, the Russian bond
market has reflected progress toward economic reform and
CONVERGENCE IN EUROPEAN YIELDS
<TABLE>
<CAPTION>
Yield (%)
-----------------------------------------------------------------------------------------------------------
Oct-95 Jan-96 Apr-96 Jul-96 Oct-96
---------------------- ---------------------- ------------------- ------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
German 10-Year 11.882 11.455 10.858 10.186 10.575 10.869 9.814 9.647 9.413 9.509 9.573 8.596 8.14
Italian 10-Year 6.44 6.169 6.031 5.896 6.388 6.438 6.339 6.496 6.505 6.373 6.386 6.096 6
</TABLE>
Source: Bloomberg, 1996
2
<PAGE>
improvement in Russian economic fundamentals. Going forward, we are
encouraged by the presence of a sufficient nucleus of reformers within the
government who understand that orthodox monetary and fiscal policies are
necessary to maintain support from investors and the IMF.
ATTRACTIVE YIELDS IN EMERGING MARKETS
<TABLE>
<CAPTION>
J.P. Morgan EMBI U.S. 30-Year Treasury
---------------- ---------------------
<S> <C> <C>
Dec-90 14.8 8.3
14.63 8.225
13.81 8.222
13.2 8.235
12.81 8.193
12.82 8.246
12.44 8.417
12.17 8.382
11.63 8.086
11.34 7.809
11.48 7.894
11.79 7.978
11.03 7.451
11.12 7.785
11.26 7.8
11.65 7.946
11.44 8.052
11.22 7.833
11.08 7.784
10.65 7.456
10.63 7.476
10.89 7.375
11.53 7.629
12.36 7.621
12.24 7.383
12.03 7.212
11.72 6.959
11.4 6.912
11.37 6.943
11.09 6.979
10.6 6.677
10.18 6.566
9.79 6.235
9.72 6.034
8.95 5.957
9.31 6.288
Jul-93 6.336 8.69
6.21 8.65
6.671 9.99
7.101 12
7.309 12.26
7.394 11.51
7.622 13.45
7.385 13.15
7.56 12.68
7.818 13.01
7.959 13.73
7.988 13.95
7.881 15.11
7.757 15.67
7.508 16.6
7.43 17.12
7.339 15.47
6.667 13.78
6.624 13.61
6.904 13.87
6.764 13.64
6.485 13.21
6.347 13.38
6.135 12.91
5.955 12.04
6.029 11.05
6.24 12.47
6.6 12.58
6.79 12.18
6.93 12.3
7.06 11.91
7.03 12
7.11 13.82
6.92 12.64
6.64 12.71
7.118 11.72
6.923 10.89
Oct-96 6.642 10.75
</TABLE>
Source: Datastream, J.P. Morgan Emerging Markets Bond Index Monitor, Various
Issues
We believe emerging market debt fundamentals are improving. On average, yields
are currently over 4% more than U.S. treasury bonds, which we believe
compensates for additional risk. The yield over U.S. treasuries has ranged from
as little as 2.3% before the Mexican peso crisis, to as much as 9% in the
aftermath of that event. Right now the yield gap suggests that despite their
excellent recent performance emerging market bonds are not yet overbought or
expensive.Past performance of the indices is no guarantee
of their future performance or the future performance of the Funds.
OUTLOOK
We expect the bond-friendly environment of low short-term interest rates and
accommodative liquidity conditions to continue in the short run. As a result, we
believe capital markets on the European periphery will outperform U.S. and
German bond markets. Meanwhile, we continue to prefer Canada and Australia in
the dollar bloc. In the longer run, however, we believe the appearance of more
synchronized global expansion may mean rising real rates. The greatest pressure
is likely to be felt in Europe.
We do not expect the massive outperformance of emerging market debt seen in 1995
and 1996 to continue, keeping in mind that value has rebounded from an extremely
low base. Performance can be mainly attributed to the dramatic correction
following the Mexican peso crisis. Also, post-crisis, government securities in
these markets behaved less like typical fixed-income investments, that is,
driven by fundamentals, and more like equities whose value was driven by growth
expectations. At present, observation leads us to believe that the distortion
created by Mexico has been fully corrected, and that the market is in a
transition phase, moving from an equity environment to a typical fixed-income
friendly position.
We believe fixed income should continue to provide above-average performance,
provided the U.S. remains stable (U.S. 30-year at 6 1/2%-6 3/4%) and no massive
correction occurs in U.S. treasuries. In our view, the universe of emerging
markets, with the exception of a few countries, is doing very well. At 5%,
average economic growth continues to be about twice as fast as in the
industrialized countries. It is also coming on the heels of outstanding
macroeconomic performance in many countries, measured in terms of lower
inflation, lower fiscal deficits and declining current account deficits. In
other words, we aren't seeing large distortions as we did in Mexico in 1994.
Also, at present the fairly good liquidity environment means money is available
to finance investment and growth. Fundamentally, then, we judge these countries
to be in very good shape.
3
<PAGE>
[GRAPHIC]
INVESTMENT OBJECTIVE
The Fund primarily seeks a high level of current income. The Fund's secondary
objectives are capital appreciation and protection of principal through active
management of maturity structure and currency exposure. It invests primarily in
high-quality U.S. and foreign government securities.
GT GLOBAL GOVERNMENT INCOME FUND
PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
GT Global Government J.P. Morgan Global
Income Fund Gov't Bond Index
-------------------- ------------------
<S> <C> <C>
3/29/1988 9,525 10,000
9,525 10,022
9,442 9,975
9,299 9,868
9,290 9,780
9,256 9,704
9,231 9,635
9,379 9,875
9,589 10,264
9,721 10,353
9,632 10,292
9,722 10,190
9,413 10,173
9,468 10,087
9,635 10,254
9,664 10,143
9,957 10,374
10,350 10,787
10,090 10,468
10,168 10,633
10,345 10,770
10,424 10,866
10,704 10,992
10,543 10,829
10,421 10,712
10,400 10,646
10,400 10,605
10,610 10,944
10,886 11,142
11,283 11,470
11,206 11,381
11,206 11,487
11,579 11,942
11,655 12,151
11,644 12,286
11,904 12,565
11,937 12,575
11,868 12,182
11,996 12,329
12,090 12,340
11,877 12,176
11,913 12,433
12,106 12,691
12,519 13,155
12,667 13,284
12,667 13,501
13,235 14,183
13,045 13,905
13,161 13,864
13,007 13,737
13,098 13,851
13,267 14,244
13,320 14,633
13,613 14,955
13,733 15,353
13,357 15,338
13,465 14,955
13,313 14,690
6/30/1992
13,493 14,829
13,715 15,080
14,358 15,323
14,414 15,558
14,399 15,842
14,627 15,943
15,246 15,955
15,536 15,962
16,236 16,435
16,119 16,608
16,413 16,600
16,325 16,479
16,936 16,647
17,084 16,804
15,915 16,620
15,453 16,543
15,221 16,531
14,818 16,394
14,837 16,589
14,887 16,744
14,699 16,701
14,734 16,785
14,958 17,036
14,906 16,821
14,573 16,860
14,732 17,201
15,086 17,644
15,478 18,542
15,852 18,838
16,208 19,364
16,131 19,484
16,145 19,577
15,849 19,033
16,120 19,461
16,337 19,651
16,593 19,871
16,851 20,117
16,864 19,910
16,497 19,794
16,454 19,764
16,430 19,691
16,386 19,711
16,557 19,883
16,768 20,249
16,822 20,333
17,075 20,445
10/31/1996 17,499 20,851
</TABLE>
The chart above shows the performance of the GT Global Government Income Fund,
Class A shares, since the Fund's inception, versus the J.P. Morgan Global
Government Bond Index. This represents a cumulative return of 74.99% and an
average annual total return of 6.73%. The chart assumes a hypothetical $10,000
initial investment in the Fund's Class A shares and reflects all Fund expenses
and the maximum 4.75% sales charge. A $10,000 investment in the Fund's Class B
shares at inception on October 22, 1992, would have been valued at $12,437. This
figure reflects all Fund expenses, the applicable contingent deferred sales
charge (5% in the first year, decreasing to 0% after six years) and assumes
complete redemption at the end of the period. A $10,000 investment in Advisor
Class shares at inception on June 1, 1995, would have been worth $10,838 on
October 31, 1996.
AVERAGE ANNUAL TOTAL RETURNS%(1)
October 31, 1996
<TABLE>
<CAPTION>
Without Sales Charge(2) With Sales Charge
Share Class 1-Year 5-Year Life of Fund 1-Year 5-Year Life of Fund
<S> <C> <C> <C> <C> <C> <C>
Class A(3) 7.11 6.68 7.34 2.03 5.64 6.73
Class B(3) 6.54 N/A 5.94 1.57 N/A 5.57
Advisor Class(4) 7.49 N/A 5.84 N/A N/A N/A
</TABLE>
HISTORICAL PERFORMANCE%(2)
ANNUAL RETURNS
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A 1.12(3) 11.14 8.77 13.67 1.94 25.52 -13.95 15.63
Class B N/A N/A N/A N/A -0.20(3) 24.70 -14.44 14.56
</TABLE>
(1) Figures assume reinvestment of all dividends and capital gain distributions
at net asset value.
(2) Performance data do not reflect the maximum 4.75% sales charge and the
contingent deferred sales charge (5% in the first year, decreasing to 0%
after six years) for Class A and Class B shares, respectively,
which, if included, would have reduced the performance quoted.
(3) The Fund began operations on March 29, 1988; Class B shares commenced on
October 22, 1992.
(4) The Fund began offering Advisor Class shares on June 1, 1995.
The above data represent past performance of the Fund's shares, which does not
guarantee future results. The investment return and principal value of an
investment in the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
4
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
INTERVIEW WITH PORTFOLIO MANAGER
ROBERT ALLEN
Q HOW DID THE FUND PERFORM?
A The Fund outperformed its index over the 12 months ended October 31, 1996.
Total return for the period was 7.11% for Class A shares (2.03% including the
maximum 4.75% sales charge). Total return for Class B shares was 6.54% (1.57%
including the maximum effect of the 5% contingent deferred sales charge). Total
return for the J.P. Morgan Global Government Bond Index(5) over the same period
was 6.11%.
Relative to the index, the Fund has done well by overweighting some of the
smaller markets, such as Italy and Spain, and underweighting larger markets,
including the U.S. and Japan. The Fund also benefited from its holdings in
Australia and Canada, two markets that enjoyed very strong returns over the
period.
Q COULD YOU DESCRIBE YOUR INVESTMENT STRATEGY
OVER THE LAST SIX MONTHS?
A Our strategy has remained consistent since the last report, although we
increased some of the allocations. Overall, we're staying relatively neutral
(close to the index) on duration. This has been fine for the year as a whole
because yields have essentially gone up and then come back down again.
A key element of the portfolio's strategy has been to overweight Canada relative
to the index. As authorities have cut rates, Canada has enjoyed an excellent
core bond market rally over the last several months. Cyclically, Canada remains
much weaker than the U.S., with high unemployment, low
THE CANADIAN REVIVAL
<TABLE>
<CAPTION>
C$ bn Current Account
---------------------
Real Yield (Oct. 1996) U.S. Canada
---------------------- --------- ---------
Canadian $ Billions
<S> <C> <C> <C>
'86 -11 3.53% 4.62%
-11
-11
-12
-12
-12
-13
-13
-13
-14
-14
-14
'87 -14
-14
-14
-14
-14
-14
-14
-14
-14
-14
-15
-16
'88 -16
-17
-17
-18
-18
-18
-19
-20
-21
-21
-21
-21
'89 -21
-22
-22
-23
-25
-26
-26
-26
-26
-27
-27
-27
'90 -28
-29
-30
-29
-28
-27
-26
-26
-26
-26
-25
-25
'91 -25
-24
-23
-24
-24
-24
-25
-26
-26
-26
-27
-27
'92 -27
-27
-28
-28
-28
-28
-28
-28
-28
-27
-26
-26
'93 -26
-26
-26
-26
-26
-26
-26
-26
-26
-27
-28
-29
'94 -29
-29
-28
-28
-29
-29
-28
-27
-26
-25
-23
-22
'95 -21
-20
-19
-19
-18
-17
-17
-16
-15
-14
-12
-11
'96 -11
-10
-9
-6
-3
1.09
1
0.86
0.551
</TABLE>
Source: Datastream, Bloomberg, October, 1996
growth and lower inflation (1.8% compared to 3% in the U.S.). It is an
example of a country with a good structural story on the fiscal side. The
Provinces and the federal government have cut their deficits. The current
account has improved considerably, and has gone from a large deficit to a
small surplus. And, the Canadian dollar has strengthened. Going forward, we
believe Canada will continue to provide good value, and our outlook remains
positive.
Also, the Fund has cut back its position in Japan, where it's been the same
story for years-deflation, low growth, financial sector problems and a weak
stock market. As a result, the yen has weakened and interest rates have fallen
to incredibly low levels. While the fundamentals justify its current position,
because the value is so low, at some point these will have to turn around, and
the risks will be quite big. In our opinion, the opportunity for capital gains
and yields is poor, and although we believe Japanese bonds are important for
their effect on the rest of the world, it is difficult to justify their
purchase.
Q WHAT HAVE BEEN THE GENERAL THEMES IN CORE
BOND MARKETS OVER THE PERIOD?
A The key is that the world is not changing that much and yields in the big
three have ended roughly where they began, despite the large moves earlier in
the year. A weak yen and strong dollar provided support to a healthy global
liquidity environment. In the U.S., growth has remained moderate with a few
strong quarters of growth followed by a few weak quarters. Inflation has been
steady and a recession appears unlikely. While we believe yields are currently
fair value, a couple more months of weak numbers might cause them to fall a bit
further.
Europe and Japan are experiencing generally weaker growth than the U.S.
Accordingly, their bond markets outperformed the U.S., Europe's in particular,
and smaller, higher-yielding markets have outperformed their larger
counterparts. Europe has rallied as a result of a combination of forces. The
German economy has remained weak, resulting in a weak DM and low and falling
short rates. Leading from that, other Eurocurrencies have strengthened against
the DM and so these countries have been able to cut interest rates faster than
Germany. Adding to this benign environment, there has been good political news
on the EMU, the key being talk about a political stability pact, which means
countries like Italy and Spain might continued p6
(5) The J.P. Morgan Global Government Bond Index is an arithmetic average,
weighted by market value, of government bonds from 13 major bond markets.
It includes the effect of reinvested coupons and is measured in U.S.
dollars.
The index is unmanaged, not available for direct investment and does not incur
sales charges and professional management fees.
5
<PAGE>
INTERVIEW WITH THE PORTFOLIO MANAGER CONTINUED
be eligible for inclusion. This good political news, along with sound attempts
by European countries to get their budgets in order, has created a good deal of
positive sentiment.
Q WHAT ARE SOME OF THE POTENTIAL RISKS FACING
CORE BOND MARKETS?
A In our opinion, some of the greater risks include: a
pickup in Japanese economic growth, which would put pressure on rates globally
because Japan is a major source for liquidity in the global market; the politics
of the EMU could break apart; and Germany could strengthen, which would pressure
German interest rates and the DM, in turn putting pressure on the global
interest rate/currency environment.
Q WHICH COUNTRIES DO YOU FIND ATTRACTIVE
GOING FORWARD?
A Although the current environment remains positive, markets have rallied and
converged quite a bit. The potential for further gains, therefore, is less and
less, which has caused us to focus on several markets. Within the core three, we
basically intend to stay overweighted in Germany and may go a bit more neutral.
In the smaller, higher-yielding markets, we are likely to stay overweighted over
the short term. In the dollar bloc, as we mentioned, Canada may have a bit
further to go.
We also feel the New Zealand market has potential over the medium term. While it
has already rallied considerably on expectations of rate cuts and the overall
rally in global bonds, we have found it one of the more interesting markets in
the bloc. They have pursued a very tight monetary policy, with high short rates
over the past several years (currently 9%), a strong economy and a strong
currency. Meanwhile, the recent election has put an end to political
uncertainty. Based on the current outlook, then, we intend to maintain an
overweighted position in this market.
