G T INVESTMENT FUNDS INC, N-30D, 1998-01-07

G T INVESTMENT FUNDS INC
N-30D, 1998-01-07

Previous: G T INVESTMENT FUNDS INC, N-30D, 1998-01-07

Next: G T INVESTMENT FUNDS INC, N-30D, 1998-01-07

<PAGE>
GT GLOBAL
OVER 25 YEARS
OF INVESTING
WORLDWIDE

/ /
GT GLOBAL
DEVELOPING
MARKETS
FUND

/ /
ANNUAL REPORT
OCTOBER 31, 1997

[LOGO]
<PAGE>
TABLE
OF CONTENTS

<TABLE>
<S> <C>
Message from the
Chairman............. 1

Report from the Fund
Managers and Key
Portfolio Holdings... 2

Report of Independent
Accountants.......... F1

Financial
Statements........... F2

Views of the Fund's management
described in this report are as
of the date written. Portfolio
holdings and allocations are as
of October 31, 1997, unless
otherwise noted. These views,
portfolio holdings and
allocations may have changed
subsequently.
</TABLE>
<PAGE>

MESSAGE FROM THE CHAIRMAN

Dear Shareholder,

Fiscal 1997 has been a challenging and exciting year. The volatility of
the market--and the resulting record highs and lows--has made investing a
sometimes awe-inspiring endeavor for investors and investment professionals
alike.

Across the GT Global family, our Funds have remained true to their investment
goals and objectives regardless of world events. Whether it be the recent
turmoil in the Asian markets, the privatization and reform underway across
eastern Europe, deregulation occurring in Latin America or the ups and downs
of the U.S. market, our Funds have maintained their focus. In fact, we
believe these changes are yielding new investment opportunities in both
established economies and dynamic new markets around the world. Looking
forward to 1998, our commitment is to continue to monitor world markets and
seek additional ways to capitalize on events as they unfold for the benefit
of our shareholders.

In an effort to provide our customers easier access to information about the
GT Global Funds, we launched our website, www.gtglobal.com, during the latter
part of this year. We hope to continually enhance the information it
contains, from our worldwide economic outlook, to fund price and performance
reporting, to the Millennium Minute message of the day. Used in conjunction
with annual and semiannual reports and your quarterly statement on our Funds,
we hope it helps you monitor your investments and achieve your financial
goals.

Be assured that we will continue to strive to offer you the quality
investment products you need to build a well-diversified portfolio. As
always, we appreciate your continued confidence in our Funds. Should you or
your adviser have any questions regarding GT Global Funds, please call us at
800-824-1580. One of our representatives will be happy to assist you.

Sincerely,

/s/ William J. Guilfoyle
William J. Guilfoyle
Chairman of the Board and President
GT Global Mutual Funds

1
<PAGE>

GT GLOBAL DEVELOPING MARKETS FUND
PERFORMANCE SUMMARY

ABOUT THE PERFORMANCE SUMMARY

The G.T. Global Developing Markets Fund, Inc. (the "Predecessor Fund"), a
closed-end fund whose single class of shares traded on the New York Stock
Exchange, converted to an open-end fund on October 31, 1997. This enabled
shareholders to realize the Predecessor Fund's discount to net asset value.
On October 31, 1997, shareholders of the Predecessor Fund received Class A
shares of the new Fund. Fees and expenses of the new Fund differ from those
of the Predecessor Fund. Performance data shown are based on performance and
expenses of the Predecessor Fund. Future performance will be affected by
expenses that it will incur as an open-end Fund. An investor's actual return
may be affected by the Fund's 2% redemption fee, which is imposed on certain
redemptions and exchanges until May 1, 1998.

GT Global
Developing Markets Fund J.P. Morgan IFC Investable
Class A Shares EMBI Plus Composite

1/11/94 9525 10000 10000
9614 9863 10011
9239 9607 9097
8357 8638 7899
7944 8474 7752
8287 8673 8325
7944 8362 7902
8274 8963 8047
9163 10115 8712
9315 10367 8982
9195 10026 8698
8915 9648 8688
8185 8620 8126
7382 7468 7734
6784 7371 7374
6632 7352 7226
7251 7661 8000
7665 7947 8695
7652 7995 8888
7863 8249 8853
7876 8028 9094
7955 7967 9450
10/31/95 7665 7667 9348
7685 7628 9619
8108 7894 10301
8799 8555 11084
8681 8365 10472
8730 8487 10711
9037 8830 11295
9212 8752 11491
9247 8856 11895
9002 8274 12143
9310 8531 12589
9624 8657 13401
9582 8471 13506
9827 8596 14180
10020 8634 14350
10367 9244 14747
10722 9696 15004
10375 9457 14463
10512 9296 14891
10838 9612 15469
11142 10027 15825
11497 10124 16481
10223 8832 16414
10548 9119 16916
10/31/97 9093 7622 14967

The chart above shows the performance of the GT Global Developing Markets
Fund, Class A shares, since the Fund's inception versus various indices. The
chart assumes a hypothetical $10,000 initial investment in the Fund's Class A
shares. The Fund also issues Class B and Advisor Class shares, which have
different sales charge structures and ongoing expenses. Because of these
differences, performance for Class B and Advisor Class shares will differ
from performance for Class A shares. Advisor Class shares are not sold 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.

AVERAGE ANNUAL TOTAL RETURNS%(1)
OCTOBER 31, 1997

Share Class Without Sales Charge(2) With Sales Charge

1-Year LOF 1-Year LOF

Class A(3) (5.10) (1.14) (9.61) (2.47)

(1) Figures assume reinvestment of all dividends and capital gains
distributions at net asset value.

(2) Performance data do not reflect the maximum 4.75% sales charge for Class A
shares, which, if included, would have reduced performance quoted.

(3) The Fund began operations on January 11, 1994.

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.

2
<PAGE>

INTERVIEW WITH HEAD OF GLOBAL EMERGING MARKETS EQUITIES
ALLAN CONWAY

Q HOW DID THE FUND PERFORM?

A The one-year period to October 31, 1997, ended on a disappointing note as
emerging markets outside Asia fell in sympathy with events in the region. The
Fund was not able to avoid the resulting volatility in worldwide emerging
stock markets and, against this backdrop, Class A shares returned a total of
- -5.10% (-9.61% including the maximum 4.75% sales charge). The International
Finance Corporation (IFC) Investable Composite Index(4) returned -10.02% over
the same period. Meanwhile, the J.P. Morgan Emerging Markets Bond Index
(EMBI) Plus(5) returned a total of 10.82%.

While country selection contributed positively to performance against the IFC
Investable Composite Index, stock selection, particularly in Malaysia, Mexico
and Turkey, was primarily responsible for relative underperformance.
Additionally, the Fund was underweighted in Brazil over the first nine months
of the period, when the market was up close to 70%, as measured by the IFC
Index. Within Brazil, the Fund was underweighted in state-owned companies,
which performed exceptionally well.

Some of the evolutionary changes we discussed in the semiannual report, such
as enhanced risk control guidelines and more disciplined stock selection,
began exerting a positive influence toward the end of the annual reporting
period, following a major restructuring of the portfolio in June.

Relative to the J.P. Morgan EMBI Plus Index, country selection has benefited
the Fund, with holdings in Bulgaria, Brazil and Russia contributing. The Fund
is also considerably more diversified than the index, which has a substantial
allocation to Latin America.

Q WHAT TRIGGERED THE GENERAL DOWNTURN IN EMERGING MARKETS?

A The trigger was a devaluation in the Thai currency in early July,
which highlighted the instability of its banking sector and many years of
excessive spending based on cheap dollar financings. While, initially,
tremors were contained to Asia, in early October the sudden, sharp decline
in the Hong Kong market--previously considered relatively immune to regional
malaise--prompted fears of a global meltdown. Even the U.S. suffered a severe
bout of volatility as investors fled to quality and liquidity.

Meanwhile, confidence in emerging equity markets worldwide was battered on a
grand scale. Effects were also evident in emerging bond markets, where
spreads to U.S. Treasuries widened dramatically, raising corporate and
government borrowing rates considerably.

Q WHAT COMPANIES PERFORMED WELL?

A A number of Fund holdings performed well over the period including LUKoil
in Russia, the State Bank of India and Electricidad de Caracas in Venezuela.

LUKoil is the largest Russian oil group and the world's third-largest oil
producer. The company has more oil reserves than any other listed oil company
in the world. We believe LUKoil should benefit from higher production based
on a strengthening of the domestic economy, the narrowing between domestic
and world price levels, higher exports, its joint venture with a major
western oil company, the acqui-
CONTINUED P4

INVESTMENT OBJECTIVE

The Fund primarily seeks long-term capital appreciation and secondarily seeks
income, to the extent consistent with seeking capital appreciation. While a
majority of its assets are ordinarily invested in developing market equity
securities, the Fund may also invest in developing market debt securities,
making it possible to shift resources where we perceive opportunities are the
most promising.

