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[GRAPHIC]
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GT GLOBAL
OVER 25 YEARS
OF INVESTING
WORLDWIDE
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-
GT GLOBAL
INCOME FUNDS
-
ANNUAL REPORT
OCTOBER 31, 1997
[LOGO] GT GLOBAL
A Member of Liechtenstein Global Trust
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GT GLOBAL
INCOME FUNDS
TABLE OF CONTENTS
Message from the Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
GT Global
Government Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
GT Global
High Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
GT Global
Strategic Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Report of
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Inside Back
List of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover
The views of the Funds' management as described in this report are as of the
date it was written. Portfolio holdings and allocations are as of October 31,
1997, unless otherwise noted. Views, portfolio holdings and allocations may have
changed subsequent to these dates.
<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
<PAGE>
MARKET OVERVIEW
FUND MANAGEMENT
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.
In this report, Mr. Lau and Mr. Mabbutt discuss their views and expectations of
global fixed income markets.
ESTABLISHED MARKETS
Generally speaking, bonds in developed markets have performed well over recent
months, based on a clear tendency for disinflationary pressures to remain strong
worldwide. However, in continental Europe, bond yields now appear to have ended
their fall, reducing the possibility of another, imminent rally. In addition,
central banks in Germany and other core countries raised interest rates by
around 25 basis points in mid-October.
In contrast, yields on U.S. Treasuries have fallen to their lowest level since
February 1996 as investors believe the Federal Reserve is unlikely to tighten
monetary policy in the near term. U.S. economic growth continues to be healthy,
while inflationary pressures remain negligible.
Bond yields have also fallen to record low levels in Japan, due to the weakness
of their economy. Because little room exists for further falls, Japanese bonds
appear to have very limited upside potential, both in absolute terms and
relative to other bond markets. Even given deterioration of the government's
fiscal position and the probability the yen will weaken over the long term we
feel bond yields are unlikely to fall further.
Canada, Australia and New Zealand are characterized by low inflation and
fiscally responsible governments, good environments for bond yields. Further,
because the Canadian dollar appears undervalued, we believe it could appreciate
over the coming year.
While we generally find continental European bonds unattractive, we have
identified relatively appealing opportunities in Gilts (UK government bonds). It
appears very possible that the spread (difference between yields) between Gilts
and German bonds will narrow further as the economic upturn in continental
Europe advances. Thus, except for selected issues, such as short-dated Italian
bonds, continental European bonds appear fully valued. We believe they are,
therefore, likely to continue to underperform bond markets of countries such as
the U.S. and Canada, where low inflation rates could foreshadow a rally.
2
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EMERGING MARKETS
A key feature of the last three months has been the volatility of emerging
market bonds in the wake of the significant stock and currency selloffs in ASEAN
markets. During late October, the yield spread between the J.P. Morgan Emerging
Markets Bond Index Plus and U.S. Treasuries widened from an average of about 330
basis points (100 basis points equal 1%) to around 600 basis points, reaching a
high of 825 basis points at one stage. This escalating spread reflected the
severe loss of investor confidence in emerging market debt.
REAL GDP GROWTH
89 97f
Developing Countries 4.64 6.6
Latin America 1.8 5.4
E. Europe/Mid-East 2.8 3.56
Asia 6.1 5.22
Source: GT Global, Inc., November 1997.
In the aftermath, however, we believe emerging market debt offers much better
value now than in mid-1997. Meanwhile, disinflationary forces worldwide are
strong, which augurs well for bonds generally. Among the markets we currently
favor are South Africa, Mexico and Russia.
A key development in South Africa was the Reserve Bank's beginning to cut
interest rates after running a very tight monetary policy. We believe this could
be the catalyst for South Africa's next rally in bonds: nominal yields are about
14%; at the same time, inflation is around 8% and falling (the rate of inflation
peaked at almost 10% in the first quarter of this year). South Africa's current
account deficit is only about 1% of GDP. Given these positive developments, we
believe the rand appears undervalued.
In Latin America, the strength of Mexico's economic recovery is a positive for
government finances. In addition, Mexico's current account deficit remains under
control and inflation is falling.
The Russian government, having made progress on clearing the backlog of pension,
military wage and public sector wage payments, appears ready to achieve positive
(if modest) economic growth next year. Other positives include a manageable
current account surplus of about 2% of GDP, falling inflation and an improving
budget deficit. The central bank has also managed to stabilize the rouble, at
least in real terms.
INFLATION
89 97f
Developing Countries 64.9 11.7
Latin America 75 18.6
E. Europe/Mid-East 21.4 8.61
Asia 11.8 7.91
Source: GT Global, Inc., November 1997.
3
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[GRAPHIC]
INVESTMENT OBJECTIVE
The Fund primarily seeks a high level of current income. The Fund's secondary
objectives are capital appreciation and protection of principal through active
management of maturity structure and currency exposure. It invests primarily in
high-quality U.S. and foreign government securities.
GT GLOBAL GOVERNMENT INCOME FUND
Performance Summary
GT Global Government Income J.P. Morgan Global
Fund Class A Shares Gov't Bond Index
3/29/88 9,525 10,000
9,525 10,022
9,442 9,975
9,299 9,868
9,290 9,780
9,256 9,704
9,231 9,635
9,379 9,875
9,589 10,264
9,721 10,353
9,632 10,292
9,722 10,190
9,413 10,173
9,468 10,087
9,635 10,254
9,664 10,143
9,957 10,374
10,350 10,787
10,090 10,468
10,168 10,633
10,345 10,770
10,424 10,866
10,704 10,992
10,543 10,829
10,421 10,712
10,400 10,646
10,400 10,605
10,610 10,944
10,886 11,142
11,283 11,470
11,206 11,381
11,206 11,487
11,579 11,942
11,655 12,151
11,644 12,286
11,904 12,565
11,937 12,575
11,868 12,182
11,996 12,329
12,090 12,340
11,877 12,176
11,913 12,433
12,106 12,691
12,519 13,155
12,667 13,284
12,667 13,501
13,235 14,183
13,045 13,905
13,161 13,864
13,007 13,737
13,098 13,851
13,267 14,244
13,320 14,633
13,613 14,955
13,733 15,353
9/30/92 13,357 15,338
13,465 14,955
13,313 14,690
13,493 14,829
13,715 15,080
14,358 15,323
14,414 15,558
14,399 15,842
14,627 15,943
15,246 15,955
15,536 15,962
16,236 16,435
16,119 16,608
16,413 16,600
16,325 16,479
16,936 16,647
17,084 16,804
15,915 16,620
15,453 16,543
15,221 16,531
14,818 16,394
14,837 16,589
14,887 16,744
14,699 16,701
14,734 16,785
14,958 17,036
14,906 16,821
14,573 16,860
14,732 17,201
15,086 17,644
15,478 18,542
15,852 18,838
16,208 19,364
16,131 19,484
16,145 19,577
15,849 19,033
16,120 19,461
16,337 19,651
16,593 19,871
16,851 20,117
16,864 19,910
16,497 19,794
16,454 19,764
16,430 19,691
16,386 19,711
16,557 19,883
16,768 20,249
16,822 20,333
17,075 20,445
17,499 20,851
17,905 21,148
17,871 21,001
17,613 20,476
17,557 20,334
17,399 20,180
17,301 20,066
17,554 20,540
17,828 20,773
17,917 20,697
17,776 20,671
18,266 21,130
10/31/97 18,335 21,578
The chart above shows the performance of the GT Global Government Income Fund
Class A shares since inception, versus the J.P. Morgan Global Government Bond
Index. This represents a cumulative return of 83.35% and an average annual total
return of 6.52%. The chart assumes a hypothetical $10,000 initial investment in
the Fund's Class A shares and reflects all Fund expenses and the maximum 4.75%
sales charge. A $10,000 investment in the Fund's Class B shares at inception on
October 22, 1992, would have been valued at $13,032. This figure reflects all
Fund expenses, the applicable contingent deferred sales charge (5% in the first
year, decreasing to 0% after six years) and assumes complete redemption at the
end of the period. A $10,000 investment in Advisor Class shares at inception on
June 1, 1995, would have been worth $11,396 on October 31, 1997.