Over the longer term, we may switch out of continental Europe into the UK, where
we believe the relative value is starting to look better for several reasons.
Its situation has been somewhat unique in Europe: bonds have generally
underperformed while the currency has outperformed. Politics have not been as
good as elsewhere; the UK is the biggest country opting out of the union. There
is also the likelihood that the Labour party will get voted in during next
year's election.
Finally, whereas the whole of Europe is weak, the UK has had a problem with
growth. Retail sales have been strong and the housing market has rebounded. As a
result, the central bank has raised official rates. This has allowed sterling to
rally but has caused bonds to suffer. The UK currently has the highest-yielding
10-year bond market (AA and AAA rated) in the world. For these reasons, we
believe there may be a good opportunity in UK bonds on a relative basis in the
next few months.
GT GLOBAL GOVERNMENT INCOME FUND(6)
GEOGRAPHIC ALLOCATION OF NET ASSETS%
October 31, 1996
Australia 4.8
Canada 11.8
Colombia 1.1
Denmark 2.9
Finland 2.0
Germany 17.6
Ireland 1.9
Italy 9.0
Mexico 1.1
New Zealand 2.6
Poland 1.1
South Africa 1.1
Spain 2.0
Sweden 4.8
UK 10.5
United States 14.7
Short Term & Other 11.0
(6) Geographic allocations may change as conditions change.
ABOUT THE PORTFOLIO MANAGER
ROBERT F. ALLEN -- Portfolio Manager for Chancellor LGT Asset Management since
1989; Investment Analyst since 1986. Prior to joining Chancellor LGT Asset
Management, Mr. Allen received his B.A. from Oxford University.
6
<PAGE>
[GRAPHIC]
INVESTMENT OBJECTIVE AND CURRENT STATEGY
The Fund primarily seeks high current income and, secondarily, capital
appreciation. It invests primarily in debt securities from emerging markets
around the world, where we perceive value through improving fundamentals.
GT GLOBAL HIGH INCOME FUND
Performance Summary
<TABLE>
<CAPTION>
GT Global High J.P. Morgan EMBI
Income Fund (Brady) Index
-------------- ----------------
<S> <C> <C>
10/22/1992 9,525 10,000
9,525 10,105
9,508 9,970
9,684 10,209
9,743 10,316
9,991 10,451
10,645 10,996
10,887 11,217
11,283 11,598
11,747 12,003
12,290 12,504
12,596 12,755
12,723 12,922
13,681 14,011
13,848 13,871
14,678 14,718
14,895 14,758
13,615 13,530
11,578 11,982
11,413 11,988
12,236 12,815
11,722 11,783
11,930 12,073
12,640 12,936
12,952 13,063
10/31/1994 12,799 12,693
12,840 12,822
11,854 11,968
11,315 11,554
10,948 10,952
10,604 10,643
11,489 11,785
12,370 12,824
12,577 13,073
12,509 13,082
12,828 13,391
13,205 13,852
13,159 13,710
13,512 14,190
14,248 15,265
15,474 16,609
14,594 15,442
14,755 15,838
15,283 16,635
15,708 16,842
16,019 17,308
16,342 17,440
16,946 18,006
18,066 19,131
10/31/1996 18,297 19,180
</TABLE>
The chart above shows the performance of the GT Global High Income Fund,
Class A shares, since the Fund's inception, versus the J.P Morgan EMBI
(Brady) Index. This represents a cumulative return of 82.97% and an average
annual total return of 16.20%. The chart assumes a hypothetical $10,000
initial investment in the Fund's Class A shares and reflects all Fund
expenses and the maximum 4.75% sales charge. A $10,000 investment in the
Fund's Class B shares at inception on October 22, 1992, would have been valued
at $18,502. This figure reflects all Fund expenses, the maximum applicable
contingent deferred sales charge (5% in the first year, decreasing to 0%
after six years) and assumes complete redemption at the end of the period. A
$10,000 investment in Advisor Class shares at inception on June 1, 1995, would
have been worth $14,849 on October 31, 1996.
AVERAGE ANNUAL TOTAL RETURNS%(1)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Without Sales Charge(2) With Sales Charge
Share Class 1-Year Life of Fund 1-Year Life of Fund
<S> <C> <C> <C> <C>
Class A(3) 39.05 17.61 32.44 16.20
Class B(3) 38.16 16.83 33.16 16.52
Advisor Class(4) 39.38 32.13 N/A N/A
</TABLE>
HISTORICAL PERFORMANCE(2)
ANNUAL RETURNS%
1992(3) 1993 1994 1995
Class A 1.67 51.57 -19.24 20.19
Class B 1.41 50.60 -19.61 19.27
(1) Figures assume reinvestment of all dividends and capital gain distributions
at net asset value.
(2) The above performance data do not reflect the maximum 4.75% sales charge
and the contingent deferred sales charge (5% in the first year, decreasing
to 0% after six years) for Class A and Class B shares, respectively,
which, if included, would have reduced the performance quoted.
(3) The Fund began operations on October 22, 1992.
(4) The Fund began offering Advisor Class shares on June 1, 1995. Advisor Class
shares are not sold directly to the general public and are only available
through certain employee benefit plans, financial institutions and other
entities that have entered into specific agreements with GT Global. Please
see the "Alternative Purchase Plan" section in the Fund's prospectus.
The above data represent past performance of the Fund's shares, which does not
guarantee future results. The investment return and principal value of an
investment in the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
7
<PAGE>
INTERVIEW WITH PORTFOLIO MANAGER
SIMON NOCERA
Q HOW DID THE FUND PERFORM?
A We are very pleased with the Fund's performance for the 12 months ended
October 31, 1996. Total return was 39.05% for Class A shares (32.44% including
the maximum 4.75% sales charge) and 38.16% for Class B shares (33.16% including
the maximum 5% contingent deferred sales charge). Total return over the same
investment period was 39.90% for the J.P. Morgan EMBI (Brady) Index.(5)
Russia and Panama were the biggest positive contributors to the Fund's
performance. In Russia, we took advantage of the IMF's announcement of loan
postponement, coupled with the market's negative reaction to Yeltsin's health,
to increase the Fund's position from 9% to 12%. We saw this as an attractive
buying opportunity because the IMF announcement was a sound public statement
underlining the seriousness of the situation, which helped Yeltsin implement the
necessary fiscal reform. Based on market reaction, we made a good decision.
Subsequently, however, we reduced the Fund's position as value became less
obvious. Nevertheless, we continue to feel the market is one of the cheapest
available, and under the current conditions intend to maintain the Fund's core
position in Russia.
In Panama, bond yields have been driven lower on the back of expectations that
Panama is soon to achieve investment grade rating. A strong commitment to
structural reform has been made, and Panama's privatization and economic reform
program is very much in place. This combination, coupled with a good fiscal
surplus, has attracted a huge flow of funds into Panamanian fixed income.
Q COULD YOU DESCRIBE YOUR INVESTMENT PROCESS?
A Our investment process consists of three steps. First, we focus primarily
on the structure and the cyclical position of the economy. Second, we employ our
proprietary quantitative system to rank the fundamental economic conditions. The
premise is very simple in emerging markets. It is a dynamic universe, growing at
twice the level of OECD countries with outstanding economic performance in many
countries as measured by lower inflation, balanced fiscal accounts, and no major
problems on the current account side. The most important reason that many of
these markets are performing so well is that most of these countries are
changing the structure of their economies. They are deregulating their internal
and external markets, abolishing barriers to trade, privatizing their economies
and establishing solid rules and regulations to ensure competition.
All of these structural developments are creating massive productivity gains,
promoting growth and, hence, value. Our investment process places emphasis on
these types of structural changes. We also examine the cyclical positions of
these economies and the types of policies they have. The second step, as we've
mentioned above, is to determine value. We look closely at where these countries
are trading relative to other global financial indicators. Finally, as the third
step, we look at global yields.
Q WHERE SHOULD AN EMERGING MARKET TRADE?
A It's a relative market, priced off U.S. treasuries and depends on
international yields. To give you an example, if Mexico trades at 300 basis
points over U.S. treasuries (100 bp equal 1%), it's difficult to say if that is
good value. If U.S treasuries are trading at 3%, then with Mexico at 300 over,
the yield is 100% compared to U.S. treasuries. If U.S. treasuries are trading at
9% then the yield is only 33% by going into Mexico and it may not be good value
any more. That is why we take the average spread and divide by the U.S. treasury
rate. Based on that indicator of value, emerging markets are still at a very
comfortable 65% yield pickup.
To give you a historical perspective, after the big bull run in emerging market
fixed income that peaked in January 1994, before the big correction, that value
indicator was all the way down at 38%. So even though investors are now
concentrating on spread, they see it as being tight after such strong
performance over the last year. Relative to U.S. treasuries, and relative to
what the market was in 1993, we believe from this very simplistic indicator
there is still quite a bit of value.
Q DID YOU MAKE ANY CHANGES IN YOUR INVESTMENT STRATEGY
OVER THE LAST SIX MONTHS?
A On a micro-level, we manage the Fund on a day-to-day basis to take
advantage of numerous inefficiencies in the market. To that end, we may change
our country allocations +/- 2%. On a macro-level, however, we have not changed
the Fund's overall geographic composition. Latin America is still roughly 50% of
the Fund's geographic allocation, while Europe, the Middle East and Africa
constitute approximately 30%. The largest change in continued p9
(5) The J.P. Morgan EMBI (Brady) Index is an arithmetic average, weighted by
market value, of Brady bonds from nine emerging bond markets. It includes
the effect of reinvested coupons and is measured in U.S. dollars.
The index is unmanaged, not available for direct investment and does not incur
sales charges and professional management fees.
8
<PAGE>
GT GLOBAL HIGH INCOME FUND
INTERVIEW WITH THE PORTFOLIO MANAGER CONTINUED
exposure over the last 12 months was in eastern Europe, where we held 10% in
Poland and practically zero in Russia at the beginning of the period. When
Poland achieved investment grade rating, we felt the value was quickly
disappearing and moved into Russia. We did so, not because of the Russian
election, and not because of Yeltsin, but primarily because we believe
fundamentals are improving and the Russian economy is poised to recover. It's a
good example of how the process works.
With respect to the remainder of the Fund, we are increasingly active in the
corporate world versus sovereign bonds, and raised the Fund's exposure to
roughly 10%-15%. We are also looking to be more active in local currency-
denominated instruments, primarily in Asia, but are also finding attractive
opportunities in eastern Europe.
Q WHAT MARKETS FACE UNCERTAINTIES?
A The Russian government is having some difficulties collecting revenues and
running a balanced fiscal policy. Generally, a government that cannot collect
revenue cannot have a credible budget. As a result, the foundations of its
policy stance can become shaky and uncertain, which can be very disturbing for
the market. Moreover, Russian politics have been precarious of late with
concerns over Yeltsin's health, Lebed's dismissal and quite a bit of infighting
at the administration level.
Although we monitor these factors carefully, we still think the most relevant
element continues to be the fundamental condition of the economy and believe
value is definitely present. While the fundamentals may not be as outstanding as
we expected them to be nine months ago, they are certainly improved from a year
ago. Going forward, we expect the fundamental economic conditions to stabilize.
While Russia might not be showing economic growth, at least inflation is coming
down and authorities appear to be addressing the fiscal situation with a sense
of urgency and seriousness.
There are also uncertainties in some of the smaller countries such as Bulgaria
and Venezuela. In Bulgaria's case, quite a bit of uncertainty is evident over
whether the country will be able to halt the deteriorating situation.
Uncertainty in Venezuela is about the ability to continue along the path of
stabilizing the economy. Even though questions remain about whether these
countries will be successful, they are relatively marginal countries and thus
unlikely, in our opinion, to drag down the entire asset class. On a positive
note, investors now seem to be becoming more selective rather than looking at
emerging markets as a single trading bloc.
Q WHAT IS YOUR OUTLOOK?
A We believe emerging market fixed income should continue to exhibit above-
average performance, provided the U.S. remains stable (U.S. 30-year at 6 1/2%-
6 3/4%) and no massive correction occurs in U.S. treasuries. In our opinion, the
greatest risk over the next 12 months is not necessarily from the country or the
value element but primarily from the global yield side--in particular, the
massive convergence in yields in Europe, both at the long and short end of the
yield curve. As an example, Italy used to trade in Italian lira at roughly 500
bps over U.S. treasuries nine months ago. Now it's trading at 140--a level we
believe is not warranted by the fundamental situation.
However, the convergence has occurred on the back of the political push to
achieve European monetary union, and we have no reason to expect the political
willingness to push for EMU will change any time soon. On the contrary, it is
picking up quite a bit of momentum. Based on political indicators, it may go
forward, but the system being devised is based on fragile fundamental
conditions, a similar situation to what occurred in the 1992 currency crisis in
the ERM. In our view, if there is any risk with regard to global yields, it
comes from Europe.
ABOUT THE PORTFOLIO MANAGER
SIMON E. NOCERA--Chief Investment Officer of Emerging Market Debt for Chancellor
LGT Asset Management since 1996; Portfolio Manager and Director of Fixed Income
Research since 1992. Previously, Mr. Nocera was Senior Vice President and
Director of Global Fixed Income Research for the Putnam Companies from 1991-92
and Economist for the International Monetary Fund from 1986-91.
GEOGRAPHIC ALLOCATION
Europe .5%
U.S., Canada & Other 8.0%
Africa 9.3%
Asia-Pacific 11.0%
Eastern Europe 14.2%
Latin America 57.0%
Alocations may change as conditions change.
9
<PAGE>
[GRAPHIC]
INVESTMENT OBJECTIVE AND CURRENT STRATEGY
The Fund primarily seeks high current income and, secondarily, capital
appreciation. It invests mainly in debt securities of issuers in the U.S.,
developed foreign countries and emerging markets. The Fund selects debt
securities from those issued by governments, their agencies and
instrumentalities, central banks, commercial banks and other corporate entities.
GT GLOBAL STRATEGIC INCOME FUND
PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
GT Global Strategic J.P. Morgan Global
Income Fund Gov't Bond Index
------------------- ------------------
<S> <C> <C>
3/29/1988 9,525 10,000
9,525 10,021
9,542 9,975
9,525 9,868
9,425 9,780
9,346 9,704
9,279 9,635
9,414 9,875
9,705 10,264
9,713 10,353
9,636 10,292
9,592 10,190
9,416 10,173
9,461 10,087
9,630 10,254
9,755 10,143
10,043 10,374
10,389 10,787
10,134 10,468
10,116 10,633
10,366 10,770
10,440 10,866
10,616 10,992
10,247 10,829
10,172 10,712
10,200 10,646
10,103 10,605
10,190 10,944
10,443 11,142
10,846 11,470
10,629 11,381
10,677 11,487
11,229 11,942
11,429 12,151
11,506 12,286
11,772 12,565
11,721 12,575
11,429 12,182
11,597 12,329
11,545 12,340
11,229 12,176
11,446 12,433
11,683 12,691
12,239 13,155
12,095 13,284
12,239 13,501
13,322 14,183
13,027 13,905
12,856 13,864
12,494 13,737
6/30/1992 12,401 13,851
12,864 14,244
13,110 14,633
13,334 14,955
13,686 15,353
13,572 15,338
13,440 14,955
13,237 14,690
13,490 14,829
13,666 15,080
14,210 15,323
14,735 15,558
15,096 15,842
15,435 15,943
16,127 15,955
16,694 15,962
17,293 16,435
17,427 16,608
18,410 16,600
18,357 16,479
19,419 16,647
19,589 16,804
17,588 16,620
15,893 16,543
15,603 16,531
16,129 16,394
15,880 16,589
16,034 16,744
16,280 16,701
16,483 16,785
16,489 17,036
16,292 16,821
15,370 16,860
15,017 17,201
14,986 17,644
15,020 18,542
15,743 18,838
16,424 19,364
16,424 19,484
16,423 19,577
16,439 19,033
16,830 19,461
16,993 19,651
17,408 19,871
17,991 20,117
18,743 19,910
18,036 19,794
18,187 19,764
18,579 19,691
18,784 19,711
19,078 19,883
19,408 20,249
19,827 20,333
20,548 20,445
10/31/1996 20,901 20,851
</TABLE>
The chart above shows the performance of the GT Global Strategic Income Fund,
Class A shares, since the Fund's inception, versus the J.P. Morgan Global
Goverment Bond Index. This represents a cumulative return of 109.01% and an
average annual total return of 8.96% for the Fund. The chart assumes a
hypothetical $10,000 initial investment in the Fund's Class A shares and
reflects all Fund expenses and the maximum 4.75% sales charge. A $10,000
investment in the Fund's Class B shares at inception on October 22, 1992 would
have been valued at $14,821. This figure reflects all Fund expenses, the
applicable contingent deferred sales charge (5% in the first year, decreasing to
0% after six years) and assumes complete redemption at the end of the period. A
$10,000 investment in Advisor Class shares at inception on June 1, 1996, would
have been worth $12,798 on October 31, 1996.