(4) The IFC Investable Composite Index is a market value-weighted average of
the performance of securities listed on the exchanges of 26 countries. It
includes the effect of reinvested dividends and is measured in U.S. dollars.

(5) The J.P. Morgan EMBI Plus is market value-weighted average of government
bonds from emerging bond markets. It includes the effect of reinvested
coupons and is measured in U.S. dollars.

Indices are unmanaged, not available for direct investment and do not include
the effects of sales charges and professional management fees.

3
<PAGE>

INTERVIEW WITH THE PORTFOLIO MANAGER CONTINUED

sition of new cheap oil reserves and the consolidation of the Russian oil
industry.

A strong market rally in Venezuela contributed to impressive returns for
Electricidad de Caracas. The rise in the company's share price reflects
progress in the privatization of the Venezuelan electricity market and
regulatory reform.

On the other hand, major disappointments were mostly limited to companies in
Malaysia, where financials such as Malayan Banking and Rashid Hussain6 were
particularly affected by the currency crisis.

Q COULD YOU DESCRIBE EVENTS IN ASIA?

A In Thailand and Malaysia, investors focused on the impact of falling
real-estate prices in the banking/financial services and property development
sectors. In both countries, the threat of bursting price "bubbles" had been
growing over the last three years, and the failure of policymakers to take
appropriate action only compounded the problem. Similar issues also featured
in the Philippines, although to a lesser degree.

Elsewhere, in South Korea the key issue was the impact of the won's weakness
on highly indebted companies that have borrowed in foreign currencies.
Uncertainty in relation to the timing and size of an International Monetary
Fund (IMF) rescue package for South Korea was also a primary concern. Even
Hong Kong was unable to escape the carnage as capital outflows caused a rise
in interest rates and a fall in property prices. Meanwhile, analysts continue
to revise downwards their expectations for growth in the economy and
corporate earnings.

Q OUTSIDE ASIA, HOW HAVE COUNTRIES BEEN IMPACTED BY THE DOWNTURN?

A The year-to-date performance for the universe in U.S. dollar terms ranged
from about 180% for Russia to -70% for Thailand (based on the IFC Index),
reinforcing our focus on top-down asset allocation. During the last several
months of the period, in particular, countries characterized by significant
current account deficits, budget deficits or political problems generally
experienced volatile share prices. Examples include Russia, Brazil and India.

Meanwhile, potential regional safe havens included Mexico, Hungary, South
Africa and Egypt. While events in Asia soured investor sentiment in Mexico
too, it was the least affected of all Latin American markets. In October
1997, fundamental economic news regarding GDP and industrial production
received a warm welcome because both exceeded expectations. The economy grew
7.3% in the first nine months of the year, while industrial production rose
13.1% year-on-year to the end of September. Led by manufacturing and
construction, industrial production was much higher than the consensus
expectation of 8.7%.

In Hungary, the three-year commitment to economic austerity has nurtured a
positive investment climate, with local investment and healthy foreign
capital inflows producing another strong year for its stock market overall.
We believe valuations are looking more attractive following October's
selloff, and feel Hungary may stand to benefit as a regional safe haven
because of its solid representation of blue-chip companies.

Q THE FUND IS SIGNIFICANTLY OVERWEIGHTED IN EGYPT RELATIVE TO THE IFCI INDEX.
WHAT DO YOU FIND ATTRACTIVE ABOUT THIS MARKET?

A We have overweighted Egypt for a number of reasons. We believe the monetary
environment is supportive, and the overall macroeconomic outlook remains very
positive. Our expectations are for a continued decline in inflation with
nominal interest rates moving in line. Capital inflows have also been
supportive. We believe the main risk for Egypt is that reform takes longer to
materialize than we anticipate. Following the market's strong performance
over the past year, we will continue to monitor events and adjust the Fund's
position accordingly.

Q WHAT AREAS ARE YOU CURRENTLY CAUTIOUS ABOUT?

A We are not yet convinced that Asian policymakers are willing to endure the
pain required to restructure
CONTINUED P5

(6) The Fund sold off its holdings of the securities of these companies prior
to October 31, 1997.

4
<PAGE>

INTERVIEW WITH THE PORTFOLIO MANAGER CONTINUED

their financial and corporate sectors, and expect further currency weakness,
slower growth and higher inflation to emerge in this region. Additionally,
continued yen weakness will put pressure on Asian export competitiveness. We
believe the key to asset allocation in this region is identifying
competitive, fundamentally strong and reasonably valued companies. We remain
underweighted in financials generally, particularly banks, across the region.

In Latin America, concerns center around Brazil and Argentina, where the
effects of higher interest rates on the private sector remain to be seen,
leading us to feel cautious for the present. The Brazilian state sector, on
the other hand, continues to be compelling as the reform process and
privatization are seemingly back on track and showing renewed momentum.
Indeed, the critical component of this equation will be the time it takes for
interest rates to fall to normal levels.

Meanwhile, we believe one result of lower economic activity should be a
reduction in the level of imports and redirection of sales to the export
market, which would give some needed relief to the current account deficit.
Of all regional markets, Argentina stands to bear most of the impact from any
slowdown in Brazil. We believe a major factor for Argentina, like Brazil,
will be the rate at which interest rates return to normal levels.

Q WHAT ARE YOUR EXPECTATIONS FOR EMERGING EQUITY MARKETS IN 1998?

A In general, our medium-term outlook for emerging markets remains
favorable. With the emerging markets universe as a whole having unwound most
of its outperformance, valuation measurements, both on a price-to-book and
price-to-earnings basis, are beginning to look attractive. Many emerging
markets remain below their 1994 highs, and we find them generally undervalued
in relation to the past and to developed markets.

We believe economic reform in many of the countries in eastern Europe and the
Middle East (EMEA) could provide attractive opportunities for investors. In
the portfolio, we continue to emphasize EMEA markets we feel are relatively
well insulated from instability. Meanwhile, potential for a pickup in
activity in Germany and other core European economies augurs well for the
eastern European region. Hungary's current account achieved a healthy surplus
in the third quarter, demonstrating strengthening export growth and resulting
support of the current account balance.

As panic subsides, we expect Latin America to decouple from events in Asia. A
decade of reform has delivered relatively stable growth and tame inflation in
many Latin American countries. True, our expectations are more modest than
several months ago but, despite the recent downturn, we are forecasting the
region as a whole to stage its best economic performance for a generation
this year, with average 1997 growth of around 5.5% and inflation below 13%.
Meanwhile, reform and privatization remain well entrenched in the region. At
the extreme, we think funding flows may take some time to recover, as
perceptions of risk have been altered and confidence remains fragile.

Q WHAT ARE YOUR EXPECTATIONS FOR EMERGING MARKET DEBT?

A Following the significant falls in emerging bond markets, we believe this
asset class is beginning to look relatively attractive and are now raising
our target bond exposure.We believe emerging market fundamentals are still
good, and opportunities remain at hand for the long-term investor.

Although the Asian crisis will inevitably heighten investor caution in
emerging markets, which may translate to slower growth rates and continuing
market volatility for many of these countries next year, we believe yield
spreads of 600-700 bps more than compensate for the risks of default.
Consequently, attractive values are reappearing in Latin America and eastern
Europe, and we see room for spreads to tighten.

5
<PAGE>

INTERVIEW WITH THE PORTFOLIO MANAGER CONTINUED

ABOUT THE PORTFOLIO MANAGERS

ALLAN CONWAY - Head of Global Emerging Markets Equity Team. Prior to joining
Chancellor LGT Asset Management in 1997, Mr. Conway spent 23 years in the
financial services industry. Most recently, from 1992-97 he was the Director,
International Equities at Hermes Investment Management. He received a B.A.
from the University of York, England.

CHENG-HOCK LAU - Chief Investment Officer, Developed Market Debt. Prior to
joining Chancellor LGT Asset Management in 1995, Mr. Lau spent a total of 13
years with Fiduciary Trust, Bankers Trust and Glaxo Enterprises as a fund
manager for Global Fixed Income. He received his B.B.A. from the University
of Oregon.

MICHAEL MABBUTT - Head of Global Emerging Market Debt. From 1992 to 1996, Mr.
Mabbutt was a senior fixed income manager at Baring Asset Management, joining
Chancellor LGT Asset Management in December 1996. He holds a B.Sc. from the
University of Capetown.