AVERAGE ANNUAL TOTAL RETURNS%(1)
October 31, 1997
Without Sales Charge(2) With Sales Charge
Share Class 1-Year 5-Year Life of Fund 1-Year 5-Year Life of Fund
Class A(3) 4.78 6.37 7.07 -0.20 5.34 6.52
Class B(3) 4.00 5.64 5.55 -0.93 5.36 5.41
Advisor Class(4) 5.15 N/A 5.55 N/A N/A N/A
HISTORICAL PERFORMANCE%(2)
Annual Total Returns (Per Calendar Year)
1988 1989 1990 1991 1992 1993 1994 1995 1996
Class A 1.12(3) 11.14 8.77 13.67 1.94 25.52 -13.95 15.63 6.05
Class B N/A N/A N/A N/A -0.20(3) 24.70 -14.44 14.56 5.50
(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 or the
contingent deferred sales charge for Class A and Class B shares,
respectively, which, if included, would have reduced the performance quoted.
(3) The Fund began operations on March 29,1988; Class B shares commenced on
October 22,1992.
(4) The Fund began offering Advisor Class shares on June 1,1995. Advisor
Class shares are not sold directly to the general public and are only
available through certain employee benefit plans, financial institutions and
other entities that have entered into specific agreements with GT Global.
Please see the "Alternative Purchase Plan" section in the Fund's prospectus.
The above data represent past performance of the Fund's shares, which does not
guarantee future results. The investment return and principal value of an
investment in the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
4
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INTERVIEW WITH CHIEF INVESTMENT OFFICER, DEVELOPED MARKET DEBT, HOCK LAU
Q HOW DID THE FUND PERFORM?
A The Fund outperformed its index over the 12 months ended October 31, 1997.
Total return for Class A shares during the period was 4.78% (-0.20% including
the maximum 4.75% sales charge); total return for Class B shares was 4.00%
(-0.93% including the maximum 5% contingent deferred sales charge). During the
same time frame, total return for the J.P. Morgan Global Government Bond
Index(5)
was 3.49%.
Q HOW WAS THE FUND POSITIONED?
A The GT Global Government Income Fund's portfolio was well positioned in the
top-performing markets of Italy, Australia, the UK and Spain. It was
underweighted in the core European markets of Germany, France and the
Netherlands. During the past 12 months the portfolio's European bond holdings
have been hedged back into the U.S. dollar to protect returns. Selective
purchases of investment-grade emerging market bonds in Mexico and South Africa
also contributed significantly. The Fund held virtually no investments in Japan,
which was an additional benefit.
Q WHAT EVENTS DOMINATED GLOBAL DEVELOPED DEBT MARKETS?
A Global developed markets were dominated by three main themes. The first was
that overall, the period was characterized by extreme sentiment swings between
bearish and bullish expectations of future inflation in the G-3 economies (the
U.S., Germany and Japan). In the first half of the 12-month review period,
above-trend economic activity in the U.S. and economic recovery in Japan and
Europe led investors to believe future inflation would trend higher as capacity
constraints tightened.
These bearish expectations, however, were tempered by the absence of supporting
evidence in reported inflation numbers. Nonetheless, investors did not believe
positive news on inflation was sustainable and attached a large inflation risk
premium to long-term bond yields. Because of the uncertainty, yields in the
U.S., Germany and Japan were volatile for the first half of the year.
Only in the early spring months did investors begin to lower their expectations
of higher inflation, as economic indicators confirmed the market's growing
optimism. Our view was consistently below the market's inflationary
expectations. Inflation in the U.S. remained remarkably low despite above-trend
growth and the economy's seventh year of expansion.
After a spring up-tick in Germany, inflation turned lower while, at the same
time, unemployment continued to rise to post-war highs. In Japan, economic
activity collapsed after a consumption tax was implemented in early April. These
events led to strong rallies as yields fell in G-3 markets. The chart below
illustrates the early volatile trading period, followed by a large decline in
yields.
G-3 YIELDS: TRENDING DOWN
Japan Germany U.S.
10/31/96 2.51 5.99 6.37
2.61 5.92 6.24
2.66 5.86 6.15
2.66 5.85 6.13
2.42 5.77 6.12
2.34 5.64 6.22
2.49 5.88 6.39
2.40 5.88 6.34
2.50 5.81 6.34
2.57 5.89 6.53
2.49 5.93 6.51
2.40 5.68 6.57
2.44 5.70 6.56
2.39 5.74 6.59
2.39 5.68 6.46
2.38 5.56 6.35
2.45 5.54 6.38
2.39 5.58 6.61
2.36 5.63 6.62
2.24 5.71 6.72
2.26 5.95 6.74
2.35 5.88 6.91
2.18 6.04 6.86
2.13 5.91 6.90
4/17/97 2.18 5.82 6.85
2.15 5.82 6.93
2.32 5.84 6.69
2.50 5.76 6.70
2.56 5.69 6.65
2.56 5.88 6.74
2.62 5.94 6.72
2.52 5.84 6.61
2.44 5.79 6.47
2.37 5.71 6.39
2.47 5.66 6.49
2.30 5.65 6.30
2.29 5.56 6.24
2.27 5.55 6.18
2.20 5.50 6.14
2.11 5.49 6.01
2.11 5.67 6.25
2.08 5.67 6.31
2.06 5.61 6.33
2.02 5.68 6.34
2.03 5.69 6.31
2.04 5.66 6.38
1.94 5.55 6.10
1.89 5.50 6.12
1.76 5.47 6.00
1.78 5.49 6.08
1.79 5.65 6.08
1.71 5.68 6.02
10/30/97 1.60 5.58 5.83
Source: Datastream, November 1997.