AVERAGE ANNUAL TOTAL RETURNS%(1)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Without Sales Charge(2) With Sales Charge
Share Class 1-Year 5-Year Life of Fund 1-Year 5-Year Life of Fund
<S> <C> <C> <C> <C> <C> <C>
Class A(3) 23.0 11.56 9.58 17.15 10.48 8.96
Class B(3) 22.15 N/A 10.64 17.15 N/A 10.27
Advisor Class(4) 23.39 N/A 18.99 N/A N/A N/A
</TABLE>
HISTORICAL PERFORMANCE%(2)
ANNUAL RETURNS
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A 1.16(3) 10.17 8.39 15.78 1.27 43.95 -20.85 17.06
Class B N/A N/A N/A N/A -0.69(3) 43.10 -21.29 16.28
</TABLE>
(1) Figures assume reinvestment of all dividends and capital gain distributions
at net asset value.
(2) Performance data do not reflect the maximum 4.75% sales charge and the
contingent deferred sales charge (5% in the first year, decreasing to 0%
after six years) for Class A and Class B shares, respectively,
which, if included, would have reduced the performance quoted. |
(3) The Fund began operations on March 29, 1988; Class B shares commenced on
October 22, 1992.
(4) Advisor Class shares are not sold directly to the general public and are
only available through certain employee benefit plans, financial
institutions and other entities that have entered into specific agreements
with GT Global. Please see the "Alternative Purchase Plan" section in the
Fund's prospectus.
The above data represent past performance of the Fund's shares, which does not
guarantee future results. The investment return and principal value of an
investment in the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
10
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
INTERVIEW WITH PORTFOLIO MANAGER
SIMON E. NOCERA & RALF LOCHMULLER
Q HOW DID THE FUND PERFORM?
A We are pleased with the Fund's performance over the 12 months ended October
31, 1996. Total return for the period was 23.0% for Class A shares (17.15%
including the maximum 4.75% sales charge) and 22.15% for Class B shares (17.15%
including the maximum 5% contingent deferred sales charge). Total return over
the same investment period was 5.10% for the J.P. Morgan Global Government Bond
Index(5) and 39.90% for the J.P. Morgan EMBI (Brady) Index.(6)
These index returns highlight the considerable divergence in the performance of
core and emerging markets over the period. Emerging market debt enjoyed such
tremendous performance because of the turnaround after the panic selloff in
Mexico and the resulting turbulence in emerging markets in general. The Fund's
significant weighting in these markets accounts for a good deal of its strong
performance, as well as its holdings in smaller, higher-yielding European
markets. Russia and Morocco stand out as the biggest positive contributors to
the Fund's performance.
In Russia, as we discussed in the High Income report, we took advantage of the
IMF's announcement of loan postponement, coupled with the market's negative
reaction to Yeltsin's health, to increase the Fund's position. We saw this as an
attractive buying opportunity because the IMF's announcement was a sound public
statement underlining the seriousness of the situation, which helped Yeltsin
implement the necessary fiscal reform. Based on market reaction, we made a good
decision. Subsequently, however, we reduced the Fund's position as value became
less obvious. Nevertheless, we continue to feel the market is one of the
cheapest available, and under the current conditions intend to maintain the
Fund's core position in Russia.
Panama was also a strong contributor to performance. Panamian bond yields have
been driven lower on the back of expectations that Panama is soon to achieve
investment grade rating. A strong commitment to structural reform has been made,
and Panama's privatization and economic reform program is very much in place.
This combination, together with a good fiscal surplus, has attracted a huge flow
of funds into Panamanian fixed income.
Q WHAT WAS THE INVESTMENT ENVIRONMENT LIKE
IN THE MAJOR CORE MARKETS?
A The U.S. market is the most important determinant of global yields. Over
the past year, relatively stable growth and subdued inflation have served as a
good background for bond rallies elsewhere. Going forward, we expect inflation
should not be a problem and treasuries should trade in the range we've seen over
the last year.
In Japan, structural economic problems continued to dampen economic activity.
Given the presence of abundant resources, we believe the inflation outlook will
continue to be benign for bonds. We also believe that fiscal policy in Japan,
which has been the primary engine of growth, will turn tighter in the future. In
other words, we find no reason to expect enough increased economic activity in
Japan to push monetary authorities to raise interest rates dramatically. Hence,
with no inflation and no expected upside surprises in economic activity, bond
markets and yields in Japan appear to us to be fairly stable, even though they
are at historically low levels (roughly 2.6%).
In Europe, the climate is similar--limited economic activity, with the exception
of the UK. While the major economies are not in an outright recession, they are
experiencing growth at or considerably below their potential. The economies of
Germany and France, for example, are growing at a mere 1% or so, versus a
potential of 2.5% or 3%. With the amount of slack capacity in these economies,
even if economic activity were to turn around, we would not expect a rise in
inflation or inflationary expectations massive enough to increase yields
dramatically.
Q WHAT ARE THE IMPLICATIONS OF THE EUROPEAN MONETARY UNION?
A Recently we've seen a steady tightening of spreads across Europe. This
convergence has occurred on the back of the political push to achieve European
monetary union, and we have no reason to expect the political willingness to
push for EMU will change any time soon. On the contrary, it is picking up quite
a bit of momentum. Based on the current situation, fiscal policy will have to be
very tight. With that kind of constraint on the economy, we believe it is
unlikely that inflationary expectations in continued p12
(5) The J.P. Morgan Global Government Bond Index is an arithmetic average,
weighted by market value, of government bonds from 13 major bond
markets. It includes the effect of reinvested coupons and is measured in
U.S. dollars.
(6) The J.P. Morgan EMBI (Brady) Index is an arithmetic average, weighted by
market value, of Brady bonds from nine emerging bond markets. It includes
the effect of reinvested coupons and is measured in U.S. dollars.
The indices are unmanged, not available for direct investment and do not incur
sales charges and professional management fees.
11
<PAGE>
INTERVIEW WITH THE PORTFOLIO MANAGER CONTINUED
Europe will rise dramatically, and a massive correction in yields is therefore
unlikely. However, the system being devised is based on very fragile fundamental
conditions, a similar situation to what occurred in the 1992 currency crisis in
the ERM. In our view, if there is any risk with regard to global yields, it
comes from Europe.
Q WHY HAS EMERGING MARKET DEBT ENJOYED SUCH
AN OUTSTANDING YEAR?
A People have been surprised by the significant outperformance of emerging
market debt in 1995 and 1996. A few observations are helpful in understanding
why such dramatic outperformance occurred. First, value has come back from an
extremely low base. The potential for outperformance was created by the
correction emerging markets experienced after the panic selloff following the
Mexican peso crisis.
Also, post-crisis, government securities in these markets behaved less like
typical fixed income investments, that is, driven by fundamentals, and more like
equities whose value was driven by growth expectations. At present, we believe
the distortion created by Mexico has been fully corrected, and the market is in
a transition phase, moving from an equity environment to a typical fixed income
environment.
Q HOW DO YOU PERCEIVE THE CURRENT FUNDAMEN-TALS OF
EMERGING MARKETS?
A In our view, the universe of emerging markets, with the exception of a few
countries, is doing very well. At 5%, average economic growth continues to be
about twice as fast as in the industrialized countries. It is also coming on the
heels of outstanding macroeconomic performance, measured in terms of lower
inflation, lower fiscal deficits and declining current account deficits. In
other words, we aren't seeing large distortions as we did in Mexico in 1994.
Also, at present, a fairly good liquidity environment exists, which means money
is available to finance investment and growth. Fundamentally, then, we judge
these countries to be in very good shape.
Q HOW DO YOU DETERMINE ASSET ALLOCATION?
A We have devised a unique set of tools to determine relative value between
core and emerging debt markets. Our process enables us to select what we feel
are the best sovereign and corporate bond opportunities in the world.
With respect to emerging markets, structural developments are creating huge
productivity gains, promoting growth and, therefore, value in many countries.
Our investment process places emphasis on these types of structural changes.
Obviously, if we are correct, these reforms should eventually make these
economies directly comparable with core countries. We also examine the
government policies and cyclical positions of these economies. The second step
is to determine value by looking closely at where these countries are trading
relative to other global financial indicators. Finally, we look at global
yields.
Q COULD YOU DESCRIBE YOUR INVESTMENT STRATEGY
OVER THE PERIOD AND GOING FORWARD?
A In general, we are now more active in the middle-tier emerging market
countries such as the Czech Republic, Hungary, Poland and Colombia. These are
not traditional countries found in an emerging markets portfolio; at the same
time, neither are they typical core markets. They are investment grade
countries, considered relatively stable. Most trade at 200 bps in U.S. dollars.
Over the last 18 months or so, in an attempt to stabilize the Fund's NAV and
reduce its risk exposure, we have been increasing allocation to these types of
countries. Going forward, we are likely to continue to play them against the
peripheral countries in Europe, where we believe, because of the convergence,
the value has been practically squeezed out and quite a bit of risk surrounds
the EMU. In terms of core Europe, we believe value still exists and currently
intend to remain overweighted there relative to the U.S. and Japan over the
medium term.
ABOUT THE PORTFOLIO MANAGERS
SIMON E. NOCERA--Chief Investment Officer of Emerging Market Debt for
Chancellor LGT since 1996; Portfolio Manager and Director of Research since
1992. Previously, Mr. Nocera was Senior Vice President and Director of Global
Fixed Income Research for the Putnam Companies from 1991-92 and Economist for
the International Monetary Fund from 1986-91.
RALF LOCHMULLER--International head of Core Market Debt for Chancellor LGT
Asset Management since 1996. Previously, he was head of Portfolio Management for
a subsidiary of Liechtenstein Global Trust and also held a number of positions
of increasing responsibility since 1988.
GEOGRAPHIC ALLOCATION
Africa 3.8%
Asia-Pacific 5.4%
Eastern Europe 8.7%
U.S., Canada & Other 20.6%
Latin America 30.5%
Europe 31.0%
Alocations may change as conditions change.
12
<PAGE>
GT GLOBAL
INCOME FUNDS
FINANCIAL
STATEMENTS
<PAGE>
GT GLOBAL INCOME FUNDS
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of GT
Global Government Income Fund, GT Global High Income Fund - Consolidated, and GT
Global Strategic Income Fund, including the portfolios of investments, as of
October 31, 1996, the related statements 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 periods indicated
herein. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and 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, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial positions of GT
Global Government Income Fund, GT Global High Income Fund - Consolidated, and GT
Global Strategic Income Fund as of October 31, 1996, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
periods indicated herein, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 13, 1996
F1
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (89.0%)
Australia (4.8%)
Commonwealth of Australia, 9.5% due 8/15/03 .......... AUD 21,800,000 $ 19,335,562 4.8
Canada (11.8%)
Canadian Government:
7% due 12/1/06 ..................................... CAD 40,000,000 31,138,957 7.6
8.75% due 12/1/05 .................................. CAD 19,600,000 17,046,021 4.2
Colombia (1.1%)
Republic of Colombia, 7.25% due 2/23/04 .............. USD 4,875,000 4,635,638 1.1
Denmark (2.9%)
Kingdom of Denmark, 7% due 12/15/04 .................. DKK 67,000,000 11,834,313 2.9
Finland (2.0%)
Finnish Government, 9.5% due 3/15/04 ................. FIM 31,000,000 8,182,127 2.0
Germany (17.6%)
Deutschland Republic, 6% due 1/5/06 .................. DEM 108,650,000 71,726,974 17.6
Ireland (1.9%)
Irish Gilts, 8% due 8/18/06 .......................... IEP 4,500,000 7,859,990 1.9
Italy (9.0%)
Italian Buoni Poliennali del Tesoro (BTPS):
9.5% due 2/1/99 .................................... ITL 22,600,000,000 15,650,408 3.8
10.5% due 11/1/00 .................................. ITL 17,000,000,000 12,393,065 3.1
9.5% due 2/1/01 .................................... ITL 12,110,000,000 8,593,403 2.1
Mexico (1.1%)
United Mexican States, 7.6875% due 8/6/01 - 144A+
{.} ................................................. USD 4,490,000 4,491,347 1.1
New Zealand (2.6%)
New Zealand Government, 8% due 11/15/06 .............. NZD 14,200,000 10,554,326 2.6
Poland (1.1%)
Republic of Poland, Past Due Interest, 4% due 10/27/14
- Registered++ ...................................... USD 5,605,000 4,631,131 1.1
South Africa (1.1%)
Republic of South Africa, 9.625% due 12/15/99 ........ USD 4,240,000 4,515,600 1.1
Spain (2.0%)
Kingdom of Spain, 10.1% due 2/28/01 .................. ESP 950,000,000 8,292,480 2.0
Sweden (4.8%)
Swedish Government, 13% due 6/15/01 .................. SEK 101,000,000 19,323,805 4.8
United Kingdom (10.5%)
United Kingdom Treasury:
7.5% due 12/7/06 ................................... GBP 16,000,000 25,821,527 6.3
7% due 11/6/01 ..................................... GBP 10,500,000 16,923,202 4.2
United States (14.7%)
United States Treasury Note:
7.875% due 11/15/04 ................................ USD 27,225,000 29,916,660 7.3
6.25% due 10/31/01 ................................. USD 20,000,000 20,150,000 5.0
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
United States Treasury Bond, 6.875% due 8/15/25 ...... USD 9,500,000 $ 9,726,738 2.4
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $351,306,081) ....... 362,743,274 89.0
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Treasury Bills (4.4%)
New Zealand (2.2%)
New Zealand Treasury Bill, 9.23% due 1/15/97 ......... NZD 13,160,000 9,133,580 2.2
Philippines (2.2%)
Philippine Treasury Bill, 9.94% due 11/27/96 ......... PHP 233,300,000 8,832,945 2.2
------------
Total Treasury Bills (cost $17,878,115) .................. 17,966,525
------------
Commercial Paper - Discounted (3.1%)
Indonesia (1.2%)
PT Bank Tabungan Negara, effective yield 16.02%, due
9/12/97 ............................................. IDR 12,000,000,000 4,552,243 1.1
PT Bank Degang Negara, effective yield 16.02%, due
9/12/97 ............................................. IDR 750,000,000 284,515 0.1
Thailand (1.9%)
Bank of Ayudhya, 10.25% due 9/24/97 .................. THB 100,000,000 3,914,304 1.0
Siam City Bank Co., Ltd., 10.58% due 11/25/96 ........ THB 100,000,000 3,898,078 0.9
------------
Total Commercial Paper - Discounted (cost $12,670,668) ... 12,649,140
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $30,548,783) .......... 30,615,665 7.5
------------ -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1996 with State Street Bank & Trust
Co., due November 1, 1996, for an effective yield of