SECTOR ALLOCATION OF NET ASSETS%
OCTOBER 31, 1997

EQUITY

Energy 13.0
Multi Industry/Misc. 11.6
Services 11.3
Materials/Basic Industry 10.9
Finance 8.3
Consumer Non-Durables 6.5
Technology 2.3
Capital Goods 1.6
Health Care 1.6
Consumer Durables 1.4

FIXED INCOME INVESTMENTS

Gov't & Gov't Agency Obligations 10.1
Sovereign Debt 4.9
Corporate Bonds 3.2
Short-Term &Other 13.3

GEOGRAPHIC ALLOCATION OF NET ASSETS%

OCTOBER 31, 1997
ARGENTINA 2.9
BRAZIL 8.2
BULGARIA 2.1
CHILE 4.8
CHINA 1.0
DOMINICAN REPUBLIC 0.1
ECUADOR 0.4
EGYPT 5.7
HONG KONG 2.1
HUNGARY 1.2
INDIA 4.0
INDONESIA 3.0
IRELAND 0.4
ISRAEL 1.2
KAZAKHSTAN 0.1
KOREA 1.0
MALAYSIA 0.9
MEXICO 11.1
PAKISTAN 0.9
PANAMA 0.9
PERU 1.5
PHILIPPINES 0.8
POLAND 0.4
PORTUGAL 0.9
RUSSIA 8.1
SOUTH AFRICA 11.5
TAIWAN 2.3
THAILAND 1.2
TURKEY 2.4
UNITED KINGDOM 0.6
UNITED STATES & OTHER 14.9
VENEZUELA 2.6
ZIMBABWE 0.8

6
<PAGE>

% of
GT GLOBAL DEVELOPING MARKETS FUND Country Net Assets

KEY EQUITY HOLDINGS(7)

TELEBRAS The holding company of Brazil's local Brazil 2.3
and long-distance services, this currently
state-controlled company is scheduled for
privatization in 1998.

ASUSTEK COMPUTER INC. Manufactures and markets Taiwan 2.2
Pentium Pro, Pentium and 486-based mainboards.
The company also offers other peripherals such as
audio, video and network cards. Asustek sells its
products in Taiwan and exports to America, Asia
and Europe.

LUKOIL HOLDING Russia's largest private oil and Russia 1.8
gas company, LUKoil holds 18% of Russia's oil and
gas extracting market and 11% of its refining
market. The company's oil reserves are estimated
to be the second largest in the world.

TELEFONOS de MEXICO, S.A. de C.V. Provides Mexico 1.7
national and international long-distance and
local telephone service to 7,320 communities
throughout Mexico. The company also provides
voice, data, image signal and cellular
transmission services.

BARLOW LTD. Holding company for a group that South Africa 1.4
produces and distributes products used in
building and construction, mining and other
industries, as well as in motor vehicle
retailing. The group's manufacturing operations
serve markets in the UK, continental Europe, the
U.S., Australia and the Far East. About 25% of
the company's attributable profit is earned in
foreign currencies.

SASOL LTD. The holding company for a group that South Africa 1.4
produces and markets liquid fuels, pipeline gas,
petrochemicals, plastics, fertilizers, waxes and
mining explosives from coal and crude oil.

KIMBERLY-CLARK de MEXICO, S.A. de C.V. The Mexico 1.3
largest manufacturer of diapers, tissue paper,
notebooks and paper in Mexico. The company's
conservative management has concentrated on
lowering costs every year to retain its
competitive position in the marketplace.

SOUTH AFRICAN BREWERIES LTD. The holding company South Africa 1.3
for a group of companies with diverse operations
in the mass consumer markets of South Africa. The
group primarily manufactures and distributes
beer, but has interests in other beverages, and
operates in the retailing, hotel and consumer
goods manufacturing and supply sectors.

FOMENTO ECONOMICO MEXICANO, S.A. de C.V. Mexico 1.1
Produces and distributes soft drinks and beer and
operates retail stores. The company sells its
beer in Mexico and exports to 63 countries
throughout the world.

PETROBRAS Produces oil and natural gas liquids Brazil 1.1
through approximately 7,258 producing wells. The
company continues to benefit from the rapid
growth of both reserves and production. The
passing of Brazil's Hydrocarbon Law during 1997
allows the company to further accelerate this
growth through joint ventures with international
corporations.

Source: Bloomberg, November 1997.

(7) There is no assurance the Fund will continue to hold these or any other
securities mentioned in this report.

7
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

REPORT OF INDEPENDENT ACCOUNTANTS

- --------------------------------------------------------------------------------

To the Shareholders and Board of Directors of
GT Global Developing Markets Fund ("Fund"):

We have audited the accompanying statement of assets and liabilities of GT
Global Developing Markets Fund (formerly G.T. Global Developing Markets Fund,
Inc.), including the portfolio of investments, as of October 31, 1997, the
related statement of operations for the ten months then ended and for the year
ended December 31, 1996, the statements of changes in net assets for the ten
months then ended and for each of the two years in the period ended December 31,
1996, and the financial highlights for each of the periods indicated therein.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Developing Markets Fund as of October 31, 1997, the results of its
operations for the ten months then ended and for the year ended December 31,
1996, the changes in its net assets for the ten months then ended and for each
of the two years in the period ended December 31, 1996, and the financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles.

COOPERS & LYBRAND L.L.P.

BOSTON, MASSACHUSETTS
DECEMBER 15, 1997

F1
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS

October 31, 1997

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (13.0%)
LUKoil Holding - ADR{\/} ................................ RUS 97,586 $ 8,172,833 1.8
OIL
Sasol Ltd. .............................................. SAFR 537,556 6,481,964 1.4
ENERGY SOURCES
Petroleo Brasileiro S.A. (Petrobras) Preferred .......... BRZL 27,126,040 5,044,302 1.1
OIL
C.A. La Electricidad de Caracas ......................... VENZ 3,443,139 4,526,264 1.0
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (CEMIG) -
ADR{\/} ................................................ BRZL 94,834 3,793,360 0.8
ELECTRICAL & GAS UTILITIES
Centrais Eletricas Brasileiras S.A. (Eletrobras): ....... BRZL -- -- 0.8
ELECTRICAL & GAS UTILITIES
"B" ADR{\/} ........................................... -- 118,958 2,617,076 --
Preferred ............................................. -- 2,112,000 913,846 --
Chilgener S.A. - ADR{\/} ................................ CHLE 124,972 3,374,244 0.7
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} .................................. CHLE 94,858 3,130,314 0.7
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} ......... CHLE 127,657 2,569,097 0.6
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ...................................... ARG 68,960 2,206,720 0.5
OIL
The Hub Power Co., Ltd. - GDR-/- {\/} ................... PAK 70,300 2,196,875 0.5
ENERGY SOURCES
Light - Participacoes S.A. .............................. BRZL 7,485,850 1,914,922 0.4
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................. BRZL 5,322,290 1,767,016 0.4
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR-/- {\/} ............................ RUS 174,640 1,484,440 0.3
OIL
PTT Exploration and Production Public Co., Ltd. -
Foreign ................................................ THAI 138,800 1,415,622 0.3
OIL
Unified Energy Systems - Reg S GDR-/- {c} {\/} .......... RUS 40,700 1,271,875 0.3
ELECTRICAL & GAS UTILITIES
Manila Electric Co. "B" ................................. PHIL 361,110 1,111,108 0.2
ELECTRICAL & GAS UTILITIES
Bombay Suburban Electric Supply (BSES) Ltd. ............. IND 200,000 1,004,209 0.2
ELECTRICAL & GAS UTILITIES
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ...... HGRY 43,600 942,850 0.2
ENERGY SOURCES
Mosenergo: .............................................. RUS -- -- 0.2
ELECTRICAL & GAS UTILITIES
ADR-/- {\/} ........................................... -- 10,964 460,488 --
144A ADR{.} {\/} ...................................... -- 10,000 420,000 --
Korea Electric Power Corp. - ADR{\/} .................... KOR 93,330 764,139 0.2
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign ....... THAI 447,200 745,333 0.2
ELECTRICAL & GAS UTILITIES
Perez Companc S.A. ...................................... ARG 100,460 629,257 0.1
OIL
</TABLE>

The accompanying notes are an integral part of the financial statements.

F2
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Tenaga Nasional Bhd. .................................... MAL 235,000 $ 508,261 0.1
ELECTRICAL & GAS UTILITIES
Yukong Ltd. ............................................. KOR 10,980 148,688 --
OIL
Guangdong Electric Power Development Co., Ltd. "B"{*} ... CHNA 201,000 113,371 --
ENERGY SOURCES
------------
59,728,474
------------
Multi-Industry/Miscellaneous (11.6%)
Barlow Ltd. ............................................. SAFR 657,524 6,629,920 1.4
CONGLOMERATE
PT Telekomunikasi Indonesia ............................. INDO 5,018,500 4,683,001 1.0
MULTI-INDUSTRY
Anglo American Corporation of South Africa Ltd. ......... SAFR 104,020 4,498,162 1.0
CONGLOMERATE
Grupo Carso, S.A. de C.V. "A1" .......................... MEX 567,700 3,610,164 0.8
MULTI-INDUSTRY
Delta Corporation Ltd. (subdivision)-/- ................. ZBBW 2,472,400 3,520,823 0.8
MULTI-INDUSTRY
ITC Ltd.: ............................................... IND -- -- 0.7
MULTI-INDUSTRY
Common ................................................ -- 136,000 2,102,842 --
GDR-/- {\/} ........................................... -- 44,370 811,971 --
Billiton PLC-/- ......................................... SAFR 980,865 2,875,301 0.6
CONGLOMERATE
The Saudi Arabian Investment Fund Ltd.-/- {\/} .......... UK 281,000 2,810,000 0.6
COUNTRY FUNDS
PT Gudang Garam ......................................... INDO 949,500 2,697,744 0.6
MULTI-INDUSTRY
China Resources Enterprise Ltd. ......................... HK 870,000 2,386,028 0.5
CONGLOMERATE
Shanghai Industrial Holdings Ltd. ....................... HK 471,000 2,096,041 0.5
MULTI-INDUSTRY
Sanluis Corporacion, S.A. de C.V. ....................... MEX 263,477 2,044,708 0.4
CONGLOMERATE
Central Asia Regional Growth Fund-/- {\/} ............... IRE 210,000 1,999,200 0.4
COUNTRY FUNDS
Malaysian Resources Corp., Bhd. ......................... MAL 2,396,000 1,425,077 0.3
CONGLOMERATE
Koc Holding AS .......................................... TRKY 3,234,900 1,216,923 0.3
CONGLOMERATE
Empresas La Moderna, S.A. de C.V. "A"-/- ................ MEX 240,600 1,181,389 0.3
MULTI-INDUSTRY
NASR (El) City Company For Housing & Construction-/- .... EGPT 17,005 1,175,296 0.3
MISCELLANEOUS
PT Bimantara Citra ...................................... INDO 1,219,000 1,120,529 0.2
MULTI-INDUSTRY
PT Hanjaya Mandala Sampoerna ............................ INDO 590,500 1,032,141 0.2
MULTI-INDUSTRY
</TABLE>