The second major theme dominating global developed bond markets was Europe's
determined march towards monetary union and a single currency. Early
expectations that a small circle of qualifying countries would form the nucleus
of an initial monetary union, with non-qualifying countries joining at a later
date, were quashed in early summer.
Continued p.6
(5) The J.P. Morgan Global Government Bond Index is a market value-weighted
average of government bonds from 13 major 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 incur
sales charges and professional management fees.
5
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INTERVIEW WITH THE CHIEF INVESTMENT OFFICER CONTINUED
It became increasingly evident that all expedient efforts would be made by
European policymakers to meet the qualifying Maastricht benchmarks, even if the
effort involved some creative accounting in a country's fiscal books. This led
to a sharp decline in peripheral European bond yields, with yields converging
toward low German levels. Spain and Italy exemplify this trend, as illustrated
in the chart below. Australia experienced a similar trend.
RALLIES IN PERIPHERAL MARKETS AND DOWN UNDER
Australia Spain Italy
10/31/96 7.38 7.84 8.31
7.29 7.55 7.88
7.10 7.38 7.64
7.09 7.22 7.64
7.12 7.13 7.67
7.15 6.94 7.48
7.37 7.07 7.63
7.46 7.04 7.62
7.43 6.99 7.59
7.45 6.88 7.57
7.49 6.94 7.62
7.42 6.67 7.31
7.31 6.62 7.25
7.40 6.72 7.35
7.37 6.82 7.13
7.35 6.68 7.11
7.41 6.74 7.14
7.65 6.78 7.30
7.77 6.98 7.44
7.78 6.96 7.73
8.04 7.21 7.85
7.99 7.10 7.93
8.08 7.25 8.06
7.92 6.88 7.70
4/17/97 7.77 6.82 7.53
7.85 6.85 7.60
7.91 6.84 7.65
7.77 6.74 7.45
7.65 6.54 7.25
7.65 6.49 7.26
7.54 6.66 7.37
7.35 6.60 7.20
7.08 6.51 7.13
6.98 6.36 6.96
7.03 6.32 6.83
6.90 6.32 6.71
6.62 6.20 6.53
6.53 6.22 6.51
6.42 6.12 6.35
6.38 6.11 6.44
6.47 6.34 6.65
6.66 6.35 6.69
6.72 6.23 6.56
6.71 6.33 6.74
6.57 6.24 6.54
6.43 6.18 6.50
6.18 6.01 6.30
6.07 5.88 6.13
6.09 5.84 6.23
6.31 5.88 6.21
6.37 5.95 6.16
6.31 6.04 6.22
10/30/97 5.90 5.99 6.26
Source: Datastream, November 1997.
The sharp appreciation of the U.S. dollar against our major trading partners'
currencies constituted the third theme. On a trade-weighted basis, the dollar
rose approximately 10%, led by a 14% appreciation of the dollar against the
deutschemark. Supporting this rally was the large economic growth differential
between the U.S. and other developed economies, and relatively higher U.S.
interest rates. ASEAN (Association of Southeast Asian Nations) currency
GEOGRAPHIC ALLOCATION
Latin America 2.6%
Africa 8.1%
Asia-Pacific 11.2%
U.S., Canada & Other 29.5%
Europe 48.6%
Allocations may change based on current market conditions.
devaluations in the wake of collapsing, highly leveraged banking systems and
non-fundable rising current account deficits, enhanced the dollar's allure.
Q WHAT ARE YOUR EXPECTATIONS LOOKING INTO 1998?
A Our outlook over the next 12 months continues to be positive. We expect
both growth and inflation to be lower; however, we do not expect a global
recession, although there could be a risk of one if Japan's economic activity
fails to recover and global policymakers respond incorrectly to the ASEAN
crisis. In the U.S., we think investors are underestimating the impact of the
ASEAN situation on the economy. Globally, we envision economic activity slowing
by 0.5% to 1%, enough to alleviate any potential inflationary pressures.
6
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[GRAPHIC]
INVESTMENT OBJECTIVE AND CURRENT STRATEGY
The Fund primarily seeks high current income and, secondarily, capital
appreciation. It invests primarily in debt securities from emerging markets
around the world where we perceive value through improving fundamentals.
GT GLOBAL HIGH INCOME FUND
PERFORMANCE SUMMARY
GT Global High Income J.P. Morgan EMBI
Fund Class A Shares (Brady) Index
10/22/92 9,525 10,000
9,525 10,105
9,508 9,970
9,684 10,209
9,743 10,316
9,991 10,451
10,645 10,996
10,887 11,217
11,283 11,598
11,747 12,003
12,290 12,504
12,596 12,755
12,723 12,922
13,681 14,011
13,848 13,871
14,678 14,718
14,895 14,758
13,615 13,530
11,578 11,982
11,413 11,988
12,236 12,815
11,722 11,783
11,930 12,073
12,640 12,936
12,952 13,063
12,799 12,693
12,840 12,822
11,854 11,968
1/31/95 11,315 11,554
10,948 10,952
10,604 10,643
11,489 11,785
12,370 12,824
12,577 13,073
12,509 13,082
12,828 13,391
13,205 13,852
13,159 13,710
13,512 14,190
14,248 15,265
15,474 16,609
14,594 15,442
14,755 15,838
15,283 16,635
15,708 16,842
16,019 17,308
16,342 17,440
16,946 18,006
18,066 19,131
18,297 19,180
19,260 20,254
19,487 20,480
20,094 21,220
20,512 21,601
19,586 20,758
20,170 21,462
20,988 22,325
21,692 22,844
22,484 23,945
22,378 23,709
23,083 24,503
10/31/97 20,943 21,866
The chart above shows the performance of the GT Global High Income Fund Class A
shares since inception, versus the J.P. Morgan EMBI (Brady) Index. This
represents a cumulative return of 109.43% and an average annual total return of
15.85% for the Fund. The chart assumes a hypothetical $10,000 initial investment
in the Fund's Class A shares and reflects all Fund expenses and the maximum
4.75% sales charge. A $10,000 investment in the Fund's Class B shares at
inception on October 22, 1992 would have been valued at $21,176. This figure
reflects all Fund expenses, the applicable contingent deferred sales charge (5%
in the first year, decreasing to 0% after six years) and assumes complete
redemption at the end of the period. A $10,000 investment in Advisor Class
shares at inception on June 1,1995, would have been worth $17,035 on October 31,
1997.
AVERAGE ANNUAL TOTAL RETURNS%(1)
October 31, 1997
Without Sales Charge(2) With Sales Charge
Share Class 1-Year 5-Year Life of Fund 1-Year 5-Year Life of Fund
Class A(3) 14.46 17.07 16.98 9.03 15.93 15.85
Class B(3) 13.77 16.30 16.21 8.77 16.08 16.10
Advisor Class(4) 14.72 N/A 24.63 N/A N/A N/A
HISTORICAL PERFORMANCE%(2)
Annual Total Returns (Per Calender Year)
1992(3) 1993 1994 1995 1996
Class A 1.67 51.57 -19.24 20.19 36.77
Class B 1.41 50.60 -19.61 19.27 35.86
(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 or the
contingent deferred sales charge for Class A and Class B shares,
respectively, which, if included, would have reduced the performance
quoted.