5.55%, collateralized by $2,365,000 U.S. Treasury
Bonds, 7.125% due 2/15/23 (market value of collateral
is $2,497,903, including accrued interest). (cost
$2,446,377) ........................................... 2,446,377 0.6
------------ -----
TOTAL INVESTMENTS (cost $384,301,241) * .................. 395,805,316 97.1
Other Assets and Liabilities ............................. 11,803,202 2.9
------------ -----
NET ASSETS ............................................... $407,608,518 100.0
------------ -----
------------ -----
</TABLE>
- --------------
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
+ The coupon rate shown on floating rate note represents the rate at
period end.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
* For Federal income tax purposes, cost is $384,541,135 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 13,757,185
Unrealized depreciation: (2,493,004)
-------------
Net unrealized appreciation: $ 11,264,181
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1996
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 3,628,300 1.26651 11/12/96 $ 12,069
Canadian Dollars........................ 4,631,930 1.3427 11/29/96 14,368
Canadian Dollars........................ 3,436,593 1.34525 11/29/96 17,154
Canadian Dollars........................ 1,165,453 1.366 11/29/96 23,433
Canadian Dollars........................ 3,346,943 1.35055 11/29/96 29,776
Canadian Dollars........................ 3,735,427 1.3503 11/29/96 32,546
Danish Kroner........................... 8,920,056 5.7816 01/17/97 (9,227)
Deutsche Marks.......................... 14,902,129 1.51102 01/30/97 64,470
Deutsche Marks.......................... 21,428,571 1.45885 11/04/96 (801,268)
Deutsche Marks.......................... 4,661,689 1.5052 11/04/96 (25,396)
Deutsche Marks.......................... 198,229 1.5073 11/04/96 (802)
Deutsche Marks.......................... 7,433,593 1.5066 11/04/96 (33,552)
Irish Punts............................. 4,794,643 0.6252 01/02/97 76,118
Irish Punts............................. 13,246,732 0.62509 01/02/97 208,108
Italian Liras........................... 8,379,070 1,531.31 01/21/97 41,111
Italian Liras........................... 4,560,976 1,545.30 01/21/97 63,467
Japanese Yen............................ 12,352,371 109.85 01/13/97 (301,248)
Japanese Yen............................ 12,605,919 111.845 02/05/97 (36,577)
Japanese Yen............................ 13,804,625 105.3 11/05/96 (1,105,157)
Japanese Yen............................ 11,472,720 107.55 11/29/96 (614,681)
Japanese Yen............................ 6,001,115 109.3 11/29/96 (220,294)
-------------- --------------
Total Contracts to Buy (Payable amount
$167,272,666)........................ 164,707,084 (2,565,582)
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 40.41%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 4,115,507 1.29149 11/12/96 (93,019)
Australian Dollars...................... 1,485,385 1.27251 11/12/96 (11,916)
Australian Dollars...................... 582,271 1.26871 11/12/96 (2,944)
Canadian Dollars........................ 22,337,854 1.368 11/29/96 (481,129)
Canadian Dollars........................ 4,736,522 1.3644 11/29/96 (89,791)
Canadian Dollars........................ 7,172,020 1.3522 11/29/96 (72,479)
Canadian Dollars........................ 1,270,045 1.3574 11/29/96 (17,651)
Canadian Dollars........................ 687,319 1.35016 11/29/96 (5,918)
Canadian Dollars........................ 164,359 1.34715 11/29/96 (1,051)
Danish Kroner........................... 6,565,784 5.8727 01/17/97 (95,166)
Danish Kroner........................... 14,863,819 5.81074 01/17/97 (59,243)
Deutsche Marks.......................... 7,092,137 1.50452 01/30/97 (174)
Deutsche Marks.......................... 7,809,992 1.4983 01/30/97 32,229
Deutsche Marks.......................... 3,733,316 1.50859 11/04/96 11,903
Deutsche Marks.......................... 1,982,292 1.4746 11/04/96 52,158
Deutsche Marks.......................... 6,862,033 1.48714 11/04/96 121,170
Deutsche Marks.......................... 21,144,443 1.49762 11/04/96 222,793
Finnish Markkaa......................... 8,536,304 4.53 01/02/97 (35,200)
Irish Punts............................. 8,382,003 0.61708 01/02/97 (24,529)
Irish Punts............................. 764,407 0.52481 01/02/97 (11,665)
Irish Punts............................. 8,894,965 0.61081 01/02/97 65,027
Italian Liras........................... 19,326,725 1,546.70 01/21/97 (286,187)
Japanese Yen............................ 12,352,371 112.755 01/13/97 (24,758)
Japanese Yen............................ 1,846,479 107.883 11/05/96 100,074
Japanese Yen............................ 3,165,392 108.307 11/05/96 158,493
Japanese Yen............................ 8,792,755 105.3 11/05/96 703,921
Japanese Yen............................ 3,388,865 109.304 11/29/96 124,273
Japanese Yen............................ 4,377,284 109.354 11/29/96 158,444
Japanese Yen............................ 9,707,686 107.88 11/29/96 488,829
New Zealand Dollars..................... 19,930,083 1.42847 01/31/97 (118,668)
Swedish Kronor.......................... 13,732,602 6.6109 01/21/97 (118,722)
Swiss Francs............................ 6,300,745 1.24608 01/03/97 39,137
Swiss Francs............................ 4,346,716 1.24171 01/03/97 42,393
Swiss Francs............................ 6,157,184 1.24205 01/03/97 58,347
-------------- --------------
Total Contracts to Sell (Receivable
amount $253,436,645)................. 252,607,664 828,981
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 61.97%.
Total Open Forward Foreign Currency
Contracts, Net....................... $(1,736,601)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (62.4%)
Argentina (10.9%)
Republic of Argentina:
Discount Bond, 6.4375% due 3/31/23+ ................. USD 26,305,000 $ 19,087,566 4.3
BOCON Pre 4, 5.4453% due 9/1/02[.] + ................ USD 15,293,000 15,346,526 3.5
Par Bond, 5.25% due 3/31/23++ ....................... USD 20,381,000 12,152,171 2.7
Floating Rate Bond, 6.625% due 3/31/05+ ............. USD 2,203,040 1,816,131 0.4
Brazil (9.6%)
Federal Republic of Brazil:
C Bond, 4.5% due 4/15/14 (Effective rate at period
end is 6.92813%, including "payment-in-kind"
bonds.)[.] ++ ...................................... USD 55,360,363 38,404,647 8.6
MYDFA Floating Rate Note, 6.6875% due 9/15/07 -
144A{.} + .......................................... USD 5,191,000 4,350,707 1.0
Bulgaria (2.9%)
Bulgaria, Discount Bond Series A, 6.6875% due 7/28/24 -
EURO+ ................................................ USD 25,780,000 13,067,238 2.9
Costa Rica (1.7%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.34375% due 5/21/05
(Effective maturity date 8/23/03)+ ................. USD 6,036,880 5,825,589 1.3
Principal Bond Series A, 6.25% due 5/21/10 .......... USD 1,900,000 1,539,000 0.4
Ecuador (4.9%)
Ecuador:
Past Due Interest Bond, 3% due 2/27/15 - Euro
(Effective rate at period end is 4.96%, including
"payment-in-kind" bonds.)[.] + ..................... USD 28,818,107 16,138,140 3.6
Past Due Interest Bond, 3% due 2/27/15 - Registered
(Effective rate at period end is 4.96%, including
"payment-in-kind" bonds.)[.] + ..................... USD 6,079,992 3,404,796 0.8
Discount Bond, 6.5% due 2/28/25 - EURO+ ............. USD 3,210,000 2,104,556 0.5
Mexico (8.3%)
United Mexican States:
Global Bond, 11.5% due 5/15/26 ...................... USD 12,700,000 12,684,125 2.9
11.375% due 9/15/16 - 144A{.} ....................... USD 5,640,000 5,625,900 1.3
7.6875% due 8/6/01 - 144A+ {.} {j} .................. USD 4,619,000 4,620,386 1.0
Discount Bond Series C, 6.35156% due 12/31/19+
+/+ ................................................ USD 4,956,000 4,082,505 0.9
Banco Nacional de Comercio Exterior, S.N.C. (BNCE)
Trust Division, 11.25% due 5/30/06 - 144A{.} ......... USD 9,440,000 9,746,800 2.2
Nigeria (4.8%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20++ ........................................... USD 34,500,000 21,390,000 4.8
Panama (3.1%)
Panama, Interest Reduction Bond, 3.5% due 7/17/14 -
144A++ {.} ........................................... USD 21,105,000 13,955,681 3.1
Philippines (2.7%)
Republic of Philippines, 8.75% due 10/7/16 -
144A{.} .............................................. USD 7,000,000 6,855,625 1.5
Central Bank of the Philippines, Debt Conversion Bond
Series B, 6.4375% due 12/1/09+ ....................... USD 5,663,000 5,422,323 1.2
United States (2.7%)
United States Treasury Note, 7% due 7/15/06{j} ........ USD 11,660,000 12,194,037 2.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Uruguay (1.5%)
Banco Central del Uruguay:
New Money Bond, 6.875% due 2/18/06+ ................. USD 3,750,000 $ 3,628,125 0.8
Par Bond Series A, 6.75% due 2/19/21+/+ ............. USD 2,290,000 1,889,250 0.4
Par Bond Series B, 6.75% due 2/19/21+/+ ............. USD 1,500,000 1,237,500 0.3
Venezuela (9.3%)
Republic of Venezuela:
Debt Conversion Bond, 6.625% due 12/18/07+ .......... USD 20,750,000 17,066,875 3.8
Front Loaded Interest Reduction Bond Series A, 6.625%
due 3/31/07+ ....................................... USD 13,000,000 10,814,375 2.4
Par Bond Series A, 6.75% due 3/31/20+/+ ............. USD 13,500,000 9,610,313 2.2
Front Loaded Interest Reduction Bond Series B, 6.5%
due 3/31/07+ ....................................... USD 5,000,000 4,159,375 0.9
------------
Total Government & Government Agency Obligations (cost
$259,273,931) ............................................ 278,220,262
------------
Sovereign Debt (17.3%)
Morocco (4.5%)
Kingdom of Morocco, Tranche A Loan Agreement, 6.4375%
due 1/1/09+ .......................................... USD 25,000,000 19,843,750 4.5
Peru (1.5%)
Peru Loan Agreement ** -/- ............................ USD 4,600,000 5,384,875 1.2
Peru Loan Agreement (Citibank Issued) ** -/- .......... USD 1,000,000 1,170,625 0.3
Russia (11.3%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- ................................... USD 46,757,000 34,337,172 7.7
Participation ** -/- ................................ DEM 12,466,000 6,321,960 1.4
Assignment ** -/- ................................... DEM 9,819,000 4,979,571 1.1
Participation ** -/- ................................ USD 6,600,000 4,846,875 1.1
------------
Total Sovereign Debt (cost $54,521,525) ................... 76,884,828
------------
Corporate Bonds (10.8%)
Argentina (0.5%)
Industrias Metallurgicas Pescarmona S.A. (IMPSA),
11.75% due 3/27/98 - 144A{.} ......................... USD 1,950,000 1,989,000 0.5
Brazil (0.3%)
Net Sat Servicos LTDA, 12.75% due 8/5/04 - 144A{.} .... USD 1,134,000 1,190,700 0.3
Indonesia (5.1%)
Asia Pulp & Paper International Finance Co., Ltd.,
11.75% due 10/1/05 ................................... USD 6,077,000 6,335,273 1.4
Dharmala Sakti Sejahtera Promissory Note, effective
yield 20.00%, due 6/9/97 ............................. IDR 9,000,000,000 3,449,610 0.8
PT Polysindo EKA Perkasa:
effective yield 20.05%, due 7/27/97 ................. IDR 6,000,000,000 2,246,285 0.5
13% due 6/15/01 - DTC ............................... USD 613,000 680,430 0.2
13% due 6/15/01 - EURO .............................. USD 395,000 438,450 0.1
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
PT Tjiwi Kimia, 13.25% due 8/1/01 ..................... USD 2,500,000 $ 2,812,500 0.6
Rapp International Finance, 13.25% due 12/15/05 -
Euro ................................................. USD 2,430,000 2,642,625 0.6
FSW International Finance Co., 12.5% due 11/1/06 -
144A{.} .............................................. USD 2,007,000 2,025,816 0.5
PT Indah Kiat International Finance Series B, 11.875%
due 6/15/02 .......................................... USD 1,510,000 1,615,700 0.4
Luxembourg (0.5%)
Millicom International Cellular, effective yield
13.07%, due 6/1/06 - 144A{.} ......................... USD 3,800,000 2,170,750 0.5
Malaysia (0.1%)
Aokam Perdana Bhd., Convertible Bond, 3.5% due
6/13/04 .............................................. USD 650,000 453,375 0.1
Mexico (2.8%)
Grupo Industrial Durango, S.A., 12.625% due 8/1/03 .... USD 4,758,000 4,960,215 1.1
Grupo Irsa, S.A. de C.V., 8.375% due 7/15/98 .......... USD 3,300,000 3,295,875 0.7
Cemex, S.A. de C.V. "B", 12.75% due 7/15/06 -
144A{.} .............................................. USD 2,420,000 2,622,675 0.6
Grupo Elektra, S.A. de C.V., 12.75% due 5/15/01 -
144A{.} .............................................. USD 1,500,000 1,573,125 0.4
People's Republic of China (0.7%)
Zhuhai Highway Co., Ltd., 11.5% due 7/1/08 -
144A{.} .............................................. USD 2,900,000 3,124,750 0.7
Philippines (0.8%)
Filinvest Capital, Convertible Bond, 3.75% due 2/1/02 -
Reg. S++ ............................................. USD 1,892,000 1,863,620 0.4
CE Casecnan Water & Energy, 11.45% due 11/15/05 - Reg.
S .................................................... USD 1,030,000 1,138,150 0.3
Subic Power Corp., 9.5% due 12/28/08 - 144A{.} ........ USD 448,276 463,966 0.1
------------
Total Corporate Bonds (cost $46,398,969) .................. 47,092,890
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $360,194,425) ........ 402,197,980 90.5
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Republic of Argentina: .................................. USD -- -- 0.3
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
Floating Rate Bond 3/31/05, Call Option, strike 77.875,
expires 11/29/96 ..................................... -- 19,800,000 890,050 --
Floating Rate Bond 3/31/05, Call Option, strike 80.625,
expires 12/9/96 ...................................... -- 19,800,000 512,365 --
Republic of Brazil C Bond 4/15/14, Call Option, strike
71.8125, expires 12/26/96 .............................. USD 99,670,154 1,108,531 0.3
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
Republic of Venezuela: .................................. USD -- -- --
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
Debt Conversion Bond 12/18/07, Call Option, strike
84.15, expires 1/2/97 ................................ -- 9,857,000 94,637 --
Debt Conversion Bond 12/18/07, Call Option, strike
84.44, expires 1/2/97 ................................ -- 9,857,000 85,894 --
------------ -----
TOTAL OPTIONS (cost $3,779,230) ........................... 2,691,477 0.6
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (3.8%)
Thailand (0.2%)
TPI Polene Public Co., Ltd., current yield 10.36% due
1/6/97 ............................................... THB 25,000,000 $ 962,735 0.2
United States (3.6%)
Merrill Lynch & Co., current yield 5.38% due
11/5/96 .............................................. USD 16,000,000 15,990,436 3.6
------------
Total Commercial Paper - Discounted (cost $16,958,338) .... 16,953,171
------------
Government & Government Agency Obligations (2.0%)
Mexico (2.0%)
Mexican Cetes, current yield 29.66% due 1/23/97 ....... MXN 4,567,238 5,351,413 1.2
Mexican Cetes, current yield 29.61% due 1/16/97 ....... MXN 1,340,951 1,578,527 0.4
Mexican Cetes, current yield 26.88% due 1/30/97 ....... MXN 1,225,706 1,436,292 0.3
Mexican Cetes, current yield 29.66% due 2/20/97 ....... MXN 325,125 372,690 0.1
Mexican Cetes, current yield 29.66% due 2/6/97 ........ MXN 135,468 156,927 --
------------
Total Government & Government Agency Obligations (cost
$8,891,671) .............................................. 8,895,849
------------
Commercial Paper - Indexed (1.4%)
Philippines (1.4%)
National Westminster Bank PLC, Currency-Linked CD,
12.3798% due 2/28/97 (cost $6,500,000) ............... USD 6,500,000 6,418,711 1.4
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $32,350,009) ........... 32,267,731 7.2
------------ -----
<CAPTION>
% OF NET
REPURCHASE AGREEMENT ASSETS
- ----------------------------------------------------------- -------------
<S> <C> <C> <C> <C>
Dated October 31, 1996, with State Street Bank & Trust
Co., due November 1, 1996, for an effective yield of
5.55% collateralized by $3,010,000 U.S. Treasury Bonds,
7.125% due 2/15/23 (market value of collateral is
$3,179,150, including accrued interest).