The accompanying notes are an integral part of the financial statements.

F3
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Koor Industries Ltd.: ................................... ISRL -- -- 0.2
CONGLOMERATE
ADR{\/} ............................................... -- 22,043 $ 471,169 --
Common ................................................ -- 2,850 294,482 --
Graboplast Rt. .......................................... HGRY 13,452 725,231 0.2
MISCELLANEOUS
GT Taiwan Fund-/- +X+ {\/} .............................. TWN 49,751 626,368 0.1
COUNTRY FUNDS
Quinenco S.A. - ADR-/- {\/} ............................. CHLE 32,400 473,850 0.1
CONGLOMERATE
Discount Investment Corp. ............................... ISRL 11,613 316,356 0.1
MULTI-INDUSTRY
------------
52,824,716
------------
Services (11.3%)
Telecomunicacoes Brasileiras S.A. (Telebras): ........... BRZL -- -- 2.3
TELEPHONE NETWORKS
ADR{\/} ............................................... -- 57,481 5,834,322 --
Common ................................................ -- 49,594,258 4,408,329 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ......... MEX 176,363 7,627,700 1.7
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
- ADR{\/} .............................................. VENZ 114,579 5,012,831 1.1
TELEPHONE NETWORKS
Pick'n Pay Stores Ltd.: ................................. SAFR -- -- 0.8
RETAILERS-OTHER
Common ................................................ -- 1,889,154 2,847,477 --
"N" ................................................... -- 780,702 1,071,234 --
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ....... CHLE 128,402 3,563,156 0.8
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ...................... PERU 155,070 3,062,633 0.7
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: .................................... MEX -- -- 0.3
RETAILERS-OTHER
"C" ................................................... -- 636,000 1,104,431 --
"A" ................................................... -- 306,000 563,626 --
"B" ................................................... -- 66,334 132,509 --
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- .............................................. BRZL 9,188,127 1,666,932 0.4
BUSINESS & PUBLIC SERVICES
Mahanagar Telephone Nigam Ltd. .......................... IND 233,600 1,627,623 0.4
TELECOM - OTHER
Telefonica de Argentina S.A. - ADR{\/} .................. ARG 55,228 1,553,288 0.3
TELEPHONE NETWORKS
Indian Hotels Co., Ltd.: ................................ IND -- -- 0.2
LEISURE & TOURISM
GDR-/- {\/} ........................................... -- 35,200 607,200 --
Common ................................................ -- 25,850 418,541 --
Migros Turk T.A.S. ...................................... TRKY 848,300 890,294 0.2
RETAILERS-FOOD
Portugal Telecom S.A. - Registered ...................... PORT 20,551 843,433 0.2
TELEPHONE NETWORKS
</TABLE>

The accompanying notes are an integral part of the financial statements.

F4
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
TelecomAsia Corp. - Foreign-/- .......................... THAI 1,878,600 $ 841,164 0.2
TELEPHONE NETWORKS
PT Citra Marga Nusaphala Persada ........................ INDO 2,847,000 812,862 0.2
BUSINESS & PUBLIC SERVICES
PT Indosat .............................................. INDO 344,500 779,683 0.2
TELECOM - OTHER
Santa Isabel S.A. - ADR{\/} ............................. CHLE 40,666 752,321 0.2
RETAILERS-FOOD
Sonae Investimentos-Sociedade Gestora de Participacoes
Sociais S.A. ........................................... PORT 18,602 695,194 0.2
RETAILERS-OTHER
Danubius Hotel and Spa Rt.-/- ........................... HGRY 21,940 686,611 0.2
LEISURE & TOURISM
Konsortium Perkapalan Bhd. .............................. MAL 267,000 501,277 0.1
TRANSPORTATION - SHIPPING
Pakistan Telecommunications Co., Ltd. - GDR-/- {\/} ..... PAK 6,000 486,000 0.1
TELEPHONE NETWORKS
Advanced Info. Service - Foreign ........................ THAI 85,700 460,478 0.1
WIRELESS COMMUNICATIONS
Investec-Consultoria Internacional S.A.-/- .............. PORT 14,612 457,144 0.1
BROADCASTING & PUBLISHING
Super Sol Ltd. .......................................... ISRL 154,231 443,830 0.1
RETAILERS-FOOD
BEC World Public Co., Ltd. - Foreign .................... THAI 77,800 406,418 0.1
BROADCASTING & PUBLISHING
Estabelecimentos Jeronimo Martins & Filho, Sociedade
Gestora de Participacoes Sociais S.A. .................. PORT 3,854 252,110 0.1
RETAILERS-OTHER
Siam Makro Public Co., Ltd. - Foreign-/- ................ THAI 170,000 224,129 --
RETAILERS-OTHER
PT Matahari Putra Prima ................................. INDO 1,035,000 201,811 --
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Preferred ... BRZL 495,118 129,349 --
TELEPHONE NETWORKS
Guangshen Railway Co., Ltd. ............................. HK 162,000 50,298 --
TRANSPORTATION - ROAD & RAIL
------------
51,016,238
------------
Materials/Basic Industry (10.9%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" .............. MEX 1,389,779 6,125,014 1.3
PAPER/PACKAGING
SA Iron & Steel Industrial Corp., Ltd. (ISCOR) .......... SAFR 9,521,806 4,948,964 1.1
METALS - STEEL
Sappi Ltd. .............................................. SAFR 587,133 3,722,985 0.8
FOREST PRODUCTS
Helwan Portland Cement Co.-/- ........................... EGPT 166,230 3,507,942 0.8
CEMENT
Suez Cement Co. - Reg S GDR{c} {\/} ..................... EGPT 158,195 3,282,546 0.7
CEMENT
Apasco S.A. ............................................. MEX 428,533 2,617,387 0.6
CEMENT
</TABLE>

The accompanying notes are an integral part of the financial statements.

F5
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Industrias Penoles S.A. (CP) ............................ MEX 634,803 $ 2,527,808 0.6
METALS - NON-FERROUS
Ameriyah Cement Co.-/- .................................. EGPT 94,500 2,390,294 0.5
CEMENT
De Beers Centenary AG - Linked Unit{=} .................. SAFR 78,000 1,861,622 0.4
MISC. MATERIALS & COMMODITIES
Torah Portland Cement Co.-/- ............................ EGPT 67,950 1,858,632 0.4
CEMENT
Hindalco Industries Ltd. ................................ IND 63,600 1,660,561 0.4
METALS - NON-FERROUS
Paints & Chemical Industry: ............................. EGPT -- -- 0.3
CHEMICALS
Common-/- ............................................. -- 31,400 1,052,916 --
144A GDR{.} -/- {\/} .................................. -- 44,000 440,000 --
Pohang Iron & Steel Co., Ltd. - ADR{\/} ................. KOR 88,870 1,444,138 0.3
METALS - STEEL
Turk Sise ve Cam Fabrikalari AS-/- ...................... TRKY 16,264,000 1,396,565 0.3
GLASS
North Cairo Flour Mills-/- .............................. EGPT 32,010 1,393,376 0.3
MISC. MATERIALS & COMMODITIES
Pannonplast Rt. ......................................... HGRY 20,732 1,138,897 0.2
MISC. MATERIALS & COMMODITIES
Helioplis Housing-/- .................................... EGPT 8,000 1,094,353 0.2
BUILDING MATERIALS & COMPONENTS
Grupo Industrial Minera Mexico "L" ...................... MEX 277,300 823,598 0.2
METALS - NON-FERROUS
Maanshan Iron and Steel Co. "H"{*} ...................... CHNA 4,939,000 785,895 0.2
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ....... CHLE 12,200 632,875 0.1
CHEMICALS
Israel Chemicals Ltd. ................................... ISRL 499,158 625,750 0.1
CHEMICALS
Cosco Pacific Ltd. ...................................... HK 516,000 600,776 0.1
PAPER/PACKAGING
Cimpor-Cimentos de Portugal, SGPS S.A. .................. PORT 21,964 555,972 0.1
CEMENT
PT Aneka Tambang-/- ..................................... INDO 1,364,500 532,117 0.1
METALS - NON-FERROUS
Engro Chemicals Pakistan Ltd. ........................... PAK 137,800 435,263 0.1
CHEMICALS
HI Cement Corp. ......................................... PHIL 3,961,000 361,117 0.1
CEMENT
Cahya Mata Sarawak Bhd. ................................. MAL 355,000 345,509 0.1
BUILDING MATERIALS & COMPONENTS
Siam Cement Co., Ltd. - Foreign ......................... THAI 39,800 338,597 0.1
CEMENT
Agros Holding S.A.-/- ................................... POL 16,123 338,212 0.1
MISC. MATERIALS & COMMODITIES
Compania de Minas Buenaventura S.A. - ADR{\/} ........... PERU 16,000 287,000 0.1
METALS - NON-FERROUS
</TABLE>

The accompanying notes are an integral part of the financial statements.