(3) The Fund began operations on October 22, 1992.
(4) The Fund began offering Advisor Class shares on June 1,1995. Advisor Class
shares are not sold directly to the general public and are only available
through certain employee benefit plans, financial institutions and other
entities that have entered into specific agreements with GT Global. Please
see the "Alternative Purchase Plan" section in the Fund's prospectus.
The above data represent past performance of the Fund's shares, which does not
guarantee future results. The investment return and principal value of an
investment in the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
7
<PAGE>
INTERVIEW WITH HEAD OF GLOBAL EMERGING MARKET DEBT MICHAEL MABBUTT
Q HOW DID THE FUND PERFORM?
A Emerging market debt performed well over the first half of the year.
However confidence in the second half of the year was bruised by the devaluation
of the Thai baht in early July and recent volatility in the Hong Kong market. In
response, the spread between yields on the J.P. Morgan Emerging Markets Bond
Index (EMBI) Plus5 and U.S. Treasuries during October widened from an average of
about 330 basis points (100 bps equal 1%) to around 600 bps, reaching 825 bps at
one stage.
Although the Fund was not immune to the volatility, it ended the 12-month period
to October 31, 1997, with a 14.46% gain for Class A shares (9.03% including the
maximum 4.75% sales charge) and 13.77% for Class B shares (8.77% including the
maximum 5% contingent deferred sales charge). Over the same period, the J.P.
Morgan EMBI Plus returned a total of 10.82%, while the J.P. Morgan EMBI (Brady)6
returned a total of 14.0%.
Q WHAT HOLDINGS WORKED WELL FOR THE FUND?
A Relative to the J.P. Morgan EMBI Plus Index, country selection has
benefited the Fund with holdings in Bulgaria, Brazil and Russia contributing
significantly. The Fund was also considerably more geographically diversified
than the index. Whereas the Fund held an average of nearly 52% of its assets in
Latin America over the period, the index held a weighting of approximately 80%
in this region. The Fund was thus able to take advantage of more attractive
opportunities elsewhere.
Q WHAT WAS YOUR INVESTMENT STRATEGY IN LIGHT OF THE LATE-OCTOBER CORRECTION?
A As the Hong Kong market collapsed, other markets moved in sympathy and the
impressive returns emerging fixed income experienced over the past several years
have been suspended, at least temporarily; emerging market debt reached its peak
on October 7, 1997 (based on the J.P. Morgan EMBI Plus Index) and had fallen 13
percentage points from its peak by October 31.
In response, on October 23, 1997 we raised cash and invested in U.S. Treasuries
as a defensive strategy. Because we felt this environment would continue for
some time, we sold off assets, beginning with those we felt were most vulnerable
to the increased risk perceptions then associated with emerging markets. These
markets included Bulgaria, Ecuador and Brazil.
Bulgaria was reduced from 8.1% of the Fund's net assets in April to 5.1% on
October 31, and Brazil from 8.6% to 2.7%. Meanwhile, we have also taken the
Fund's position in Argentina down from 16.7% to 6.9% in favor of Mexico.
While over the short term we have allocated assets into cash and U.S.
Treasuries, our basic investment principle remains intact--to avoid countries
with large or growing current account or budget deficits. Argentina, Brazil,
Poland, the Philippines and the Czech Republic are examples of countries having,
or that we feel may face, difficulties in financing their budget shortfalls in a
world where liquidity is being squeezed.
Among emerging debt markets, Brazil has been hit the hardest by this correction
for a number of reasons, including budget deficit and current account problems.
Also worrisome is that Brazilian interest rates, which have risen considerably,
are likely to impact growth. Argentina, moving in tandem, has seen its spreads
widen as a result of its reliance on Brazil as an export destination.
On the other hand, Russia, Bulgaria and Venezuela enjoy current account
surpluses--Venezuela because of its oil, Bulgaria because its currency is
inexpensive,
Continued p.9
(5) The J.P. Morgan EMBI Plus is a market value-weighted average of government
bonds from 13 emerging bond markets. It includes the effect of reinvested
coupons and is measured in U.S. dollars. Relative to the J.P. Morgan EMBI
(Brady), the EMBI Plus is more diversified both geographically and in the
instruments it tracks.
(6) The J.P. Morgan EMBI (Brady) is a market value-weighted average of Brady
bonds from ten 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 incur
sales charges and professional management fees.
8
<PAGE>
INTERVIEW WITH THE PORTFOLIO MANAGER CONTINUED
making its exports very competitive, and Russia because of its resource exports.
We believe this implies a much greater capacity in these countries to service
their foreign bonds because they have access to inflows of foreign exchange.
Q THE FUND'S LARGEST POSITION IS IN MEXICO. HOW HAS IT FARED DURING THESE
UNCERTAIN TIMES?
A Once the pariah, Mexico has come a long way since devaluing its currency in
December 1994, and is now regarded as a relatively safe haven in Latin America.
It has achieved this status in part by maintaining only a small current account
deficit and a free-floating exchange rate. These qualities enabled Mexico to
enjoy by far the tightest spreads against U.S. Treasuries in Latin American
markets over the last several months, although spreads widened in late October.
A free-floating exchange rate acts as an adjustment mechanism to diminish
external imbalances; the exchange rate adjusts to satisfy conditions of the
economy.
Q YOU ALSO INTRODUCED A LARGE POSITION IN SOUTH AFRICA. WHAT DO YOU FIND
ATTRACTIVE ABOUT THIS MARKET?
A We believe South Africa is a compelling story. Nominal yields are currently
about 14%, while inflation is around 8% and falling. In addition, South Africa's
current account deficit is only about 1% of GDP. Most importantly, the reserve
bank has begun to cut interest rates after running a very tight monetary policy,
a key development we think could be the catalyst for the next bond rally there.
Q WHAT ARE THE IMPLICATIONS OF EMERGING MARKET DEBT ONCE AGAIN REVERTING TO
BEING MORE "EQUITY-LIKE"?
A As investor confidence returned to emerging market debt (having
sufficiently recovered from the Mexican peso crisis), spreads began to narrow,
became more bond-like and were influenced by U.S. Treasury yields. Now that
they've widened, however, we believe they've once again become more equity-like
and are bound to be influenced more by economic developments in countries and
their equity markets. This means potential exists for larger capital gains,
whereas three months ago it didn't because yields had tightened about as far as
they could relative to U.S. Treasuries.
GEOGRAPHIC ALLOCATION
Middle East 1.1%
Asia-Pacific 7.9%
Africa 12.7%
U.S., Canada & Other 17.0%
Eastern Europe 19.2%
Latin America 42.1%
Allocations may change based on current market conditions.