(cost $3,112,480) ..................................... 3,112,480 0.7
------------ -----
TOTAL INVESTMENTS (cost $399,436,144) * ................... 440,269,668 99.0
Other Assets and Liabilities .............................. 4,348,817 1.0
------------ -----
NET ASSETS ................................................ $444,618,485 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
+ The coupon rate shown on floating rate note represents the rate at
period end.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
[.] Bond pays stated or additional interest with "payment-in-kind"
(PIK) bonds.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{j} Security is segregated as collateral for when-issued securities
held by the Fund. See Note 1 of Notes to Financial Statements.
* For Federal income tax purposes, cost is $401,018,014 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 42,322,854
Unrealized depreciation: (3,071,200)
-------------
Net unrealized appreciation: $ 39,251,654
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1996
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 6,587,811 1.47060 11/13/96 $ 191,735
-------------- --------------
Total Contracts to Sell (Receivable
amount $6,779,546)................... 6,587,811 191,735
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 1.48%.
Total Open Forward Foreign Currency
Contracts............................ $ 191,735
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (82.1%)
Argentina (6.4%)
Republic of Argentina:
Discount Bond, 6.4375% due 3/31/23+ ................ USD 16,365,000 $ 11,874,853 2.3
BOCON Pre 4, 5.4453% due 9/1/02[.] + ............... USD 9,290,000 9,322,515 1.8
Par Bond, 5.25% due 3/31/23++ ...................... USD 11,350,000 6,767,438 1.3
Floating Rate Bond, 6.625% due 3/31/05+ ............ USD 6,224,960 5,131,701 1.0
Australia (2.2%)
Commonwealth of Australia, 9.5% due 8/15/03 .......... AUD 13,000,000 11,530,381 2.2
Brazil (4.2%)
Federal Republic of Brazil:
C Bond, 4.5% due 4/15/14 (Effective rate at period
end is 6.928125%, including "payment-in-kind"
bonds.)[.] ++ ..................................... USD 27,866,864 19,332,637 3.7
MYDFA Floating Rate Note, 6.6875% due 9/15/07 -
144A+ {.} ......................................... USD 3,326,000 2,787,604 0.5
Bulgaria (1.6%)
Bulgaria, Discount Bond Series A, 6.6875% due 7/28/24
- EURO+ ............................................. USD 15,872,000 8,045,120 1.6
Canada (2.7%)
Canadian Government:
8.75% due 12/1/05 .................................. CAD 10,500,000 9,131,797 1.8
8% due 11/1/98 ..................................... CAD 6,000,000 4,785,187 0.9
Costa Rica (0.8%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.34375% due 5/21/05
(Effective maturity date 8/23/03)+ ................ USD 2,711,480 2,616,578 0.5
Principal Bond Series A, 6.25% due 5/21/10 ......... USD 1,900,000 1,539,000 0.3
Denmark (2.8%)
Kingdom of Denmark, 7% due 12/15/04 .................. DKK 81,000,000 14,307,236 2.8
Ecuador (2.6%)
Ecuador:
Past Due Interest Bond, 3% due 2/27/15 - Euro
(Effective rate at period end is 4.96%, including
"payment-in-kind" bonds.)[.] + .................... USD 16,652,835 9,325,588 1.8
Discount Bond, 6.5% due 2/28/25 - Euro+ ............ USD 6,520,000 4,274,675 0.8
Past Due Interest Bond, 3% due 2/27/15 - 144A
(Effective rate at period end is 4.96%, including
"payment-in-kind" bonds.)[.] + {.} ................ USD 1,058 592 --
France (1.7%)
France O.A.T., 7.25% due 4/25/06 ..................... FRF 40,000,000 8,576,852 1.7
Germany (9.9%)
Deutschland Republic:
6% due 1/5/06 ...................................... DEM 45,000,000 29,707,608 5.7
8.25% due 9/20/01 .................................. DEM 14,500,000 10,885,060 2.1
Treuhandanstalt, 7.125% due 1/29/03 .................. DEM 15,000,000 10,746,994 2.1
Italy (3.9%)
Italian Buoni Poliennali del Tesoro (BTPS):
10.5% due 11/1/00 .................................. ITL 11,200,000,000 8,164,843 1.6
9.5% due 2/1/99 .................................... ITL 8,000,000,000 5,539,967 1.1
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Republic of Italy Series Y, .5625% due 7/26/99+ ...... JPY 700,000,000 $ 6,216,478 1.2
Mexico (7.0%)
United Mexican States:
Discount Bond Series C, 6.35156% due 12/31/19+
+/+ ............................................... USD 18,634,000 15,349,758 3.0
Global Bond, 11.5% due 5/15/26 ..................... USD 8,272,000 8,261,660 1.6
11.375% due 9/15/16 - 144A{.} ...................... USD 3,000,000 2,992,500 0.6
7.6875% due 8/6/01 - 144A+ {.} ..................... USD 2,953,000 2,953,886 0.6
Banco Nacional de Comercio Exterior, S.N.C. (BNCE)
Trust Division, 11.25% due 5/30/06 - 144A{.} ........ USD 6,152,000 6,351,940 1.2
New Zealand (1.1%)
New Zealand Government, 8% due 2/15/01 ............... NZD 8,000,000 5,822,342 1.1
Nigeria (2.0%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20++ .......................................... USD 16,500,000 10,230,000 2.0
Panama (2.0%)
Panama, Interest Reduction Bond, 3.5% due 7/17/14 -
144A++ {.} .......................................... USD 15,805,000 10,451,056 2.0
Philippines (0.2%)
Republic of Philippines, 8.75% due 10/7/16 -
144A{.} ............................................. USD 1,000,000 979,375 0.2
Spain (3.5%)
Kingdom of Spain, 10.1% due 2/28/01 .................. ESP 2,100,000,000 18,330,746 3.5
Supranational (1.6%)
International Bank of Reconstruction & Development,
4.75% due 12/20/04 .................................. JPY 800,000,000 8,227,205 1.6
Sweden (2.3%)
Swedish Government, 13% due 6/15/01 .................. SEK 63,000,000 12,053,463 2.3
Turkey (0.8%)
Sultan Ltd., 8.49874% due 6/11/99+ ................... USD 4,400,000 4,327,928 0.8
United Kingdom (6.6%)
United Kingdom Treasury:
7% due 11/6/01 ..................................... GBP 14,100,000 22,725,571 4.4
7.5% due 12/7/06 ................................... GBP 7,000,000 11,296,982 2.2
United States (10.7%)
United States Treasury Note, 6.875% due 3/31/00{j} ... USD 43,000,000 44,211,056 8.5
United States Treasury Bond, 6.875% due 8/15/25 ...... USD 11,000,000 11,262,539 2.2
Uruguay (0.2%)
Banco Central del Uruguay, Par Bond Series A, 6.75%
due 2/19/21+/+ ...................................... USD 1,370,000 1,130,250 0.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Venezuela (5.3%)
Republic of Venezuela:
Debt Conversion Bond, 6.625% due 12/18/07+ ......... USD 13,750,000 $ 11,309,375 2.2
Front Loaded Interest Reduction Bond Series B, 6.5%
due 3/31/07+ ...................................... USD 9,000,000 7,486,875 1.4
Par Bond Series A, 6.75% due 3/31/20+/+ ............ USD 7,500,000 5,339,063 1.0
Front Loaded Interest Reduction Bond Series A,
6.625% due 3/31/07+ ............................... USD 4,500,000 3,743,438 0.7
------------
Total Government & Government Agency Obligations (cost
$406,608,996) ........................................... 425,447,712
------------
Sovereign Debt (8.1%)
Morocco (1.8%)
Kingdom of Morocco, Tranche A Loan Agreement, 6.4375%
due 1/1/09+ ......................................... USD 11,460,000 9,096,375 1.8
Russia (6.3%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- .................................. USD 31,585,000 23,195,234 4.5
Participation ** -/- ............................... DEM 8,786,000 4,455,699 0.9
Participation ** -/- ............................... USD 3,440,000 2,526,250 0.5
Assignment ** -/- .................................. DEM 4,566,000 2,315,584 0.4
------------
Total Sovereign Debt (cost $27,803,682) .................. 41,589,142
------------
Corporate Bonds (3.4%)
Brazil (0.2%)
Net Sat Servicos LTDA, 12.75% due 8/5/04 - 144A{.} ... USD 738,000 774,900 0.2
Indonesia (0.9%)
PT Polysindo EKA Perkasa, 13% due 6/15/01:
EURO ............................................... USD 1,955,000 2,170,050 0.4
DTC ................................................ USD 395,000 438,450 0.1
FSW International Finance Co., 12.5% due 11/1/06 -
144A{.} ............................................. USD 1,090,000 1,100,219 0.2
Rapp International Finance, 13.25% due 12/15/05 -
Euro ................................................ USD 664,000 722,100 0.1
PT Indah Kiat International Finance Series B, 11.875%
due 6/15/02 ......................................... USD 664,000 710,480 0.1
Luxembourg (0.3%)
Millicom International Cellular, effective yield
13.07% due 6/1/06 - 144A{.} ......................... USD 2,300,000 1,313,875 0.3
Mexico (0.7%)
Grupo Industrial Durango, S.A., 12.625% due 8/1/03 ... USD 2,653,000 2,765,753 0.5
Grupo Elektra, S.A. de C.V., 12.75% due 5/15/01 -
144A{.} ............................................. USD 1,000,000 1,048,750 0.2
Philippines (0.3%)
Filinvest Capital, Convertible Bond, 3.75% due 2/1/02
- 144A{.} ........................................... USD 1,260,000 1,241,100 0.2
CE Casecnan Water & Energy, 11.45% due 11/15/05 - Reg.
S ................................................... USD 670,000 740,350 0.1
United States (1.0%)
Chase Manhattan Corp., 6.25% due 1/15/06 ............. USD 2,835,000 2,700,839 0.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
General Motors Acceptance Corp., 6.625% due
10/15/05 ............................................ USD 2,700,000 $ 2,641,580 0.5
------------
Total Corporate Bonds (cost $17,787,296) ................. 18,368,446
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $452,199,974) ....... 485,405,300 93.6
------------ -----
<CAPTION>
UNDERLYING % OF NET
OPTIONS CURRENCY AMOUNT ASSETS
- ---------------------------------------------------------- -------- -------------- -------------
<S> <C> <C> <C> <C>
Republic of Brazil C Bond 4/15/14, Call Option, strike
71.8125, expires 12/26/96 ............................. USD 59,364,791 660,255 0.2
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
Republic of Venezuela: ................................. USD -- -- --
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
Debt Conversion Bond 12/18/07, Call Option, strike
84.15, expires 1/2/97 ............................... -- 5,500,000 52,806 --
Debt Conversion Bond 12/18/07, Call Option, strike
84.44, expires 1/2/97 ............................... -- 5,500,000 47,927 --
------------ -----
TOTAL OPTIONS (cost $1,727,048) .......................... 760,988 0.2
------------ -----
<CAPTION>
PRINCIPAL % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT ASSETS
- ---------------------------------------------------------- -------- -------------- -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (0.9%)
Mexico (0.9%)
Mexican Cetes, current yield 29.66% due 1/23/97 ...... MXN 2,552,332 2,990,557 0.6
Mexican Cetes, current yield 29.61% due 1/16/97 ...... MXN 749,370 882,136 0.2
Mexican Cetes, current yield 26.88% due 1/30/97 ...... MXN 684,968 802,651 0.1
Mexican Cetes, current yield 29.66% due 2/20/97 ...... MXN 181,691 208,272 --
Mexican Cetes, current yield 29.66% due 2/6/97 ....... MXN 75,705 87,697 --
------------
Total Government & Government Agency Obligations (cost
$4,968,978) ............................................. 4,971,313
------------
Commercial Paper - Indexed (0.5%)
Philippines (0.5%)
National Westminster Bank PLC, Currency-Linked CD,
12.3798% due 2/28/97 (cost $2,500,000) .............. USD 2,500,000 2,468,735 0.5
------------
Commercial Paper - Discounted (0.2%)
Thailand (0.2%)
TPI Polene Public Co., Ltd., current yield 10.36% due
1/6/97
(cost $967,902) ..................................... THB 25,000,000 962,735 0.2
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $8,436,880) ........... 8,402,783 1.6
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1996, with State Street Bank & Trust
Co., due November 1, 1996, for an effective yield of
5.55% collateralized by $16,135,000 U.S. Treasury
Bonds, 7.125% due 2/15/23 (market value of collateral
is $17,041,721, including accrued interest). (cost
$16,705,575) ......................................... $ 16,705,575 3.2
------------ -----
TOTAL INVESTMENTS (cost $479,069,477) * .................. 511,274,646 98.6
Other Assets and Liabilities ............................. 7,508,600 1.4
------------ -----
NET ASSETS ............................................... $518,783,246 100.0
------------ -----
------------ -----
</TABLE>
- --------------
+ The coupon rate shown on floating rate note represents the rate at
period end.
** Underlying loan agreement currently in default.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
-/- Non-income producing security.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
[.] Bond pays stated or additional interest with "payment-in-kind"
(PIK) bonds.
{j} Security is segregated as collateral for when-issued securities
held by the Fund. See Note 1 of Notes to Financial Statements.
* For Federal income tax purposes, cost is $480,138,813 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 34,211,689
Unrealized depreciation: (3,075,856)
-------------
Net unrealized appreciation: $ 31,135,833
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1996
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1996
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ ----------- -------- --------------
<S> <C> <C> <C> <C>
Canadian Dollars........................ 418,368 1.35055 11/29/96 $ 3,722
Deutsche Marks.......................... 330,382 1.48683 11/05/96 (5,905)
Deutsche Marks.......................... 175,102 1.52412 11/05/96 1,231
Deutsche Marks.......................... 35,067,522 1.47631 11/27/96 (832,700)
------------ --------------
Total Contracts to Buy (Payable amount
$36,825,026)......................... 35,991,374 (833,652)
------------ --------------
THE VALUE OF CONTRACTS TO BUY AS PERCENTAGE OF NET ASSETS IS 6.94%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
Canadian Dollars........................ 14,000,381 1.35715 11/29/96 (192,033)
Canadian Dollars........................ 537,902 1.35220 11/29/96 (5,436)
Deutsche Marks.......................... 8,259,548 1.47358 11/05/96 223,195
Deutsche Marks.......................... 5,011,894 1.46463 11/05/96 166,888
Deutsche Marks.......................... 22,849,488 1.50483 11/12/96 70,044
Deutsche Marks.......................... 12,928,667 1.50920 11/27/96 18,590
Deutsche Marks.......................... 10,748,606 1.52824 11/27/96 (118,653)
Deutsche Marks.......................... 3,969,908 1.50676 11/27/96 12,146
Deutsche Marks.......................... 717,812 1.52558 11/27/96 (6,686)
Deutsche Marks.......................... 635,185 1.52100 11/27/96 (4,021)
Deutsche Marks.......................... 330,826 1.47100 11/27/96 9,079
Italian Liras........................... 14,175,119 1546.70000 01/21/97 (209,903)
Swedish Kronor.......................... 9,887,474 6.61090 01/21/97 (85,480)
------------ --------------
Total Contracts to Sell (Receivable
amount $103,930,540)................. 104,052,810 (122,270)
------------ --------------
THE VALUE OF CONTRACTS TO SELL AS PERCENTAGE OF NET ASSETS IS 20.06%.