F6
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
PT Indah Kiat Pulp & Paper Corp.Tbk ..................... INDO 709,000 $ 271,553 0.1
PAPER/PACKAGING
Fauji Fertilizer Co., Ltd. .............................. PAK 116,300 258,997 0.1
MISC. MATERIALS & COMMODITIES
------------
49,657,231
------------
Finance (8.3%)
ABSA Group Ltd. ......................................... SAFR 761,136 4,509,849 1.0
BANKS-REGIONAL
Uniao Bancos Brasileiras "A" Preferred .................. BRZL 142,972,483 3,628,783 0.8
BANKS-MONEY CENTER
State Bank of India Ltd.: ............................... IND -- -- 0.7
BANKS-MONEY CENTER
Common ................................................ -- 267,000 1,931,961 --
GDR{\/} ............................................... -- 71,640 1,318,176 --
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} ................................................ CHLE 142,366 2,384,631 0.5
INVESTMENT MANAGEMENT
Egyptian American Bank SAE-/- ........................... EGPT 57,663 1,857,088 0.4
BANKS-MONEY CENTER
Commercial International Bank: .......................... EGPT -- -- 0.4
BANKS-MONEY CENTER
144A GDR{.} {\/} ...................................... -- 58,000 1,261,500 --
Common ................................................ -- 23,940 553,789 --
Banco de A. Edwards - ADR{\/} ........................... CHLE 100,934 1,753,728 0.4
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} ................................ PERU 94,800 1,700,475 0.4
BANKS-MONEY CENTER
Global Menkul Degerler AS-/- ............................ TRKY 69,103,256 1,601,182 0.4
SECURITIES BROKER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................ PAN 37,631 1,495,832 0.3
OTHER FINANCIAL
Turkiye Is Bankasi (Isbank) "C" ......................... TRKY 15,098,500 1,461,119 0.3
BANKS-MONEY CENTER
Banco Frances del Rio de la Plata S.A. - ADR{\/} ........ ARG 48,968 1,205,837 0.3
BANKS-MONEY CENTER
Aksigorta A.S. .......................................... TRKY 15,080,000 1,171,573 0.3
INSURANCE - MULTI-LINE
Liberty Life Association of Africa Ltd. ................. SAFR 37,400 933,056 0.2
INSURANCE-LIFE
BPI-SGPS S.A. ........................................... PORT 40,637 914,217 0.2
BANKS-MONEY CENTER
Yapi ve Kredi Bankasi AS ................................ TRKY 29,106,092 888,639 0.2
BANKS-REGIONAL
Kookmin Bank - GDR-/- {\/} .............................. KOR 128,480 822,272 0.2
BANKS-MONEY CENTER
Ayala Land, Inc. "B" .................................... PHIL 1,723,800 675,278 0.1
REAL ESTATE
Bank Leumi Le - Israel .................................. ISRL 406,668 624,411 0.1
BANKS-REGIONAL
Metroplex Bhd. .......................................... MAL 1,751,000 610,141 0.1
REAL ESTATE
</TABLE>

The accompanying notes are an integral part of the financial statements.

F7
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Turkiye Garanti Bankasi AS .............................. TRKY 11,565,600 $ 599,025 0.1
BANKS-REGIONAL
Bank Hapoalim Ltd. ...................................... ISRL 244,830 579,448 0.1
BANKS-REGIONAL
Muslim Commercial Bank Ltd.-/- .......................... PAK 546,500 558,844 0.1
BANKS-MONEY CENTER
JSC Kazkommertsbank Co. - GDR-/- {\/} (.) ............... KAZ 26,600 558,600 0.1
BANKS-REGIONAL
SM Prime Holdings, Inc. ................................. PHIL 2,664,600 470,670 0.1
REAL ESTATE
Thai Farmers Bank Public Co., Ltd. - Foreign ............ THAI 166,400 455,323 0.1
BANKS-REGIONAL
Bank Slaski S.A. ........................................ POL 7,316 426,767 0.1
BANKS-MONEY CENTER
Banco Santander Chile - ADR{\/} ......................... CHLE 28,100 365,300 0.1
BANKS-REGIONAL
Land and House Public Co., Ltd. - Foreign ............... THAI 392,300 341,555 0.1
REAL ESTATE
Belle Corp.-/- .......................................... PHIL 3,297,000 300,581 0.1
REAL ESTATE
Malaysian Assurance Alliance Bhd. ....................... MAL 116,200 209,432 --
INSURANCE - MULTI-LINE
Bangkok Bank Public Co., Ltd. - Foreign ................. THAI 56,400 196,418 --
BANKS-MONEY CENTER
C & P Homes, Inc. ....................................... PHIL 1,382,000 104,339 --
REAL ESTATE
------------
38,469,839
------------
Consumer Non-Durables (6.5%)
South African Breweries Ltd. ............................ SAFR 226,892 6,037,874 1.3
BEVERAGES - ALCOHOLIC
Fomento Economico Mexicano, S.A. de C.V. "B" ............ MEX 738,356 5,217,126 1.1
BEVERAGES - ALCOHOLIC
Gruma S.A. "B"-/- ....................................... MEX 883,073 3,468,838 0.8
FOOD
Companhia Cervejaria Brahma Preferred ................... BRZL 4,662,721 2,918,430 0.6
BEVERAGES - ALCOHOLIC
C.G. Smith Foods Ltd. ................................... SAFR 174,000 2,496,050 0.5
FOOD
Eastern Tobacco Co.-/- .................................. EGPT 90,785 2,276,300 0.5
TOBACCO
A-Ahram Beverages Co. S.A.E. - 144A GDR{.} -/- {\/} ..... EGPT 62,514 1,719,135 0.4
BEVERAGES - ALCOHOLIC
Embotelladora Andina S.A.: .............................. CHLE -- -- 0.4
BEVERAGES - NON-ALCOHOLIC
"B" ADR{\/} ........................................... -- 41,497 850,689 --
"A" ADR{\/} ........................................... -- 34,400 825,600 --
Hindustan Lever Ltd. .................................... IND 40,650 1,438,245 0.3
PERSONAL CARE/COSMETICS
San Miguel Corp. "B" .................................... PHIL 851,600 958,353 0.2
BEVERAGES - ALCOHOLIC
</TABLE>

The accompanying notes are an integral part of the financial statements.

F8
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Compania Cervecerias Unidas S.A. ADR{\/} ................ CHLE 36,800 $ 897,000 0.2
BEVERAGES - ALCOHOLIC
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ............... POL 4,461 333,293 0.1
BEVERAGES - ALCOHOLIC
Reliance Industries Ltd. - GDR-/- {\/} (.) .............. IND 12,100 255,008 0.1
TEXTILES & APPAREL
Kuala Lumpur Kepong Bhd. ................................ MAL 60,000 144,187 --
OTHER CONSUMER GOODS
La Tondena Distillers, Inc. ............................. PHIL 137,900 84,469 --
BEVERAGES - ALCOHOLIC
------------
29,920,597
------------
Technology (2.3%)
Asustek Computer Inc. - Reg. S GDR-/- {c} {\/} .......... TWN 830,248 10,149,782 2.2
COMPUTERS & PERIPHERALS
Clal Electronics Industries Ltd. ........................ ISRL 2,754 399,041 0.1
SEMICONDUCTORS
LG Information & Communication .......................... KOR 2,728 156,860 --
TELECOM TECHNOLOGY
------------
10,705,683
------------
Capital Goods (1.6%)
New World Infrastructure Ltd.-/- ........................ HK 1,076,000 2,129,728 0.5
CONSTRUCTION
Cheung Kong Infrastructure Holdings ..................... HK 643,000 1,663,648 0.4
CONSTRUCTION
United Engineers Ltd. ................................... MAL 428,000 1,015,680 0.2
CONSTRUCTION
Irkutskenergo - ADR-/- {\/} ............................. RUS 68,712 927,612 0.2
ELECTRICAL PLANT/EQUIPMENT
Daewoo Heavy Industries ................................. KOR 99,000 577,500 0.1
INDUSTRIAL COMPONENTS
Elektrim Spolka Akcyjna S.A. ............................ POL 58,947 555,592 0.1
ELECTRICAL PLANT/EQUIPMENT
ECI Telecommunications Ltd.{\/} ......................... ISRL 16,200 447,525 0.1
TELECOM EQUIPMENT
Sungmi Telecom Electronics Co. .......................... KOR 184 8,999 --
TELECOM EQUIPMENT
------------
7,326,284
------------
Health Care (1.6%)
Egypt International Pharmaceutical Industries Co.
(EIPICO) ............................................... EGPT 33,200 2,402,118 0.5
PHARMACEUTICALS
Richter Gedeon Rt. - Reg S GDR{c} {\/} .................. HGRY 17,552 1,632,336 0.4
PHARMACEUTICALS
Ranbaxy Laboratories Ltd. ............................... IND 79,850 1,555,391 0.3
MEDICAL TECHNOLOGY & SUPPLIES
Teva Pharmaceutical Industries Ltd. ..................... ISRL 25,548 1,189,452 0.3
PHARMACEUTICALS
</TABLE>