Q IS EMERGING MARKET DEBT STILL ATTRACTIVE AS AN ASSET CLASS?
A We believe emerging market fundamentals are still good, and opportunities
remain at hand for the long-term investor. Emerging market debt is essentially
an issue of creditworthiness. Do we think these countries will default? No, not
in the markets we're interested in.
We have been underweighted in Asia but continue to believe debt servicing
capacities of many eastern European and Latin American countries are fairly
good. When markets realize these countries are not going to default, we expect
spreads at worst will remain at current levels, but are likely to be narrower.
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. Nevertheless, we believe yield spreads of
600-700 bps more than compensate for the risks of potential default.
Consequently, attractive values are reappearing in Latin America and eastern
Europe, and we see room for spreads to tighten.
9
<PAGE>
[GRAPHIC]
INVESTMENT OBJECTIVE AND CURRENT STRATEGY
The Fund primarily seeks high current income and, secondarily, capital
appreciation. It invests mainly in debt securities of issuers in the U.S.,
developed foreign countries and emerging markets. The Fund selects debt
securities from those issued by governments, their agencies and
instrumentalities, central banks, commercial banks and other corporate entities.
GT GLOBAL STRATEGIC INCOME FUND
PERFORMANCE SUMMARY
GT Global Strategic Income J.P. Morgan Global
Fund Class A Shares Gov't Bond Index
3/29/88 9,525 10,000
9,525 10,021
9,542 9,975
9,525 9,868
9,425 9,780
9,346 9,704
9,279 9,635
9,414 9,875
9,705 10,264
9,713 10,353
9,636 10,292
9,592 10,190
9,416 10,173
9,461 10,087
9,630 10,254
9,755 10,143
10,043 10,374
10,389 10,787
10,134 10,468
10,116 10,633
10,366 10,770
10,440 10,866
10,616 10,992
10,247 10,829
10,172 10,712
10,200 10,646
10,103 10,605
10,190 10,944
10,443 11,142
10,846 11,470
10,629 11,381
10,677 11,487
11,229 11,942
11,429 12,151
11,506 12,286
11,772 12,565
11,721 12,575
11,429 12,182
11,597 12,329
11,545 12,340
11,229 12,176
11,446 12,433
11,683 12,691
12,239 13,155
12,095 13,284
12,239 13,501
13,322 14,183
13,027 13,905
12,856 13,864
12,494 13,737
12,401 13,851
12,864 14,244
13,110 14,633
13,334 14,955
13,686 15,353
9/30/92 13,572 15,338
13,440 14,955
13,237 14,690
13,490 14,829
13,666 15,080
14,210 15,323
14,735 15,558
15,096 15,842
15,435 15,943
16,127 15,955
16,694 15,962
17,293 16,435
17,427 16,608
18,410 16,600
18,357 16,479
19,419 16,647
19,589 16,804
17,588 16,620
15,893 16,543
15,603 16,531
16,129 16,394
15,880 16,589
16,034 16,744
16,280 16,701
16,483 16,785
16,489 17,036
16,292 16,821
15,370 16,860
15,017 17,201
14,986 17,644
15,020 18,542
15,743 18,838
16,424 19,364
16,424 19,484
16,423 19,577
16,439 19,033
16,830 19,461
16,993 19,651
17,408 19,871
17,991 20,117
18,743 19,910
18,036 19,794
18,187 19,764
18,579 19,691
18,784 19,711
19,078 19,883
19,408 20,249
19,827 20,333
20,548 20,445
20,901 20,851
21,648 21,148
21,775 21,001
21,972 20,476
22,116 20,334
21,460 20,180
21,717 20,066
22,362 20,540
22,842 20,773
23,328 20,697
23,216 20,671
23,894 21,130
10/31/97 22,866 21,578
The chart above shows the performance of the GT Global Strategic Income Fund
Class A shares since inception, versus the J.P. Morgan Global Government Bond
Index. This represents a cumulative return of 128.66% and an average annual
total return of 9.01% for the Fund. The chart assumes a hypothetical $10,000
initial investment in the Fund's Class A shares and reflects all Fund expenses
and the maximum 4.75% sales charge. A $10,000 investment in the Fund's Class B
shares at inception on October 22, 1992 would have been valued at $16,228. This
figure reflects all Fund expenses, the applicable contingent deferred sales
charge (5% in the first year, decreasing to 0% after six years) and assumes
complete redemption at the end of the period. A $10,000 investment in Advisor
Class shares at inception on June 1, 1996, would have been worth $14,060 on
October 31, 1997.
AVERAGE ANNUAL TOTAL RETURNS%(1)
October 31, 1997
Without Sales Charge(2) With Sales Charge
Share Class 1-Year 5-Year Life of Fund 1-Year 5-Year Life of Fund
Class A(3) 9.40 11.21 9.56 4.21 10.14 9.01
Class B(3) 8.70 10.52 10.25 3.70 N/A 10.11
Advisor Class(4) 9.86 N/A 15.13 N/A N/A N/A
HISTORICAL PERFORMANCE%(2)
Annual Total Returns (Per Calendar Year)
1988 1989 1990 1991 1992 1993 1994 1995 1996
Class A 1.16(3) 10.17 8.39 15.78 1.27 43.95 -20.85 17.06 21.03
Class B N/A N/A N/A N/A -0.69(3) 43.10 -21.29 16.28 20.31
(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 or the
contingent deferred sales charge for Class A and Class B shares,
respectively, which, if included, would have reduced the performance
quoted.
(3) The Fund began operations on March 29, 1988; Class B shares commenced on
October 22, 1992.
(4) Advisor Class shares are not sold directly to the general public and are
only available through certain employee benefit plans, financial
institutions and other entities that have entered into specific agreements
with GT Global. Please see the "Alternative Purchase Plan" section in the
Fund's prospectus.
The above data represent past performance of the Fund's shares, which does not
guarantee future results. The investment return and principal value of an
investment in the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
10
<PAGE>
INTERVIEW WITH PORTFOLIO MANAGERS HOCK LAU AND MICHAEL MABBUTT
Q HOW DID THE FUND PERFORM?
A In a generally volatile environment, over the 12 months ended October 31,
1997, the Fund returned a total of 9.40% for Class A shares (4.21% including the
maximum 4.75% sales charge); total return for Class B shares was 8.70% (3.70%
including the maximum 5% contingent deferred sales charge). During the same time
frame, total return for the J.P. Morgan Global Government Bond5 was 3.49%,
14.00% for the J.P. Morgan Emerging Markets Bond Index (EMBI) (Brady)6 and
10.82% for the J.P. Morgan EMBI Plus.7
Q WHAT HOLDINGS CONTRIBUTED TO PERFORMANCE?