Total Open Forward Foreign Currency
Contracts, Net....................... $(955,922)
--------------
--------------
</TABLE>
- --------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF ASSETS
AND LIABILITIES
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------
GOVERNMENT HIGH INCOME- STRATEGIC
INCOME CONSOLIDATED INCOME
------------- ------------ -------------
<S> <C> <C> <C>
Assets:
Investments in securities, at value
(cost $384,301,241, $399,436,144, and
$479,069,477, respectively) (Note
1)................................... $ 395,805,316 $440,269,668 $ 511,274,646
U.S. currency......................... 688 747 764
Foreign currencies (cost $163,
$375,538, and $6,038,
respectively)........................ 165 363,584 5,983
Receivable for securities sold........ 25,721,936 19,276,936 7,533,831
Interest receivable................... 12,649,427 8,384,949 13,463,776
Receivable for Fund shares sold....... 288,358 5,276,241 2,864,788
Receivable for open forward foreign
currency contracts, net (Note 1)..... -- 191,735 --
Receivable for forward foreign
currency contracts -- closed (Note
1)................................... 674,249 -- --
Miscellaneous receivable.............. -- -- 90,538
Cash held as collateral for securities
loaned (Note 1)...................... 92,153,670 -- 47,372,677
Unamortized organizational costs...... -- 35,371 --
------------- ------------ -------------
Total assets........................ 527,293,809 473,799,231 582,607,003
------------- ------------ -------------
Liabilities:
Payable for securities purchased...... 16,533,723 21,061,541 12,311,147
Payable for Fund shares repurchased... 8,524,914 7,137,124 1,807,865
Payable for open forward foreign
currency contracts, net (Note 1)..... 1,736,601 -- 955,922
Payable for forward foreign currency
contracts -- closed.................. -- -- 404,268
Payable for investment management and
administration fees (Note 2)......... 256,521 381,409 324,636
Payable for service and distribution
expenses (Note 2).................... 216,795 283,839 344,647
Payable for printing and postage
expenses............................. 95,659 116,749 84,559
Payable for transfer agent fees (Note
2)................................... 63,830 62,864 85,559
Payable for professional fees......... 51,757 58,593 57,257
Payable for registration and filing
fees................................. 22,078 8,320 28,364
Payable for custodian fees (Note 1)... 9,679 23,927 29,251
Payable for fund accounting fees (Note
2)................................... 8,364 9,624 10,417
Payable for Directors' and Trustees'
fees and expenses (Note 2)........... 4,832 10,497 2,999
Other accrued expenses................ 6,868 26,159 4,189
Collateral for securities loaned (Note
1)................................... 92,153,670 -- 47,372,677
------------- ------------ -------------
Total liabilities................... 119,685,291 29,180,646 63,823,757
Minority interest (Notes 1 & 2)..... -- 100 --
------------- ------------ -------------
Net assets.............................. $ 407,608,518 $444,618,485 $ 518,783,246
------------- ------------ -------------
------------- ------------ -------------
Class A:
Net asset value and redemption price per
share ($240,944,963 DIVIDED BY
27,559,672, $178,317,938 DIVIDED BY
12,011,654, and $185,125,741 DIVIDED BY
15,748,198 shares outstanding,
respectively).......................... $ 8.74 $ 14.85 $ 11.76
------------- ------------ -------------
------------- ------------ -------------
Maximum offering price per share
(100/95.25 of $8.74, 100/95.25 of
$14.85, and 100/95.25 of $11.76,
respectively) *........................ $ 9.18 $ 15.59 $ 12.35
------------- ------------ -------------
------------- ------------ -------------
Class B:+
Net asset value and offering price per
share ($166,577,127 DIVIDED BY
19,059,341, $251,002,484 DIVIDED BY
16,920,131, and $333,178,201 DIVIDED BY
28,314,377 shares outstanding,
respectively).......................... $ 8.74 $ 14.83 $ 11.77
------------- ------------ -------------
------------- ------------ -------------
Advisor Class:
Net asset value, offering price per
share, and redemption price per share
($86,428 DIVIDED BY 9,897, $15,298,063
DIVIDED BY 1,031,529, and $479,304
DIVIDED BY 40,725 shares outstanding,
respectively).......................... $ 8.73 $ 14.83 $ 11.77
------------- ------------ -------------
------------- ------------ -------------
Net assets consist of:
Paid in capital (Note 4).............. $ 552,445,325 $398,450,836 $ 598,321,655
Undistributed net investment income... 364,918 -- --
Accumulated net realized gain (loss)
on investments and foreign currency
transactions......................... (155,061,909) 5,153,808 (110,861,534)
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... (1,643,891) 180,317 (882,044)
Net unrealized appreciation of
investments.......................... 11,504,075 40,833,524 32,205,169
------------- ------------ -------------
Total -- representing net assets
applicable to capital shares
outstanding............................ $ 407,608,518 $444,618,485 $ 518,783,246
------------- ------------ -------------
------------- ------------ -------------
<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.
F16
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF OPERATIONS
Year ended October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
----------------------------------------
GOVERNMENT HIGH INCOME- STRATEGIC
INCOME CONSOLIDATED INCOME
------------ ------------ ------------
<S> <C> <C> <C>
Investment income: (Note 1)
Interest income....................... $ 39,935,517 $ 45,539,611 $ 49,794,868
------------ ------------ ------------
Total investment income............. 39,935,517 45,539,611 49,794,868
------------ ------------ ------------
Expenses:
Investment management and
administration fees (Note 2)......... 3,672,503 4,030,144 3,807,689
Transfer agent fees (Note 2).......... 899,178 644,652 1,027,713
Service and distribution expenses:
(Note 2)
Class A............................. 1,074,110 560,451 625,247
Class B............................. 2,006,881 2,405,007 3,468,104
Custodian fees (Note 1)............... 305,430 181,559 290,730
Fund accounting fees (Note 2)......... 127,205 101,697 131,517
Printing and postage expenses......... 88,931 101,142 94,439
Audit fees............................ 71,998 74,353 73,189
Legal fees............................ 26,352 39,821 25,230
Registration and filing fees.......... 52,704 51,240 47,004
Amortization of Organization Costs.... -- 34,894 --
Directors' and Trustees' fees and
expenses (Note 2).................... 17,712 24,607 11,712
Insurance Expenses.................... -- 2,987 --
Other expenses........................ 39,783 6,221 13,540
------------ ------------ ------------
Total expenses before reductions and
interest expense................... 8,382,787 8,258,775 9,616,114
Interest expense (Note 1)......... -- 163,819 --
Expense reductions (Note 1)....... (250,204) -- (108,002)
------------ ------------ ------------
Total net expenses.................. 8,132,583 8,422,594 9,508,112
------------ ------------ ------------
Net investment income................... 31,802,934 37,117,017 40,286,756
------------ ------------ ------------
Net realized and unrealized gain (loss)
on investments and foreign currencies:
(Note 1)
Net realized gain on investments...... 8,737,745 62,643,262 43,672,673
Net realized loss on foreign currency
transactions......................... (10,634,640) (125,790) (6,996,692)
------------ ------------ ------------
Net realized gain (loss) during the
year............................... (1,896,895) 62,517,472 36,675,981
Net change in unrealized appreciation
on translation of assets and
liabilities in foreign currencies.... 2,319,205 174,082 1,913,734
Net change in unrealized appreciation
(depreciation) of investments........ (1,121,083) 31,730,913 27,794,834
------------ ------------ ------------
Net unrealized appreciation during
the year........................... 1,198,122 31,904,995 29,708,568
------------ ------------ ------------
Net realized and unrealized gain (loss)
on investments and foreign
currencies............................. (698,773) 94,422,467 66,384,549
------------ ------------ ------------
Net increase in net assets resulting
from operations........................ $ 31,104,161 $131,539,484 $106,671,305
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
----------------------------------------------------------
GOVERNMENT INCOME HIGH INCOME-CONSOLIDATED
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income................. $ 31,802,934 $ 46,493,014 $ 37,117,017 $ 39,491,435
Net realized gain (loss) on
investments and foreign currency
transactions......................... (1,896,895) (4,465,423) 62,517,472 (62,112,954)
Net change in unrealized appreciation
on translation of assets and
liabilities in foreign currencies.... 2,319,205 3,260,081 174,082 (302)
Net change in unrealized appreciation
(depreciation) of investments........ (1,121,083) 12,089,374 31,730,913 24,969,833
------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations.................... 31,104,161 57,377,046 131,539,484 2,348,012
------------- ------------- ------------- -------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............ (15,504,590) (29,604,447) (13,418,057) (12,528,224)
From net realized gain on
investments.......................... (8,183,323) -- (1,230,117) (474,126)
In excess of net investment income.... -- -- -- --
Return of capital..................... -- -- -- (737,846)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............ (9,165,193) (15,123,091) (18,753,394) (17,274,071)
From net realized gain on
investments.......................... (5,303,358) -- (1,719,241) (622,059)
In excess of net investment income.... -- -- -- --
Return of capital..................... -- -- -- (1,015,555)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............ (7,915) (3,476) (505,715) (54,186)
From net realized gain on
investments.......................... (2,893) -- (46,362) --
In excess of net investment income.... -- -- -- --
Return of capital..................... -- -- -- (3,075)
------------- ------------- ------------- -------------
Total distributions................. (38,167,272) (44,731,014) (35,672,886) (32,709,142)
------------- ------------- ------------- -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 386,482,407 359,717,885 583,133,415 418,666,106
Decrease from capital shares
repurchased.......................... (592,826,606) (515,847,692) (592,743,855) (430,339,278)
------------- ------------- ------------- -------------
Net decrease from capital share
transactions....................... (206,344,199) (156,129,807) (9,610,440) (11,673,172)
------------- ------------- ------------- -------------
Total increase (decrease) in net
assets................................. (213,407,310) (143,483,775) 86,256,158 (42,034,302)
Net assets:
Beginning of year..................... 621,015,828 764,499,603 358,362,327 400,396,629
------------- ------------- ------------- -------------
End of year........................... $ 407,608,518* $ 621,015,828** $ 444,618,485* $ 358,362,327**
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
STRATEGIC INCOME
----------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
------------- -------------
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income................. $ 40,286,756 $ 54,919,073
Net realized gain (loss) on
investments and foreign currency
transactions......................... 36,675,981 (82,675,607)
Net change in unrealized appreciation
on translation of assets and
liabilities in foreign currencies.... 1,913,734 (3,747,114)
Net change in unrealized appreciation
(depreciation) of investments........ 27,794,834 35,939,954
------------- -------------
Net increase in net assets resulting
from operations.................... 106,671,305 4,436,306
------------- -------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............ (12,520,881) (16,844,112)
From net realized gain on
investments.......................... -- --
In excess of net investment income.... (1,097,884) --
Return of capital..................... -- (852,171)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............ (22,200,673) (27,777,018)
From net realized gain on
investments.......................... -- --
In excess of net investment income.... (1,946,649) --
Return of capital..................... -- (1,405,284)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............ (46,547) (14,952)
From net realized gain on
investments.......................... -- --
In excess of net investment income.... (4,081) --
Return of capital..................... -- (756)
------------- -------------
Total distributions................. (37,816,715) (46,894,293)
------------- -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 335,665,174 194,343,201
Decrease from capital shares
repurchased.......................... (432,196,117) (339,216,716)
------------- -------------
Net decrease from capital share
transactions....................... (96,530,943) (144,873,515)
------------- -------------
Total increase (decrease) in net
assets................................. (27,676,353) (187,331,502)
Net assets:
Beginning of year..................... 546,459,599 733,791,101
------------- -------------
End of year........................... $ 518,783,246* $ 546,459,599**
------------- -------------
------------- -------------
<FN>
- ----------------
* Includes undistributed net investment income of $364,918, $0, and $0,
respectively.
** Includes undistributed net investment income (loss) of $1,761,999,
$78,582,766, and $(68,169), respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F18
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1996 (D) 1995 (D) 1994 (D) 1993 (D) 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.57 0.62 0.65 0.74 0.92
Net realized and unrealized gain
(loss) on investments................ 0.03 0.15 (1.52) 1.34 (0.31)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.60 0.77 (0.87) 2.08 0.61
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.57) (0.59) (0.65) (0.74) (0.83)
From net realized gain on
investments.......................... (0.10) -- (0.27) -- (0.13)
In excess of net realized gain on
investments.......................... -- -- (0.55) -- --
Return of capital..................... -- -- (0.10) -- --
From sources other than net investment
income............................... -- -- -- (0.10) (0.11)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.67) (0.59) (1.57) (0.84) (1.07)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.74 $ 8.81 $ 8.63 $ 11.07 $ 9.83
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 7.11% 9.22% (8.87)% 21.9% 6.3%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 240,945 $ 385,404 $ 502,094 $ 708,301 $ 623,387
Ratio of net investment income to
average net assets..................... 6.52% 6.98% 6.87% 7.1% 9.0%
Ratio of expenses to average net assets:
(Note 1)
With expense reductions............... 1.34% 1.35% 1.33% 1.4% 1.6%
Without expense reductions............ 1.39% 1.38% --%* --%* --%*
Portfolio turnover rate++++............. 268% 385% 625% 495% 351%
</TABLE>
- ----------------
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon weighted
average shares outstanding during the year.
+ All capital shares issued and oustanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
The accompanying notes are an integral part of the financial statements.
F19
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS B++
-----------------------------------------------------------
OCTOBER 22,
1992
YEAR ENDED OCTOBER 31, TO
--------------------------------------------- OCTOBER 31,
1996 (D) 1995 (D) 1994 (D) 1993 (D) 1992
--------- --------- --------- --------- -----------
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 8.80 $ 8.64 $ 11.07 $ 9.83 $ 9.87
--------- --------- --------- --------- -----------
Income from investment
operations:
Net investment income....... 0.51 0.55 0.59 0.67 0.02
Net realized and unrealized
gain (loss) on
investments................ 0.04 0.14 (1.52) 1.34 (0.06)
--------- --------- --------- --------- -----------
Net increase (decrease)
from investment
operations............... 0.55 0.69 (0.93) 2.01 (0.04)
--------- --------- --------- --------- -----------
Distributions to shareholders:
From net investment
income..................... (0.51) (0.53) (0.59) (0.67) --
From net realized gain on
investments................ (0.10) -- (0.27) -- --
In excess of net realized
gain on investments........ -- -- (0.54) -- --
Return of capital........... -- -- (0.10) -- --
From sources other than net
investment income.......... -- -- -- (0.10) --
--------- --------- --------- --------- -----------
Total distributions....... (0.61) (0.53) (1.50) (0.77) --
--------- --------- --------- --------- -----------
Net asset value, end of
period....................... $ 8.74 $ 8.80 $ 8.64 $ 11.07 $ 9.83
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
Total investment return (c)... 6.54% 8.22% (9.39)% 21.1% (0.4)% (a)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $166,577 $235,481 $262,405 $182,972 $2,624
Ratio of net investment income
to average net assets........ 5.87% 6.33% 6.22% 6.5% 8.0% (b)
Ratio of expenses to average
net assets: (Note 1)
With expense reductions..... 1.99% 2.00% 1.98% 2.0% 1.9% (b)
Without expense
reductions................. 2.04% 2.03% --%* --%* --% *
Portfolio turnover rate++++... 268% 385% 625% 495% 351%
<CAPTION>
ADVISOR CLASS+++
--------------------------
YEAR JUNE 1, 1995
ENDED TO
OCTOBER 31, OCTOBER 31,
1996 (D) 1995 (D)
----------- ------------
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 8.80 $ 8.98
----------- ------------
Income from investment
operations:
Net investment income....... 0.60 0.26
Net realized and unrealized
gain (loss) on
investments................ 0.03 (0.19)
----------- ------------
Net increase (decrease)
from investment
operations............... 0.63 0.07
----------- ------------
Distributions to shareholders:
From net investment
income..................... (0.60) (0.25)
From net realized gain on
investments................ (0.10) --
In excess of net realized
gain on investments........ -- --
Return of capital........... -- --
From sources other than net
investment income.......... -- --
----------- ------------
Total distributions....... (0.70) (0.25)
----------- ------------
Net asset value, end of
period....................... $ 8.73 $ 8.80
----------- ------------
----------- ------------
Total investment return (c)... 7.49% 0.83% (a)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 86 $ 131
Ratio of net investment income
to average net assets........ 6.87% 7.33% (b)
Ratio of expenses to average
net assets: (Note 1)
With expense reductions..... 0.99% 1.00% (b)
Without expense
reductions................. 1.04% 1.03% (b)
Portfolio turnover rate++++... 268% 385%
</TABLE>
- ----------------
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon weighted
average shares outstanding during the year.