The accompanying notes are an integral part of the financial statements.

F9
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

TOTAL EQUITY INVESTMENTS (cost $359,966,965) .............. 312,881,526 68.5
------------ -----
<CAPTION>

PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (10.1%)
Argentina (1.2%)
Republic of Argentina:
Global Bond, 11.375% due 1/30/17 .................... USD 2,741,000 2,617,655 0.6
Par Bond Series L, 5.5% due 3/31/23++ ............... USD 2,690,000 1,830,881 0.4
Global Bond, 11% due 10/9/06 ........................ USD 720,000 713,700 0.2
Brazil (0.4%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24++ ............................................ USD 3,020,000 1,996,975 0.4
Bulgaria (2.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12++ ...................................... USD 9,017,000 4,914,265 1.1
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro+ .............................................. USD 7,099,000 4,663,156 1.0
Ecuador (0.4%)
Republic of Ecuador, Discount Bond, 6.6875% due 2/28/25
- Euro+ .............................................. USD 2,845,000 1,998,613 0.4
Mexico (2.2%)
United Mexican States:
Discount Bond Series A, 6.6925% due 12/31/19+ +/+ ... USD 6,110,000 5,533,369 1.2
Global Bond, 9.875% due 1/15/07 ..................... USD 1,615,000 1,633,169 0.4
Global Bond, 11.375% due 9/15/16 .................... USD 1,455,000 1,547,756 0.3
Global Bond, 11.5% due 5/15/26 ...................... USD 1,421,000 1,534,680 0.3
</TABLE>

The accompanying notes are an integral part of the financial statements.

F10
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Panama (0.6%)
Republic of Panama, Interest Reduction Bond, 3.75% due
7/17/14++ ............................................ USD 3,536,000 $ 2,486,250 0.6
Peru (0.3%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17++ ............................................. USD 2,533,000 1,443,810 0.3
South Africa (0.8%)
Republic of South Africa, 13% due 8/31/10{j} .......... ZAR 20,173,000 3,807,589 0.8
United States (1.6%)
United States Treasury:
6.375% due 8/15/27 .................................. USD 4,032,000 4,149,180 0.9
5.875% due 9/30/02 .................................. USD 3,033,000 3,049,587 0.7
Venezuela (0.5%)
Republic of Venezuela, Par Bond Series A, 6.75% due
3/31/20+/+ ........................................... USD 2,543,000 2,128,173 0.5
------------
Total Government & Government Agency Obligations (cost
$49,316,056) ............................................. 46,048,808
------------
Sovereign Debt (4.9%)
Russia (4.9%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- {j} ............................... USD 22,635,000 20,131,003 4.4
Participation ** -/- ................................ DEM 4,186,000 2,227,112 0.5
------------
Total Sovereign Debt (cost $12,006,889) ................... 22,358,115
------------
Corporate Bonds (3.2%)
Argentina (0.5%)
Supermercados Norte, 10.875% due 2/9/04 - 144A{.} ..... USD 1,193,000 1,109,490 0.3
Acindar Industrial Argentina, 11.25% due 2/15/04 ...... USD 661,000 654,390 0.2
Brazil (0.2%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ...... USD 1,107,000 1,079,325 0.2
China (0.6%)
Panda Global Energy Co., 12.5% due 4/15/04{.} ......... USD 2,139,000 2,010,660 0.4
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} ..... USD 960,000 876,000 0.2
Dominican Republic (0.1%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............. USD 652,000 645,480 0.1
Hong Kong (0.1%)
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} .............................................. USD 700,000 652,750 0.1
India (0.2%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ......... USD 1,093,000 954,189 0.2
Indonesia (0.1%)
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} .............................................. USD 653,000 574,640 0.1
</TABLE>

The accompanying notes are an integral part of the financial statements.

F11
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Mexico (0.8%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} .......................... USD 2,104,000 $ 1,930,420 0.4
8.85% due 9/15/07 - 144A{.} ......................... USD 1,050,000 1,009,313 0.2
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} .............................................. USD 996,000 1,088,130 0.2
Russia (0.4%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} .............................................. USD 851,000 1,144,595 0.3
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} .... USD 555,000 488,400 0.1
South Africa (0.2%)
Eskom, 11% due 6/1/08 ................................. ZAR 4,990,000 826,527 0.2
------------
Total Corporate Bonds (cost $15,533,169) .................. 15,044,309
------------ -----

TOTAL FIXED INCOME INVESTMENTS (cost $76,856,114) ......... 83,451,232 18.2
------------ -----

UNDERLYING
NOMINAL VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Federal Republic of Brazil Debt Conversion Bond, Call
Option, strike 82.25, expires 1/12/98 (cost
$312,660) .............................................. USD 17,370,000 126,732 --
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>

NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
PT Matahari Putra Prima Rights, expire 12/3/97 .......... INDO 2,070,000 115,320 --
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights,
expire 11/12/97 ........................................ BRZL 257,975 234 --
TELEPHONE NETWORKS
------------ -----

TOTAL RIGHTS (cost $0) .................................... 115,554 --
------------ -----
<CAPTION>

NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Belle Corp. Warrants, expire 2002 (cost $0) ............. PHIL 659,400 122 --
------------ -----
OIL
</TABLE>

The accompanying notes are an integral part of the financial statements.

F12
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ----------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $34,850,000 U.S. Treasury Bond,
8.875% due 8/15/17 (market value of collateral is
$45,720,975, including accrued interest).
(cost $44,816,933) .................................... $ 44,816,933 9.8
------------ -----

TOTAL INVESTMENTS (cost $481,952,672) * .................. 441,392,099 96.5
Other Assets and Liabilities .............................. 15,987,089 3.5
------------ -----

NET ASSETS ................................................ $457,379,188 100.0
------------ -----
------------ -----
</TABLE>

- --------------

-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
+X+ The GT Global Developing Markets Fund (the "Fund") has invested in
the GT Global Taiwan Fund, a fund managed by LGT Asset Management
Ltd. who is an affiliate of the Fund's manager, Chancellor LGT
Asset Management, Inc.
** Underlying loan agreement currently in default.
{j} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities. See Note 1 to the
Financial Statements.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{*} Security denominated in Hong Kong Dollars.
{=} Each Centenary Linked Unit consists of 1 registered deferred share
of De Beers Consolidated Mine + 1 Centenary Depositary Receipt.
(.) Restricted securities: At October 31, 1997, the Fund owned the
following restricted securities constituting 0.2% of net assets
which may not be publicly sold without registration under the
Securities Act of 1933 (Note 1). Additional information on the
securities is as follows:

<TABLE>
<CAPTION>
ACQUISITION MARKET VALUE
DESCRIPTION DATE SHARES COST PER SHARE
- ------------------------------ ------------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
JSC Kazkommertsbank Co. -
GDR.......................... 7/15/97 26,600 $ 500,080 $ 21.00
Reliance Industries - GDR..... 5/20/94 12,100 223,850 21.08
</TABLE>

* For Federal income tax purposes, cost is $483,269,089 and
appreciation (depreciation) is as follows:

<TABLE>
<S> <C>
Unrealized appreciation: $ 26,262,525
Unrealized depreciation: (68,139,515)
-------------
Net unrealized depreciation: $ (41,876,990)
-------------
-------------
</TABLE>

Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt

The accompanying notes are an integral part of the financial statements.