A The GT Global Strategic Income Fund benefited the most from its holdings in
Bulgaria and Russia. Also, the Fund was underweighted in the core European
markets of France, Belgium and the Netherlands--several of the poorer-performing
European markets--in favor of the higher-yielding markets of Italy, Spain and
Sweden, which enjoyed rallies in their bond markets. The Fund held virtually no
investments in Japan, which benefited its performance relative to the markets as
a whole.
Q WHAT WAS YOUR INVESTMENT STRATEGY OVER THE PERIOD?
A Given our view of moderate global non-inflationary growth, we overweighted
the portfolio's allocation to emerging markets. Within this portion, we
significantly underweighted Brazil, and Argentina to some degree, while
overweighting our allocation to Mexico. In the non-Latin portion, the Fund's
position in Russia and Bulgaria remained essentially unchanged. We introduced a
position in South Africa on the basis of improving fundamentals and low
correlation to other emerging debt markets.
Because our positive, fundamental outlook for emerging markets supported this
allocation, we did not anticipate that emerging debt would be derailed
by rising global interest rates. In August we began to lower the portfolio's
allocation to emerging markets, by 5%, a reflection of our view that much of the
positive news was priced into higher market levels.
Q HOW HAVE EUROPEAN MARKETS PERFORMED?
A Non-accelerating inflation helped fuel dollar-based returns of 17.82% in
the UK, making it Europe's top-performing bond market over the
12-month period based on the J.P. Morgan Index. Meanwhile, serious efforts in
Italy and Spain to meet deficit and inflation targets for membership in the
European Monetary Union (EMU) helped Italian and Spanish bond markets become
Europe's second and third top-performing markets, respectively.
Core European bond markets such as Germany and France remained relatively poor
performers, hampered by ongoing investor concerns about interest rates rising to
contain inflationary pressures.
Q ON THE EMERGING SIDE, THE FUND'S LARGEST POSITION IS IN MEXICO. HOW HAS IT
FARED DURING THESE UNCERTAIN TIMES?
A Once the pariah, Mexico has come a long way since devaluing its currency in
December 1994, and is now regarded as a relatively safe haven in Latin America.
It has achieved this status in part by maintaining only a small current account
deficit and a free-floating exchange rate. These qualities enabled Mexico to
enjoy by far the tightest spreads in Latin American markets over the last
several months, although spreads widened in late October. A free-floating
exchange rate acts as an adjustment mechanism to diminish external imbalances;
the exchange rate adjusts to satisfy conditions of the economy.
Q WHAT EVENTS DOMINATED GLOBAL DEVELOPED DEBT MARKETS?
A Global developed markets were dominated by three main themes. The first was
that overall, the
Continued p.12
(5) The J.P. Morgan Global Government Bond Index is a market value-weighted
average of government bonds from 13 major bond markets. It includes the
effect of reinvested coupons and is measured in U.S. dollars.
(6) The J.P. Morgan EMBI (Brady) is a market value-weighted average of Brady
bonds from ten emerging bond markets. It includes the effect of reinvested
coupons and is measured in U.S. dollars.
(7) The J.P. Morgan EMBI Plus is a market value-weighted average of government
bonds from 13 emerging bond markets. It includes the effect of reinvested
coupons and is measured in U.S. dollars. Relative to the J.P. Morgan EMBI
(Brady), the EMBI Plus is more diversified both geographically and in the
instruments it tracks.
Indices are unmanaged, not available for direct investment and do not incur
sales charges and professional management fees.
11
<PAGE>
INTERVIEW WITH THE PORTFOLIO MANAGERS CONTINUED
period was characterized by extreme sentiment swings between bearish and bullish
expectations of future inflation in the G-3 economies (the U.S., Germany and
Japan). In the first half of the 12-month review period, above-trend economic
activity in the U.S. and economic recovery in Japan and Europe led investors to
believe future inflation would move higher. As capacity constraints tightened, a
large inflation risk premium was attached to long-term bond yields. Because of
the uncertainty, yields in the U.S., Germany and Japan were volatile for the
first half of the year. However, in the second half of the year, declining
inflation and Japanese economic activity led to sharp falls in yields and rising
developed market bond prices.
The second major theme dominating global developed bond markets was Europe's
determined march towards monetary union and a single currency. It became
increasingly evident that all expedient efforts would be made by the European
policymakers to meet the qualifying Maastricht benchmarks. This led to a sharp
decline in peripheral European bond yields, with yields converging toward those
of low German bonds.
The sharp appreciation of the U.S. dollar against our major trading partners'
currencies constituted the third theme. On a trade-weighted basis, the dollar
rose approximately 10%, led by a 14% appreciation of the dollar against the
deutschemark. Supporting this rally was the large economic growth differential
between the U.S. and other developed economies, and relatively higher U.S.
interest rates. ASEAN (Association of Southeast Asian Nations) currency
devaluations in the wake of collapsing, highly leveraged banking systems and
non-fundable rising current account deficits enhanced the dollar's allure.
GEOGRAPHIC ALLOCATION
Middle East 0.4%
Africa 4.1%
Asia - Pacific 6.9%
Eastern Europe 10.0%
Latin America 20.6%
U.S., Canada & Other 28.4%
Europe 29.6%
Allocations may change based on current market conditions.
Q WHAT ARE YOUR EXPECTATIONS LOOKING INTO 1998?
A Our outlook for the markets over the next 12 months continues to be
positive; we expect both growth and inflation to be lower. The ASEAN economic
crisis, and its impact on both Japan and the U.S., is a significant contributor
to our expectations of a global economic slowdown. Although we do not anticipate
a global recession, it could be a possibility if Japan's economic activity fails
to recover and global policymakers respond incorrectly to the ASEAN crisis. We
envision global economic activity slowing by 0.5% to 1%, enough to alleviate any
inflationary pressures.
In emerging debt markets, we believe fundamentals are still good. Over the
shorter term, given continuing market instabilities, we plan to minimize our
investments in countries with large balance of payment imbalances or onerous
debt amortization schedules.