+ All capital shares issued and oustanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
The accompanying notes are an integral part of the financial statements.
F20
<PAGE>
GT GLOBAL HIGH INCOME FUND - CONSOLIDATED
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
OCTOBER 22,
1992
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS) TO
--------------------------------------------- OCTOBER 31,
1996 (E) 1995 1994 (E) 1993 (E) 1992
--------- --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 11.70 $ 12.56 $ 14.92 $ 11.43 $ 11.43
--------- --------- --------- --------- -----------------
Income from investment
operations:
Net investment income....... 1.27 1.35 0.94 0.78 --
Net realized and unrealized
gain (loss) on
investments................ 3.09 (1.09) (1.87) 3.92 --
--------- --------- --------- --------- -----------------
Net increase (decrease)
from investment
operations............... 4.36 0.26 (0.93) 4.70 --
--------- --------- --------- --------- -----------------
Distributions to shareholders:
From net investment
income..................... (1.11) (1.03) (0.94) (0.78) --
From net realized gain on
investments................ (0.10) (0.03) (0.27) -- --
In excess of net realized
gain on investments........ -- -- (0.22) -- --
Return of capital........... -- (0.06) -- -- --
From sources other than net
investment income.......... -- -- -- (0.43) --
--------- --------- --------- --------- -----------------
Total distributions....... (1.21) (1.12) (1.43) (1.21) --
--------- --------- --------- --------- -----------------
Net asset value, end of
period....................... $ 14.85 $ 11.70 $ 12.56 $ 14.92 $ 11.43
--------- --------- --------- --------- -----------------
--------- --------- --------- --------- -----------------
Total investment return (d)... 39.05% 2.81% (6.45)% 43.6% --% (a)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $178,318 $142,002 $167,974 $143,171 $ 207
Ratio of net investment income
to average net assets........ 9.52% 11.85% 7.00% 6.40% N/A(c)
Ratio of operating expenses to
average net assets........... 1.69% 1.75% 1.57% 2.20% N/A(c)
Ratio of interest expense to
average net assets........... 0.04% N/A 0.22% N/A N/A
Portfolio turnover rate++..... 290% --% --% --% --%
</TABLE>
- ----------------
+ 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 among the classes of shares issued.
(a) Not annualized
(b) Annualized
(c) Ratios are not meaningful due to short period of operation.
(d) Total investment return does not include sales charges.
(e) These selected per share operating data were calculated based upon
weighted average shares outstanding during the year.
N/A Not applicable
The accompanying notes are an integral part of the financial statements.
F21
<PAGE>
GT GLOBAL HIGH INCOME FUND - CONSOLIDATED
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
OCTOBER 22, ADVISOR CLASS+
1992 --------------------------
(COMMENCEMENT YEAR JUNE 1, 1995
YEAR ENDED OCTOBER 31, OF OPERATIONS) TO ENDED TO
--------------------------------------------- OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 (E) 1995 1994 (E) 1993 (E) 1992 1996 (E) 1995
--------- --------- --------- --------- ----------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 11.69 $ 12.56 $ 14.90 $ 11.43 $ 11.43 $ 11.71 $ 11.44
--------- --------- --------- --------- ----------------- ----------- ------------
Income from investment
operations:
Net investment income....... 1.17 1.27 0.86 0.70 -- 1.34 0.57
Net realized and unrealized
gain (loss) on
investments................ 3.09 (1.09) (1.85) 3.90 -- 3.05 0.17
--------- --------- --------- --------- ----------------- ----------- ------------
Net increase (decrease)
from investment
operations............... 4.26 0.18 (0.99) 4.60 -- 4.39 0.74
--------- --------- --------- --------- ----------------- ----------- ------------
Distributions to shareholders:
From net investment
income..................... (1.03) (0.96) (0.86) (0.70) -- (1.16) (0.44)
From net realized gain on
investments................ (0.09) (0.03) (0.27) -- -- (0.11) --
In excess of net realized
gain on investments........ -- -- (0.22) -- -- -- --
Return of capital........... -- (0.06) -- -- -- -- (0.03)
From sources other than net
investment income.......... -- -- -- (0.43) -- -- --
--------- --------- --------- --------- ----------------- ----------- ------------
Total distributions....... (1.12) (1.05) (1.35) (1.13) -- (1.27) (0.47)
--------- --------- --------- --------- ----------------- ----------- ------------
Net asset value, end of
period....................... $ 14.83 $ 11.69 $ 12.56 $ 14.90 $ 11.43 $ 14.83 $ 11.71
--------- --------- --------- --------- ----------------- ----------- ------------
--------- --------- --------- --------- ----------------- ----------- ------------
Total investment return (d)... 38.16% 2.07% (6.99)% 42.6% --% (a) 39.38% 6.54% (a)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $251,002 $214,897 $232,423 $127,035 $ 53 $15,298 $ 1,463
Ratio of net investment income
to average net assets........ 8.87% 11.20% 6.35% 5.8% N/A(c) 9.87% 12.20% (b)
Ratio of operating expenses to
average net assets........... 2.34% 2.40% 2.22% 2.8% N/A(c) 1.34% 1.40% (b)
Ratio of interest expense to
average net assets........... 0.04% N/A 0.22% N/A N/A 0.04% N/A
Portfolio turnover rate++..... 290% --% --% --% --% 290% --% (b)
</TABLE>
- ----------------
+ 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 among the classes of shares issued.
(a) Not annualized
(b) Annualized
(c) Ratios are not meaningful due to short period of operation.
(d) Total investment return does not include sales charges.
(e) These selected per share operating data were calculated based upon
weighted average shares outstanding during the year.
N/A Not applicable
The accompanying notes are an integral part of the financial statements.
F22
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
1996 (E) 1995 (E) 1994 1993 (E) 1992
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91
--------- --------- --------- --------- --------
Income from investment
operations:
Net investment income....... 0.89 0.97 0.79 0.96 0.86
Net realized and unrealized
gain (loss) on
investments................ 1.44 (0.69) (2.14) 2.85 0.31
--------- --------- --------- --------- --------
Net increase (decrease)
from investment
operations............... 2.33 0.28 (1.35) 3.81 1.17
--------- --------- --------- --------- --------
Distributions to shareholders:
From net investment
income..................... (0.82) (0.80) (0.79) (0.96) (0.83)
From net realized gain on
investments................ -- -- (0.38) (0.37) --
In excess of net investment
income..................... (0.07) -- -- -- --
Return of capital........... -- (0.04) (0.21) -- --
From sources other than net
investment income.......... -- -- -- (0.12) --
--------- --------- --------- --------- --------
Total distributions....... (0.89) (0.84) (1.38) (1.45) (0.83)
--------- --------- --------- --------- --------
Net asset value, end of
period....................... $ 11.76 $ 10.32 $ 10.88 $ 13.61 $ 11.25
--------- --------- --------- --------- --------
--------- --------- --------- --------- --------
Total investment return (c)... 23.00% 3.06% (10.44)% 37.0% 11.1%
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $185,126 $188,165 $275,241 $287,870 $83,849
Ratio of net investment income
to average net assets........ 8.09% 9.64% 6.74% 7.2% 7.6%
Ratio of expenses to average
net assets:
With expense reductions
(Note 1)................... 1.38% 1.42% 1.40% 1.7% 1.8%
Without expense
reductions................. 1.40% 1.45% --%* --%* --%*
Ratio of interest expenses to
average net assets........... N/A N/A 0.10% N/A N/A
Portfolio turnover rate++++... 177% 238% 583% 310% 418%
</TABLE>
- ----------------
+ All capital shares issued and outstanding as of October 21, 1992, were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ 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 among the classes of shares issued.
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charges.
(d) Ratios are not meaningful due to the short period of operation of
Class B shares.
(e) These selected per share data were calculated based upon weighted
average shares outstanding during the period.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
The accompanying notes are an integral part of the financial statements.
F23
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
---------------------------------------------------------------- ADVISOR CLASS+++
OCTOBER 22, --------------------------
1992 YEAR JUNE 1, 1995
YEAR ENDED OCTOBER 31, TO ENDED TO
--------------------------------------------- OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 (E) 1995 (E) 1994 1993 (E) 1992 1996 (E) 1995 (E)
--------- --------- --------- --------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 10.33 $ 10.88 $ 13.60 $ 11.24 $ 11.36 $ 10.33 $10.32
--------- --------- --------- --------- ---------------- ----------- ------------
Income from investment
operations:
Net investment income....... 0.82 0.91 0.73 0.89 0.01 0.93 0.41
Net realized and unrealized
gain (loss) on
investments................ 1.44 (0.69) (2.14) 2.85 (0.13) 1.44 (0.04)
--------- --------- --------- --------- ---------------- ----------- ------------
Net increase (decrease)
from investment
operations............... 2.26 0.22 (1.41) 3.74 (0.12) 2.37 0.37
--------- --------- --------- --------- ---------------- ----------- ------------
Distributions to shareholders:
From net investment
income..................... (0.75) (0.73) (0.72) (0.89) -- (0.86) (0.34)
From net realized gain on
investments................ -- -- (0.38) (0.37) -- -- --
In excess of net investment
income..................... (0.07) -- -- -- -- (0.07) --
Return of capital........... -- (0.04) (0.21) -- -- -- (0.02)
From sources other than net
investment income.......... -- -- -- (0.12) -- -- --
--------- --------- --------- --------- ---------------- ----------- ------------
Total distributions....... (0.82) (0.77) (1.31) (1.38) -- (0.93) (0.36)
--------- --------- --------- --------- ---------------- ----------- ------------
Net asset value, end of
period....................... $ 11.77 $ 10.33 $ 10.88 $ 13.60 $ 11.24 $ 11.77 $10.33
--------- --------- --------- --------- ---------------- ----------- ------------
--------- --------- --------- --------- ---------------- ----------- ------------
Total investment return (c)... 22.15% 2.48% (11.02)% 36.2% (1.1)% (b) 23.39% 3.72% (b)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $333,178 $357,852 $458,550 $310,431 $ 533 $ 479 $ 443
Ratio of net investment income
to average net assets........ 7.44% 8.99% 6.09% 6.5% N/A(d) 8.44% 9.99% (a)
Ratio of expenses to average
net assets:
With expense reductions
(Note 1)................... 2.03% 2.07% 2.05% 2.4% N/A(d) 1.03% 1.07% (a)
Without expense
reductions................. 2.05% 2.10% --%* --%* --% * 1.05% 1.10% (a)
Ratio of interest expenses to
average net assets........... N/A N/A 0.10% N/A N/A N/A N/A
Portfolio turnover rate++++... 177% 238% 583% 310% 418% 177% 238%
</TABLE>
- ----------------
+ All capital shares issued and outstanding as of October 21, 1992, were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charges.
(d) Ratios are not meaningful due to the short period of operation of
Class B shares.
(e) These selected per share data were calculated based upon weighted
average shares outstanding during the period.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
The accompanying notes are an integral part of the financial statements.
F24
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Government Income Fund, GT Global High Income Fund, and GT Global
Strategic Income Fund ("Funds") are separate series of G.T. Investment Funds,
Inc. ("Company"). Collectively, these Funds are known as the "GT Global Income
Funds." The Company is organized as a Maryland corporation and is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as an
open-end management investment company. The Company has twelve series of shares
in operation, each series corresponding to a distinct portfolio of investments.
The GT Global High Income Fund invests substantially all of its investable
assets in the Global High Income Portfolio ("Portfolio"). The Portfolio is
organized as a New York Trust and is registered under the 1940 Act as a
non-diversified, open-end management investment company.
The Portfolio has investment objectives, policies, and limitations substantially
identical to those of its corresponding Fund. Therefore, the financial
statements of the Fund and its respective Portfolio have been presented on a
consolidated basis, and represent all activities of both the Fund and Portfolio.
Through October 31, 1996, all of the shares of beneficial interest of the
Portfolio were owned by either its Fund or Chancellor LGT Asset Management, Inc.
(the "Manager"), which has a nominal ($100) investment in the Portfolio.
The Funds offer Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of each 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 Funds and Portfolio in the preparation of the financial
statements. The policies are in conformity with generally accepted accounting
principles, and the financial statements may include certain estimates made by
management.
(A) PORTFOLIO VALUATION
The Funds and the Portfolio calculate the net asset value of and complete 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 the Manager 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 the
Manager 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 or the Portfolio's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors or
the Portfolio's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund and Portfolio are maintained in U.S.
dollars. The market values of foreign securities, currency holdings, and other
assets and liabilities are recorded in the books and records of the Funds or
Portfolio (the phrase "Funds or Portfolio" hereinafter refers to the GT Global
Government Income Fund, the GT Global Strategic Income Fund, and the Global High
Income Portfolio) after translation to U.S. dollars based on the exchange rates
on that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange rates
when earned or incurred.
A Fund or Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on a
Fund's or
F25
<PAGE>
GT GLOBAL INCOME FUNDS
Portfolio's books and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains or losses arise from
changes in the value of assets and liabilities other than investments in
securities at period end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by a Fund or Portfolio, it is
the Fund's or Portfolio's policy to always receive, as collateral, United States
government securities or other high quality debt securities of which the value,
including accrued interest, is at least equal to the amount to be repaid to the
Fund or Portfolio 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 a Fund or Portfolio as an unrealized gain or loss.
When the Forward Contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference between the value at the time it was opened
and the value at the time it was closed. Forward Contracts involve market risk
in excess of the amount shown in the Fund's or Portfolio's "Statement of Assets
and Liabilities". A Fund or Portfolio could be exposed to risk if a counterparty
is unable to meet the terms of the contract or if the value of the currency
changes unfavorably. A Fund or Portfolio may enter into Forward Contracts in
connection with planned purchases or sales of securities, or to hedge against
adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When a Fund or Portfolio writes a call or put option, an amount equal to the
premium received is included in the Fund's or Portfolio's "Statement of Assets
and Liabilities" as an asset and an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the option. The current market value of an option listed on a traded exchange
is valued at its last bid price, or, in the case of an over-the-counter option,
is valued at the average of the last bid prices obtained from brokers, unless a
quotation from only one broker is available, in which case only that broker's
price will be used. If an option expires on its stipulated expiration date or if
the Fund or Portfolio enters into a closing purchase transaction, a gain or loss
is realized without regard to any unrealized gain or loss on the underlying
security and the liability related to such option is extinguished. If a written
call option is exercised, a gain or loss is realized from the sale of the
underlying security and the proceeds of the sale are increased by the premium
originally received. If a written put option is exercised, the cost of the
underlying security purchased would be decreased by the premium originally
received. The Fund or Portfolio can write options only on a covered basis,
which, for a call, requires that the Fund or Portfolio hold the underlying
security and, for a put, requires the Fund or Portfolio to set aside cash, U.S.
government securities or other liquid 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 or Portfolio 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 or Portfolio for the purchase of a call or put
option is included in the Fund's or Portfolio's "Statement of Assets and
Liabilities" as an investment and subsequently "marked-to-market" to reflect the
current market value of the option. If an option which the Fund or Portfolio has
purchased expires on the stipulated expiration date, the Fund or Portfolio
realizes a loss in the amount of the cost of the option. If the Fund or
Portfolio enters into a closing sale transaction, the Fund or Portfolio realizes
a gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund or Portfolio
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund or Portfolio
exercises a put option, it realizes a gain or loss from the sale of the
underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund or Portfolio may forego
the opportunity of profit if the market value of the underlying security or
index increases and the option is exercised. The risk in writing a put option is
that the Fund or Portfolio may incur a loss if the market value of the
underlying security or index decreases and the option is exercised. In addition,
there is the risk the Fund or Portfolio may not be able to enter into a closing
transaction because of an illiquid secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract a
Fund or Portfolio is required to pledge to the broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the exchange on
which the contract is traded. Pursuant to the contract, the Fund or Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Fund or Portfolio as unrealized gains
or losses. When the contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The potential risk
to the Fund or Portfolio is that the change in value of the underlying
securities may not correlate to the change in value of the contracts. A Fund or
Portfolio 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
F26
<PAGE>
GT GLOBAL INCOME FUNDS
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. A Fund or Portfolio may trade securities on other than
normal settlement terms. This may increase the risk if the other party to the
transaction fails to deliver and causes the Fund or Portfolio to subsequently
invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1996, stocks with an aggregate value listed below were on loan to
brokers. The loans were secured by cash collateral received by the Funds:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31,
-------------------------------- 1996
AGGREGATE VALUE CASH --------------
GT GLOBAL ON LOAN COLLATERAL FEES RECEIVED
- ---------------------------------------- --------------- -------------- --------------
<S> <C> <C> <C>
Government Income Fund.................. $ 85,475,086 $ 92,153,670 $250,204
Strategic Income Fund................... 44,548,682 47,372,677 108,002
</TABLE>
For international securities, cash collateral is received by a Fund or Portfolio
against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by a Fund or Portfolio against loaned securities in an
amount at least equal to 102% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
100% of the market value of the loaned securities during the period of the loan.