F13
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

PORTFOLIO OF INVESTMENTS (cont'd)

October 31, 1997

- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:

<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 1.2 1.7 2.9
Brazil (BRZL/BRL) .................... 7.6 0.6 8.2
Bulgaria (BUL/LEV) ................... 2.1 2.1
Chile (CHLE/CLP) ..................... 4.8 4.8
China (CHNA/RMB) ..................... 0.4 0.6 1.0
Dominican Republic (DR/USD) .......... 0.1 0.1
Ecuador (ECDR/ECS) ................... 0.4 0.4
Egypt (EGPT/EGP) ..................... 5.7 5.7
Hong Kong (HK/HKD) ................... 2.0 0.1 2.1
Hungary (HGRY/HUF) ................... 1.2 1.2
India (IND/INR) ...................... 3.8 0.2 4.0
Indonesia (INDO/IDR) ................. 2.9 0.1 3.0
Ireland (IRE/IEP) .................... 0.4 0.4
Israel (ISRL/ILS) .................... 1.2 1.2
Kazakhstan (KAZ/KTS) ................. 0.1 0.1
Korea (KOR/KRW) ...................... 1.0 1.0
Malaysia (MAL/MYR) ................... 0.9 0.9
Mexico (MEX/MXN) ..................... 8.1 3.0 11.1
Pakistan (PAK/PKR) ................... 0.9 0.9
Panama (PAN/PND) ..................... 0.3 0.6 0.9
Peru (PERU/PES) ...................... 1.2 0.3 1.5
Philippines (PHIL/PHP) ............... 0.8 0.8
Poland (POL/PLZ) ..................... 0.4 0.4
Portugal (PORT/PTE) .................. 0.9 0.9
Russia (RUS/SUR) ..................... 2.8 5.3 8.1
South Africa (SAFR/ZAR) .............. 10.5 1.0 11.5
Taiwan (TWN/TWD) ..................... 2.3 2.3
Thailand (THAI/THB) .................. 1.2 1.2
Turkey (TRKY/TRL) .................... 2.4 2.4
United Kingdom (UK/GBP) .............. 0.6 0.6
United States (US/USD) ............... 1.6 13.3 14.9
Venezuela (VENZ/VEB) ................. 2.1 0.5 2.6
Zimbabwe (ZBBW/ZWD) .................. 0.8 0.8
------ ----- ----- -----
Total ............................... 68.5 18.2 13.3 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>

- --------------

{d} Percentages indicated are based on net assets of $457,379,188.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997

<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 1,681,647 1.84950 11/06/97 $ (113,656)
Indonesian Rupiahs...................... 1,114,206 3610.00000 11/05/97 (6,173)
South African Rands..................... 3,338,977 5.04500 1/30/98 (73,645)
-------------- --------------
Total Contracts to Sell (Receivable
amount $5,941,356)................... 6,134,830 (193,474)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 1.34%.
Total Open Forward Foreign Currency
Contracts............................ $ (193,474)
--------------
--------------
</TABLE>

- ----------------
See Note 1 to the financial statements.

The accompanying notes are an integral part of the financial statements.

F14
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $481,952,672) (Note 1).......................... $441,392,099
U.S. currency................................................................. $1,159,740
Foreign currencies (cost $14,108,834)......................................... 14,122,604 15,282,344
----------
Receivable for securities sold............................................................ 13,029,046
Interest receivable....................................................................... 1,251,368
Dividends receivable...................................................................... 366,109
Unamortized organizational costs (Note 1)................................................. 85,312
Miscellaneous receivable.................................................................. 11,894
-----------
Total assets............................................................................ 471,418,172
-----------
Liabilities:
Payable for securities purchased.......................................................... 12,905,923
Payable for investment management and administration fees (Note 2)........................ 722,480
Payable for open forward foreign currency contracts (Note 1).............................. 193,474
Payable for professional fees............................................................. 39,732
Payable for printing and postage expenses................................................. 37,656
Payable for custodian fees................................................................ 30,062
Payable for Directors' fees and expenses (Note 2)......................................... 15,494
Payable for transfer agent fees (Note 2).................................................. 5,964
Payable for fund accounting fees (Note 2)................................................. 4,387
Payable for registration and filing fees.................................................. 2,127
Other accrued expenses.................................................................... 81,685
-----------
Total liabilities....................................................................... 14,038,984
-----------
Net assets.................................................................................. $457,379,188
-----------
-----------
Class A:
Net asset value per share ($457,379,188 DIVIDED BY 36,416,667 shares outstanding)........... $ 12.56
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................. $545,103,263
Undistributed net investment income....................................................... 8,645,635
Accumulated net realized loss on investments and foreign currency transactions............ (55,602,092)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (207,045)
Net unrealized depreciation of investments................................................ (40,560,573)
-----------
Total -- representing net assets applicable to capital shares outstanding................... $457,379,188
-----------
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F15
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

STATEMENTS OF OPERATIONS

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED
OCTOBER 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Investment income: (Note 1)
Interest income........................................................... $11,436,242 $20,641,051
Dividend income (net of foreign withholding tax of $365,717 and $420,409,
respectively)............................................................ 5,481,523 7,351,830
Other income.............................................................. -- 74,487
------------- -------------
Total investment income................................................. 16,917,765 28,067,368
------------- -------------
Expenses:
Investment management fees (Note 2)....................................... 6,274,911 6,673,159
Administration fees (Note 2).............................................. 1,108,912 1,191,681
Custodian fees (Note 1)................................................... 317,289 332,166
Fund accounting fees (Note 2)............................................. 108,484 119,321
Professional fees......................................................... 92,091 101,382
Printing and postage expenses............................................. 33,504 65,880
Transfer agent fees (Note 2).............................................. 63,520 190,834
Amortization of organization costs (Note 1)............................... 58,930 70,949
Directors' fees and expenses (Note 2)..................................... 25,536 38,064
Registration and filing fees.............................................. -- 3,000
Other expenses............................................................ 119,278 37,139
------------- -------------
Total expenses before reductions........................................ 8,202,455 8,823,575
Expense reductions (Notes 1 & 5)...................................... (374,173) (162,760)
------------- -------------
Total net expenses...................................................... 7,828,282 8,660,815
------------- -------------
Net investment income....................................................... 9,089,483 19,406,553
------------- -------------
Net realized and unrealized gain (loss) on investments and foreign
currencies: (Note 1)
Net realized gain on investments.......................................... 46,804,651 1,845,666
Net realized loss on foreign currency transactions........................ (1,151,351) (900,512)
------------- -------------
Net realized gain during the periods.................................... 45,653,300 945,154
------------- -------------
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................. (297,303) 91,835
Net change in unrealized appreciation (depreciation) of investments....... (101,078,671) 78,628,364
------------- -------------
Net unrealized appreciation (depreciation) during the periods........... (101,375,974) 78,720,199
------------- -------------
Net realized and unrealized gain (loss) on investments and foreign
currencies................................................................. (55,722,674) 79,665,353
------------- -------------
Net increase (decrease) in net assets resulting from operations............. $(46,633,191) $99,071,906
------------- -------------
------------- -------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F16
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

STATEMENTS OF CHANGES IN NET ASSETS

- --------------------------------------------------------------------------------

TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ------------------------
1997 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income.......................................... $ 9,089,483 $19,406,553 $26,375,900
Net realized gain (loss) on investments and foreign currency
transactions.................................................. 45,653,300 945,154 (78,379,558)
Net change in unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currencies... (297,303) 91,835 (3,021)
Net change in unrealized appreciation (depreciation) of
investments................................................... (101,078,671) 78,628,364 47,401,359
------------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations.................................................. (46,633,191) 99,071,906 (4,605,320)
------------- ----------- -----------
Distributions to shareholders: (Note 1)
From net investment income..................................... -- (17,407,047) (26,292,834)
------------- ----------- -----------
Capital share transactions: (Note 4)
Adjustment to estimate of initial offering expenses............ -- -- 373,757
------------- ----------- -----------
Total increase (decrease) in net assets...................... (46,633,191) 81,664,859 (30,524,397)
Net assets:
Beginning of period............................................ 504,012,379 422,347,520 452,871,917
------------- ----------- -----------
End of period *................................................ $457,379,188 $504,012,379 $422,347,520
------------- ----------- -----------
------------- ----------- -----------
* Includes undistributed net investment income (loss) of........ $ 8,645,635 $ 363,782 $ (7,034)
------------- ----------- -----------
------------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F17
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.