12
<PAGE>
GT GLOBAL
INCOME FUNDS
FINANCIAL
STATEMENTS
<PAGE>
GT GLOBAL INCOME FUNDS
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Government Income Fund, GT Global High Income Fund-Consolidated, and GT
Global Strategic Income Fund, including the portfolios of investments, as of
October 31, 1997, the related statements of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
herein. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial positions of GT
Global Government Income Fund, GT Global High Income Fund-Consolidated and GT
Global Strategic Income Fund as of October 31, 1997, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods indicated herein, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
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 (49.4%)
Australia (3.0%)
Commonwealth of Australia, 7.5% due 9/15/09 .......... AUD 10,660,000 $ 8,416,716 3.0
Canada (2.0%)
Canadian Government, 7.25% due 6/1/07 ................ CAD 6,920,000 5,548,964 2.0
Germany (4.7%)
Deutschland Republic, 6% due 1/5/06 .................. DEM 22,050,000 13,180,133 4.7
Italy (9.4%)
Italian Buoni Poliennali del Tesoro (BTPS):
9.50% due 1/1/05 ................................... ITL 13,100,000,000 9,228,992 3.3
9% due 11/1/23 ..................................... ITL 11,730,000,000 8,839,498 3.1
7.25% due 11/1/26 .................................. ITL 13,200,000,000 8,361,624 3.0
New Zealand (4.4%)
New Zealand Government, 8% due 4/15/04 ............... NZD 18,570,000 12,360,425 4.4
Spain (2.3%)
Spain Government, 10.5% due 10/30/03 ................. ESP 770,000,000 6,581,165 2.3
Sweden (2.9%)
Swedish Government, 8% due 8/15/07 ................... SEK 54,800,000 8,163,505 2.9
United Kingdom (4.4%)
United Kingdom Treasury:
9.5% due 4/18/05 ................................... GBP 5,000,000 9,775,453 3.5
7.25% due 12/7/07 .................................. GBP 1,420,000 2,503,816 0.9
United States (15.3%)
United States Treasury:
8% due 11/15/21{./} {z} ............................ USD 17,000,000 20,683,023 7.3
6.125% due 8/15/07 ................................. USD 9,750,000 9,958,711 3.5
6.375% due 8/15/27 ................................. USD 6,250,000 6,431,641 2.3
6.625% due 5/15/07 ................................. USD 5,800,000 6,106,992 2.2
Uruguay (1.0%)
Republic of Uruguay, 7.875% due 7/15/27 -
144A{./}{.} ......................................... USD 3,000,000 2,898,000 1.0
------------
Total Government & Government Agency Obligations (cost
$136,776,126) ........................................... 139,038,658
------------
Corporate Bonds (23.5%)
Denmark (5.4%)
Realkredit Bank, 7% due 10/1/29 ...................... DKK 104,000,000 15,287,266 5.4
Germany (2.0%)
Commerzbank O/S Financial, 8.5% due 5/13/02 .......... NZD 5,340,000 3,467,559 1.2
Kredit Fuer Wiederaufbau International Finance, 7.25%
due 7/16/07 ......................................... AUD 3,100,000 2,304,569 0.8
New Zealand (3.8%)
Transpower Finance Ltd., 8% due 3/15/02 .............. NZD 16,500,000 10,590,896 3.8
South Africa (5.5%)
Eskom, 11% due 6/1/08{./} ............................ ZAR 68,500,000 11,346,106 4.0
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Transnet Ltd., 7.5% due 4/1/08 ....................... ZAR 28,140,000 $ 3,612,816 1.3
Development Bank of South Africa, due 12/31/27 ....... ZAR 124,000,000 580,042 0.2
Tunisia (1.5%)
Banque Centrals de Tunisie, 8.25% due 9/19/27 ........ USD 4,750,000 4,314,235 1.5
United Kingdom (5.3%)
SBC Jersey, 8.75% due 6/20/05 ........................ GBP 8,200,000 14,927,163 5.3
------------
Total Corporate Bonds (cost $68,215,638) ................. 66,430,652
------------
Mortgage Backed (12.0%)
United States (12.0%)
Federal National Mortgage Association:
7.25% due 6/20/02 .................................. NZD 15,050,000 9,421,474 3.3
6.375% due 8/15/07 ................................. AUD 7,300,000 5,212,020 1.8
Government National Mortgage Association:
TBA Pool, 7% due 11/15/27{*} ....................... USD 8,725,000 8,774,078 3.1
Pool #780515, 9.5% due 12/15/21 .................... USD 5,026,270 5,475,493 1.9
Federal Home Loan Mortgage Association Pool #E62449,
8.5% due 3/1/10 ..................................... USD 2,595,424 2,769,195 1.0
Salomon Brothers Mortgage Securities CMO, effective
yield 6.0867% due 12/25/30 .......................... USD 2,342,065 2,400,617 0.9
------------
Total Mortgage Backed (cost $34,786,107) ................. 34,052,877
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $239,777,871) ....... 239,522,187 84.9
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Deutsche Marks Put Option, strike 1.7825, expires
11/13/97
(cost $80,102) ........................................ USD 4,840,000 3,896 --
------------ -----
CURRENCY OPTIONS
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (14.9%)
Egypt (1.1%)
Egypt Treasury Bill, 0% due 11/25/97 ................. EGP 11,000,000 3,215,643 1.1
Italy (7.1%)
Italian Buoni Poliennali del Tesoro (BTPS), 10.5% due
4/15/98 ............................................. ITL 33,520,000,000 20,073,397 7.1
Mexico (1.6%)
Mexican Cetes due 11/13/97 ........................... MXN 3,732,000 4,445,773 1.6
United Kingdom (5.1%)
United Kingdom Treasury, 7.25% due 3/30/98 ........... GBP 8,550,000 14,354,277 5.1
------------
Total Government & Government Agency Obligations (cost
$41,749,459) ............................................ 42,089,090
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (3.1%)
United States (3.1%)
General Electric Capital Corp., effective yield 5.68%
due 11/19/97 (cost $8,659,446){./} .................. USD 8,725,000 $ 8,659,446 3.1
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $50,408,905) .......... 50,748,536 18.0
------------ -----
TOTAL INVESTMENTS (cost $290,266,878) * ................. 290,274,619 102.9
Other Assets and Liabilities ............................. (8,165,141) (2.9)
------------ -----
NET ASSETS ............................................... $282,109,478 100.0
------------ -----
------------ -----
</TABLE>
- --------------
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
{z} All or part of the Fund's holdings in this security is segregated
as collateral for written options. See Note 1 to the Financial
Statements.
{.} 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.
{*} Purchased on a forward commitment basis.