Fees received from securities loaned were used to reduce the Funds' or
Portfolios' custodian fees.
(I) TAXES
It is the intended policy of the Funds and Portfolios 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 Funds to make
distributions sufficient to avoid imposition of any excise tax under Section
4982 of the Code. Therefore, no provision has been made for Federal taxes on
income, capital gains, or unrealized appreciation of securities held, and excise
tax on income and capital gains. The GT Global Government Income Fund has a
capital loss carryforward of $156,095,393 of which $140,349,807 expires in 2002,
and $15,745,586 expires in 2003. The GT Global Strategic Income Fund has a
capital loss carryforward of $110,439,537 of which $33,635,683 expires in 2002,
and $76,803,854 expires in 2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each 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 Funds or Portfolios and timing
differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the GT Global High Income Fund and the Portfolio in
connection with their organization, their initial registration with the
Securities and Exchange Commission and with various states and the initial
public offering of its shares aggregated $149,100 and $25,000, respectively.
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 or Portfolio'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.
(M) INDEXED SECURITIES
A Fund or Portfolio may invest in indexed securities whose value is linked
either directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
(N) RESTRICTED SECURITIES
A Fund or Portfolio is permitted to invest in privately placed restricted
securities. These securities may be resold in transactions exempt from
registration or to the public if the securities are registered. Disposal of
these securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) are shown at the end of the Fund's
Portfolio of Investments.
(O) LINE OF CREDIT
For the year ended October 31, 1996, the Global High Income Portfolio
periodically borrowed amounts from a bank at a base or Eurodollar rate. The
arrangement with the bank allows the Portfolio to borrow a maximum amount of
$25,000,000. On February 28 & 29, 1996, the Portfolio borrowed $24,000,000, all
of which was repaid on April 18, 1996.
For the year ended October 31, 1996, the weighted average outstanding daily
balance of bank loans (based on the number of
F27
<PAGE>
GT GLOBAL INCOME FUNDS
days the loans were outstanding) was $17,800,000 with a weighted average
interest rate of 6.63%. Interest expense for the year ended October 31, 1996 was
$163,819.
(P) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
A Fund or Portfolio may trade securities on a when-issued or forward commitment
basis, with payment and delivery scheduled for a future date. These transactions
are subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund or Portfolio will generally purchase these securities with the intention of
acquiring such securities, they may sell such securities before the settlement
date. These securities are identified on the accompanying Portfolio of
Investments. The Fund or Portfolio has set aside sufficient cash or liquid high
grade debt securities as collateral for these purchase commitments.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds' and Portfolio's investment
manager and administrator. On October 31, 1996, Chancellor Capital Management,
Inc. merged with LGT Asset Management, Inc., and the surviving entity was
renamed Chancellor LGT Asset Management, Inc. The GT Global Government Income
Fund and GT Global Strategic Income Fund each pays the Manager investment
management and administration fees at the annualized rate of 0.725% on the first
$500 million of the average daily net assets of the Fund; 0.70% on the next $1
billion; 0.675% on the next $1 billion; and 0.65% on amounts thereafter. The GT
Global High Income Fund pays administration fees to the Manager at the
annualized rate of 0.25% of its average daily net assets. These fees are
computed daily and paid monthly, and are subject to reduction in any year to the
extent that a 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.
The Global High Income Portfolio pays investment management and administration
fees to the Manager at the annualized rate of 0.475% on the first $500 million
of average daily net assets of the Portfolio; 0.45% on the next $1 billion;
0.425% on the next $1 billion; and 0.40% on amounts thereafter, plus 2% of the
Portfolio's total investment income calculated in accordance with generally
accepted accounting principles, adjusted daily for currency revaluations, on a
mark to market basis, of the Portfolio's assets; provided, however, that during
any fiscal year this amount shall not exceed 2% of the Portfolio's total
investment income calculated in accordance with generally accepted accounting
principles. These fees are computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Funds'
distributor. The Funds offer 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 Funds' current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the period ended October 31, 1996, GT Global retained the
following sales charges: $55,131 for the GT Global Government Income Fund,
$69,243 for the Global High Income Fund, and $23,580 for the GT Global Strategic
Income Fund. Purchases of Class A shares exceeding $500,000 may be subject to a
contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Funds' current prospectus. GT Global collected CDSCs for the year ended
October 31, 1996, as follows: $17,709 for the GT Global Government Income Fund,
$0 for the GT Global High Income Fund and $10,099 for the GT Global Strategic
Income Fund. GT Global also makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Funds' current
prospectus. For the year ended October 31, 1996, GT Global collected CDSCs in
the amount of: $1,449,342 for the GT Global Government Income Fund, $1,739,271
for the Global High Income Fund, and $1,915,487 for the GT Global Strategic
Income Fund. In addition, GT Global makes ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class B shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Funds' Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which a Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, a Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, a Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B Shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
F28
<PAGE>
GT GLOBAL INCOME FUNDS
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit GT Global
Government Income Fund and GT Global Strategic Income Fund's expenses (exclusive
of brokerage commissions, taxes, interest, and extraordinary expense) to the
maximum annual rate of 1.85%, 2.50%, and 1.50% of the average daily net assets
of each Fund's Class A, Class B, and Advisor Class shares, respectively.
Similarly, they voluntarily have undertaken to limit GT Global High Income
Fund's expenses to the maximum annual rate of 2.20%, 2.85%, and 1.85% of the
average daily net assets of the Fund's Class A, Class B, and Advisor Class
shares, respectively. If necessary, these limitations will be effected by
waivers by the Manager of investment management and administration fees, waivers
by GT Global of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or GT Global of portions of each Fund's other
operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of LGT and GT
Global, is the transfer agent of the Funds. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services receives
an annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Funds and Portfolio. The
monthly fee for these services to the Manager is a percentage, not to exceed
0.03% annually, of a Fund or Portfolio's average daily net assets. The annual
fee rate is derived by applying 0.03% to the first $5 billion of assets of all
registered mutual funds advised by the Manager and 0.02% to the assets in excess
of $5 billion and allocating the result according to each Fund's average daily
net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director. The
Portfolio pays each of its Trustees who is not an employee, officer or director
of the Manager, GT Global or GT Services $500 per year plus $150 for each
meeting of the board or any committee thereof attended by the Trustees.
At October 31, 1996, all of the shares of beneficial interest of the Portfolio
were owned either by its Fund or the Manager.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by each Fund or Portfolio for the year ended
October 31, 1996:
PURCHASES AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PURCHASES
------------------------------
U.S. GOVERNMENT OTHER ISSUES
--------------- ------------
<S> <C> <C>
GT Global Government Income Fund................................................ $352,752,344 $921,279,705
Global High Income Portfolio.................................................... 96,288,547 983,932,679
GT Global Strategic Income Fund................................................. 71,587,672 816,104,575
</TABLE>
<TABLE>
<CAPTION>
SALES
------------------------------
U.S. GOVERNMENT OTHER ISSUES
--------------- ------------
<S> <C> <C>
GT Global Government Income Fund................................................ $441,687,203 $1,075,693,915
Global High Income Portfolio.................................................... 84,315,986 1,020,907,620
GT Global Strategic Income Fund................................................. 109,353,125 896,578,545
</TABLE>
4. CAPITAL SHARES
At October 31, 1996, 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 GT Global Telecommunications Fund; 400,000,000 were
classified as shares of GT Global Government Income Fund; 200,000,000 were
classified as shares of GT Global Health Care Fund; 200,000,000 were classified
as shares of GT Global Strategic Income Fund; 300,000,000 were classified as
shares of GT Global Currency Fund (inactive); 200,000,000 were classified as
shares of GT Global Growth & Income Fund; 200,000,000 were classified as shares
of GT Global Small Companies Fund (inactive); 200,000,000 were classified as
shares of GT Global Latin America Growth Fund; 200,000,000 were classified as
shares of GT Global Emerging Markets Fund; 200,000,000 were classified as shares
of GT Global High Income Fund; 200,000,000 were classified as shares of GT
Global Financial Services Fund; 200,000,000 were classified as shares of GT
Global Natural Resources Fund; 200,000,000 were classified as shares of GT
Global Infrastructure Fund; and 200,000,000 were classified as shares of GT
Global Consumer Products and Services Fund. The shares of each of the foregoing
series of the Company were divided equally into two classes, designated Class A
and Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fourteen series of
the Company and designated as Advisor Class common stock. 1,400,000,000 shares
remain unclassified. Transactions in capital shares of the Funds were as
follows:
F29
<PAGE>
GT GLOBAL INCOME FUNDS
CAPITAL SHARE TRANSACTIONS
GT GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 19,126,586 $ 164,293,090 17,764,859 $ 154,603,577
Shares issued in connection with
reinvestment of distributions......... 1,643,833 14,228,931 2,042,839 17,630,697
--------------- ------------------ --------------- ------------------
20,770,419 178,522,021 19,807,698 172,234,274
Share repurchased....................... (36,969,597) (318,856,283) (34,203,619) (297,666,599)
--------------- ------------------ --------------- ------------------
Net decrease............................ (16,199,178) $ (140,334,262) (14,395,921) $ (125,432,325)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------------------------- -----------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 23,047,364 $ 198,774,141 20,700,346 $ 178,801,868
Shares issued in connection with
reinvestment of distributions......... 956,866 8,282,950 1,005,589 8,536,817
--------------- ------------------ --------------- ------------------
24,004,230 207,057,091 21,705,935 187,338,685
Share repurchased....................... (31,688,935) (273,022,079) (25,343,381) (218,171,165)
--------------- ------------------ --------------- ------------------
Net decrease............................ (7,684,705) $ (65,964,988) (3,637,446) $ (30,832,480)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
JUNE 1, 1995
YEARS ENDED (COMMENCEMENT OF SALE OF SHARES) TO
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------------------------- -----------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 105,543 $ 891,754 15,659 $ 141,450
Shares issued in connection with
reinvestment of distributions......... 1,345 11,541 397 3,476
--------------- ------------------ --------------- ------------------
106,888 903,295 16,056 144,926
Shares repurchased...................... (111,905) (948,244) (1,142) (9,928)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. (5,017) $ (44,949) 14,914 $ 134,998
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
F30
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL HIGH INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 25,694,335 $ 346,426,450 25,003,318 $ 280,486,242
Shares issued in connection with
reinvestment of distributions......... 607,445 8,023,249 682,971 7,764,542
--------------- ------------------ --------------- ------------------
26,301,780 354,449,699 25,686,289 288,250,784
Share repurchased....................... (26,422,858) (355,715,247) (26,927,729) (301,862,112)
--------------- ------------------ --------------- ------------------
Net decrease............................ (121,078) $ (1,265,548) (1,241,440) $ (13,611,328)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------------------------- -----------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 14,568,804 $ 194,636,619 10,582,935 $ 119,426,735
Shares issued in connection with
reinvestment of distributions......... 765,798 10,086,445 826,797 9,372,626
--------------- ------------------ --------------- ------------------
15,334,602 204,723,064 11,409,732 128,799,361
Share repurchased....................... (16,793,522) (225,719,415) (11,542,431) (128,317,008)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. (1,458,920) $ (20,996,351) (132,699) $ 482,353
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
JUNE 1, 1995
YEAR ENDED (COMMENCEMENT OF SALE OF
OCTOBER 31, 1996 SHARES) TO OCTOBER 31, 1995
----------------------------------- -----------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,706,101 $ 23,413,749 133,919 $ 1,558,699
Shares issued in connection with
reinvestment of distributions......... 40,101 546,903 4,923 57,262
--------------- ------------------ --------------- ------------------
1,746,202 23,960,652 138,842 1,615,961
Share repurchased....................... (839,670) (11,309,193) (13,845) (160,158)
--------------- ------------------ --------------- ------------------
Net increase............................ 906,532 $ 12,651,459 124,997 $ 1,455,803
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
F31
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 15,025,486 $ 168,473,834 10,413,395 $ 105,118,727
Shares issued in connection with
reinvestment of distributions......... 829,046 9,085,802 1,180,205 11,913,775
--------------- ------------------ --------------- ------------------
15,854,532 177,559,636 11,593,600 117,032,502
Shares repurchased...................... (18,331,797) (204,237,090) (18,672,585) (187,700,412)
--------------- ------------------ --------------- ------------------
Net decrease............................ (2,477,265) $ (26,677,454) (7,078,985) $ (70,667,910)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------------------------- -----------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 12,778,909 $ 141,835,937 5,950,544 $ 60,333,373
Shares issued in connection with
reinvestment of distributions......... 1,206,362 13,216,165 1,633,228 16,496,489
--------------- ------------------ --------------- ------------------
13,985,271 155,052,102 7,583,772 76,829,862
Shares repurchased...................... (20,318,197) (224,904,917) (15,079,063) (151,484,130)
--------------- ------------------ --------------- ------------------
Net decrease............................ (6,332,926) $ (69,852,815) (7,495,291) $ (74,654,268)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
JUNE 1, 1995
YEAR ENDED (COMMENCEMENT OF SALE OF SHARES) TO
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------------------------- -----------------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 278,551 $ 3,010,280 44,461 $ 465,129
Shares issued in connection with
reinvestment of distributions......... 3,931 43,156 1,535 15,708
--------------- ------------------ --------------- ------------------
282,482 3,053,436 45,996 480,837
Shares repurchased...................... (284,638) (3,054,110) (3,115) (32,174)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. (2,156) $ (674) 42,881 $ 448,663
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
5. WRITTEN OPTIONS:
The Global High Income Portfolio's written options contract activity for the
year ended October 31, 1996 was as follows:
COVERED CALL AND PUT OPTIONS WRITTEN
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT PREMIUMS
----------- ---------
<S> <C> <C>
Options outstanding at October 31, 1995.................................................................... 0 $ 0
Options written............................................................................................ 7,000,000 101,500
Options cancelled in closing purchase transactions......................................................... 0 0
Options expired prior to exercise.......................................................................... (7,000,000) (101,500)
Options exercised.......................................................................................... 0 0
----------- ---------
Options outstanding at October 31, 1996.................................................................... 0 $ 0
----------- ---------
----------- ---------
</TABLE>
- --------------
FEDERAL TAX INFORMATION:
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as capital gain dividends for the fiscal year ended October
31, 1996:
<TABLE>
<CAPTION>
CAPITAL GAIN
FUND DIVIDEND
- ---------------------------------------------------------------------------------------------------------- ------------
<S> <C>
Government Income......................................................................................... --
High Income............................................................................................... $1,206,836
Strategic Income.......................................................................................... --
</TABLE>
F32
<PAGE>
GT GLOBAL INCOME FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR INVESTMENT COUNSELOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580. THE PROSPECTUS CONTAINS MORE COMPLETE
INFORMATION, INCLUDING CHARGES, EXPENSES AND RISKS. INVESTORS SHOULD READ
THE PROSPECTUS CAREFULLY BEFORE INVESTING.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA GROWTH FUND
Concentrates on small and medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS.
<PAGE>
[LOGO]
GT Global, Inc.
Fifty California Street
27th Floor
San Francisco, California
94111-4624
DATED MATERIAL
PLEASE EXPEDITE
GT GLOBAL INCOME FUND
GOVSAR606042M