<TABLE>
<CAPTION>
JANUARY 11, 1994
(COMMENCEMENT
TEN MONTHS YEAR ENDED OF OPERATIONS)
ENDED DECEMBER 31, TO
OCTOBER 31, ---------------------- DECEMBER 31,
1997 1996 1995 1994
----------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 13.84 $ 11.60 $ 12.44 $ 15.00
----------- ---------- ---------- ----------------
Income from investment operations:
Net investment income................. 0.25 0.53 0.72 0.35
Net realized and unrealized gain
(loss) on investments................ (1.53) 2.19 (0.84) (2.46)
----------- ---------- ---------- ----------------
Net increase (decrease) from
investment operations.............. (1.28) 2.72 (0.12) (2.11)
----------- ---------- ---------- ----------------
Distributions to shareholders:
From net investment income............ -- (0.48) (0.72) (0.35)
From net realized gain on
investments.......................... -- -- -- (0.10)
----------- ---------- ---------- ----------------
Total distributions................. -- (0.48) (0.72) (0.45)
----------- ---------- ---------- ----------------
Net asset value, end of period.......... $ 12.56 $ 13.84 $ 11.60 $ 12.44
----------- ---------- ---------- ----------------
----------- ---------- ---------- ----------------
Market value, end of period............. $ 11.81 $ 11.63 $ 9.75 $ 9.75
----------- ---------- ---------- ----------------
----------- ---------- ---------- ----------------

Total investment return (based on market
value)................................. 1.62%(b) 24.18% 6.60% (32.16)% (b)

Total investment return (based on net
asset value)........................... (9.25)%(b) 23.59% (0.95)% (14.07)% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 457,379 $ 504,012 $ 422,348 $ 452,872
Ratio of net investment income to
average net assets..................... 2.03%(a) 4.07% 6.33% 2.75 % (a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.75%(a) 1.82% 1.77% 2.01 % (a)
Without expense reductions............ 1.83%(a) 1.85% 1.80% 2.01 % (a)
Portfolio turnover rate................. 184%(a) 138% 75% 56 %
Average commission rate per share paid
on portfolio transactions.............. $ 0.0023 $ 0.0022 N/A N/A
</TABLE>

- ----------------

(a) Annualized
(b) Not annualized
N/A Not Applicable.

These financial highlights provide per share financial information of G.T.
Global Developing Markets Fund, Inc. ("Predecessor Fund") for the periods
shown. The fees and expenses of the Fund differ from those of the
Predecessor Fund (See Note 2).

The accompanying notes are an integral part of the financial statements.

F18
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

NOTES TO
FINANCIAL STATEMENTS
October 31, 1997

- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Developing Markets Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Company
has thirteen series of shares in operation, each series corresponding to a
distinct portfolio of investments.

On October 31, 1997, at the close of business, the Fund acquired the assets and
assumed the liabilities of G.T. Global Developing Markets Fund, Inc., a Maryland
corporation registered under the 1940 Act as a non-diversified closed-end
management investment company ("Predecessor Fund"), in exchange for Class A
shares of the Fund in a tax-free reorganization of the Predecessor Fund.
Shareholders of the Predecessor Fund approved the reorganization on October 20,
1997. Prior to October 28, 1997 the Closed-End Fund's shares traded on the New
York Stock Exchange. As a result of the reorganization of the Predecessor Fund
into the Fund, the Fund has a fiscal year end of October 31 to coincide with the
fiscal years of the other series of the Company. Class A shares of the Fund
issued in connection with the reorganization of the Predecessor Fund will be
subject to a 2% redemption fee for redemptions until May 1, 1998. The financial
statements presented are the financial statements for the Predecessor Fund.

Commencing November 1, 1997, the Fund began to offer Class A, Class B, and
Advisor Class shares, each of which has equal rights as to assets and voting
privileges except that Class A and Class B each has exclusive voting rights with
respect to its distribution plan. Investment income, realized and unrealized
capital gains and losses, and the common expenses of the Fund are allocated on a
pro rata basis to each class based on the relative net assets of each class to
the total net assets of the Fund. Each class of shares differs in its respective
service and distribution expenses, and may differ in its transfer agent,
registration, and certain other class-specific fees and expenses.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.

(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.

Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.

Fixed income investments are valued at the mean of representative quoted bid and
asked prices for securities or, if such prices are not available, at prices for
securities 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
Fund's Board of Directors.

Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Fund's Board of Directors.

(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.

The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
existing 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 and losses arise from sales and
maturities of short-term investments, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from

F19
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

changes in the value of assets and liabilities other than investments in
securities at year end, resulting from changes in exchange rates.

(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.

(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of a contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities or to hedge against adverse
fluctuations in exchange rates between currencies.

(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, 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 enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.

The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.

The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.

(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates.

(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to collection of income on securities, income is
recorded net of all withholding tax with any rebate recorded when received. The
Fund may trade securities on other than normal settlement terms. This may
increase the market risk if the other party to the transaction fails to deliver
and causes the Fund to subsequently invest at less advantageous prices.

(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $29,571,465
were on loan to brokers. The loans were secured by cash collateral of
$33,239,507 received by the Fund. For international

F20
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

securities, cash collateral is received by the Fund against loaned securities in
an amount at least equal to 105% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
103% of the market value of the loaned securities during the period of the loan.
For domestic securities, cash collateral is received by the Fund against loaned
securities in an amount at least equal to 102% of the market value of the loaned
securities at the inception of each loan. This collateral must be maintained at
not less than 100% of the market value of the loaned securities during the
period of each loan. For the period ended October 31, 1997, the Fund received
securities lending income of $302,308 which was used to reduce the Fund's
custodian fees and administrative expenses.

(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$54,472,976 which expires in 2003.

(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.

(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
aggregated $353,775. These expenses are being amortized on a straightline basis
over a five-year period.

(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.

(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.

(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations 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) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
The Fund may trade securities on a when-issued or forward commitment basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Portfolio of Investments. The Fund
has purchased and sold when-issued securities during the period and has set
aside liquid securities as collateral for these commitments.

(P) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager ("GT Funds"), has a line of credit with each of BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of the Fund's total assets. On October 31,
1997, the Fund had no loans outstanding.

For the period ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $12,607,909, with a weighted average interest rate of 6.29%.
Interest expense for the Fund for the period ended October 31, 1997 was $24,241,
and is included in "Other Expenses" on the Statement of Operations.

2. RELATED PARTIES

(A) PREDECESSOR FUND THROUGH OCTOBER 31, 1997
Chancellor LGT Asset Management, Inc. was the Predecessor Fund's investment
manager and administrator. The Predecessor Fund paid the Manager investment
management fees, which were computed weekly and paid monthly, at the annualized
rate of 1.40% of the funds average weekly net assets. The Manager also acted as
administrator of the Predecessor Fund and paid the Manager administration fees,
which were computed and paid monthly, at an annualized rate of 0.25% of the
Fund's average weekly net assets.

The Manager was the pricing and accounting agent for the Predecessor Fund. The
monthly fee for these services to the Manager was a percentage, not to exceed
0.03% annually, of the Predecessor Fund's average daily net assets. The annual
fee rate was 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

F21
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

$5 billion and allocating the result according to the Predecessor Fund's average
daily net assets.

The Predecessor Fund paid each of its Directors who was not an employee, officer
or director of the Manager or any of its affiliated companies $5,000 per year
plus $300 for each meeting of the board or any committee thereof attended by the
Director.

(B) THE FUND COMMENCING NOVEMBER 1, 1997
Chancellor LGT Asset Management, Inc. is the Fund's investment manager and
administrator. The Fund pays the Manager investment management and
administration fees at the annualized rate of 0.975% on the first $500 million
of average daily net assets of the Fund; 0.95% on the next $500 million; 0.925%
on the next $500 million and 0.90% on amounts thereafter. These fees are
computed daily and paid monthly.

GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A, Class B, and Advisor Class shares for
purchase.

Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. Purchases of Class A shares exceeding $500,000 may be subject to
a contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. GT Global also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.

Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. 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 Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.

Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.

The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.00%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by the 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 the Fund's other
operating expenses.

GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. 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 fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.

The Company pays each of its Directors who is not an employee, officer or
director of the Manager or any of its affiliated companies $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director.

3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $736,422,573 and $765,404,012, respectively. Purchases
of U.S. government obligations by the Fund were $7,226,388 for the year. There
were no sales of U.S. government obligations by the Fund for the year.

4. CAPITAL SHARES
At October 31, 1997, the Predecessor Fund was authorized to issue 100 million
shares of capital stock, $0.001 par value, all of which was classified as Common
Stock.

At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of GT Global Developing Markets Fund; 400,000,000 were
classified as shares of GT

F22
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

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; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Latin America Growth Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
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. 1,100,000,000 shares
remain unclassified.

5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses

were reduced by $71,865 under these arrangements.

- --------------
FEDERAL TAX INFORMATION (UNAUDITED):

For its fiscal year ended October 31, 1997, the total amount of income received
by the Fund from sources within foreign countries and possessions of the United
States was approximately $.7797 per share (representing an approximate total of
$15,509,507). The total amount of taxes paid by the Fund to such countries was
approximately $.0213 per share (representing an approximate total of $424,399).

F23
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND

NOTES

- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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 HEALTH CARE FUND
Invests in growing health care industries worldwide

GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture, or sell
telecommunications services or equipment

GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve, or maintain a country's infrastructure

GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products

GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore, or develop natural resources

GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services

/ / REGIONALLY DIVERSIFIED FUNDS

GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
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 MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.

GT GLOBAL AMERICA VALUE FUND
Concentrates on large cap equity securities of U.S. companies believed to be
undervalued

GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market

GROWTH AND INCOME FUND

GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world

INCOME FUNDS

GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities

GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets

GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets

MONEY MARKET FUND

GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities

worldwide for stability and preservation of capital

[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 Developing Markets Fund
GTDAR712XXXMER.672
December, 1997