* For Federal income tax purposes, cost is $290,620,342 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 5,885,779
Unrealized depreciation: (6,231,502)
-------------
Net unrealized depreciation: $ (345,723)
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN OPTIONS CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNDERLYING EXPIRATION STRIKE MARKET
PUT OPTIONS AMOUNT DATE PRICE VALUE
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
DEM..................................... 4,840,000 11/13/97 DEM1.82 $ (406)
------
Total outstanding written options
(Premium received $44,673)........... (406)
------
------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 14,130,053 1.33485 11/6/97 $ (927,862)
Australian Dollars...................... 2,108,963 1.37000 11/6/97 (80,812)
Australian Dollars...................... 4,077,329 1.37155 11/6/97 (151,451)
Australian Dollars...................... 8,168,717 1.36885 11/6/97 (320,158)
British Pounds.......................... 17,545,780 0.62087 2/5/98 505,103
Canadian Dollars........................ 1,412,149 1.37160 11/6/97 (38,712)
Danish Kroner........................... 5,263,096 6.67385 11/6/97 87,497
Deutsche Marks.......................... 4,607,616 1.79770 11/6/97 187,616
Deutsche Marks.......................... 7,647,020 1.72473 11/6/97 1,020
Deutsche Marks.......................... 8,632,762 1.85468 2/5/98 650,345
Deutsche Marks.......................... 9,831,529 1.86050 2/5/98 769,116
Deutsche Marks.......................... 9,121,259 1.84900 2/5/98 661,259
Deutsche Marks.......................... 10,320,977 1.82590 2/5/98 627,127
Deutsche Marks.......................... 22,031,550 1.76970 2/5/98 681,550
Deutsche Marks.......................... 15,399,073 1.74950 2/5/98 304,074
Deutsche Marks.......................... 7,856,456 1.74980 2/5/98 156,456
Deutsche Marks.......................... 7,924,376 1.74230 2/5/98 124,376
Italian Liras........................... 3,458,975 1,768.30000 2/5/98 138,837
Italian Liras........................... 8,545,464 1,747.52000 2/5/98 245,464
Italian Liras........................... 3,796,301 1,741.50000 2/5/98 96,301
Italian Liras........................... 15,238,110 1,732.32000 2/5/98 307,843
Italian Liras........................... 5,672,764 1,699.54000 2/5/98 7,399
Italian Liras........................... 996,994 1,697.70000 2/5/98 221
South African Rand...................... 873,181 4.81550 11/6/97 997
Swedish Kronor.......................... 8,468,638 7.57006 11/6/97 92,472
Swedish Kronor.......................... 2,827,601 7.49385 2/5/98 11,645
-------------- --------------
Total Contracts to Buy (Payable amount
$201,819,010)........................ 205,956,733 4,137,723
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 73.01%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 35,852,373 1.34162 11/6/97 2,161,497
Australian Dollars...................... 8,548,124 1.43055 11/6/97 (48,124)
British Pounds.......................... 8,269,037 0.62724 11/6/97 (409,138)
British Pounds.......................... 9,476,686 0.63291 11/6/97 (549,686)
British Pounds.......................... 8,830,253 0.60165 2/5/98 19,747
Canadian Dollars........................ 1,412,149 1.39136 11/6/97 36,705
Canadian Dollars........................ 5,516,238 1.39136 2/5/98 43,762
Danish Kroner........................... 7,511,923 6.95000 11/6/97 (418,398)
Deutsche Marks.......................... 4,699,886 1.83370 11/6/97 (279,886)
Deutsche Marks.......................... 7,559,969 1.78347 11/6/97 (249,969)
Deutsche Marks.......................... 8,548,334 1.71846 2/5/98 (17,440)
Deutsche Marks.......................... 7,689,586 1.71600 2/5/98 (4,687)
Deutsche Marks.......................... 57,287,100 1.71600 2/5/98 (34,920)
Deutsche Marks.......................... 18,029,667 1.71800 2/5/98 (31,966)
Italian Lira............................ 39,768,497 1,696.15000 2/5/98 27,512
New Zealand Dollars..................... 36,510,209 1.57878 11/6/97 638,701
South African Rand...................... 8,879,420 4.83145 11/12/97 (39,420)
South African Rand...................... 7,946,694 4.95150 11/28/97 (171,272)
Swedish Kronor.......................... 4,273,847 7.94000 11/6/97 (243,620)
Swedish Kronor.......................... 9,215,482 8.00000 11/6/97 (590,482)
-------------- --------------
Total Contracts to Sell (Receivable
amount $295,664,390)................. 295,825,474 (161,084)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 104.86%.
Total Open Forward Foreign Currency
Contracts, Net....................... $ 3,976,639
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
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 (53.2%)
Argentina (5.2%)
Republic of Argentina:
Global Bond, 11% due 10/9/06 ....................... USD 11,919,000 $ 11,814,709 3.2
Par Bond Series L, 5.50% due 3/31/23++ ............. USD 6,610,000 4,498,931 1.2
Global Bond, 11.375% due 1/30/17 ................... USD 3,048,000 2,910,840 0.8
Brazil (2.1%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24++ ........................................... USD 11,384,000 7,527,670 2.1
Bulgaria (5.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12++ ..................................... USD 18,357,000 10,004,565 2.7
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro+ ............................................. USD 13,522,000 8,882,264 2.4
Costa Rica (1.7%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.5391% due 5/21/05
(effective maturity date 8/21/02)+ ................ USD 4,270,656 4,270,656 1.2
Principal Bond Series A, 6.25% due 5/21/10 ......... USD 1,900,000 1,653,000 0.5
Ecuador (2.1%)
Republic of Ecuador Discount Bond, 6.6875% due 2/28/25
- EURO+ ............................................. USD 11,069,000 7,775,973 2.1
Mexico (11.7%)
United Mexican States:
Discount Bond Series D, 6.8125% due 12/31/19+ ...... USD 24,328,000 22,032,045 6.0
Global Bond, 11.5 due 5/15/26 ...................... USD 7,290,000 7,873,200 2.2
Global Bond, 9.875% due 1/15/07 .................... USD 6,430,000 6,502,338 1.8
Global Bond, 11.375% due 9/15/16 ................... USD 5,793,000 6,162,304 1.7
Nigeria (3.4%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20+/+ ......................................... USD 18,750,000 12,281,250 3.4
Panama (3.4%)
Republic of Panama, Interest Reduction Bond, 3.75% due
7/17/14++ ........................................... USD 17,850,000 12,550,781 3.4
Peru (1.6%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17 - 144A{.} .................................... USD 10,086,000 5,749,020 1.6
South Africa (5.0%)
Republic of South Africa, 13% due 8/31/10{./} ........ ZAR 97,113,000 18,329,766 5.0
United States (7.5%)
United States Treasury:
6.375% due 8/15/27 ................................. USD 15,337,000 15,782,732 4.3
5.875% due 9/30/02{./} ............................. USD 11,747,000 11,811,242 3.2
Uruguay (2.1%)
Banco Central del Uruguay:
Debt Conversion Bond Series B, 6.8125% due
2/18/07+ .......................................... USD 4,000,000 4,000,000 1.1
Par Bond Series A, 6.75% due 2/19/21+/+ ............ USD 2,290,000 2,129,700 0.6
Par Bond Series B, 6.75% due 2/19/21+/+ ............ USD 1,500,000 1,395,000 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
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)
Venezuela (2.3%)
Republic of Venezuela, Par Bond Series A, 6.75% due
3/31/20+/+ .......................................... USD 10,025,000 $ 8,389,672 2.3
------------
Total Government & Government Agency Obligations (cost
$202,758,127) ........................................... 194,327,658
------------
Corporate Bonds (25.9%)
Argentina (1.7%)
Supermercados Norte, 10.875% due 2/9/04 - 144A{.} .... USD 2,655,000 2,469,150 0.7
Impsa Corp., 9.5% due 5/31/02 - 144A{.} .............. USD 2,409,000 2,276,505 0.6
Acindar Industrial Argentina, 11.25% due 2/15/04 ..... USD 1,497,000 1,482,030 0.4
Brazil (0.6%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 2,273,000 2,216,175 0.6
Canada (0.8%)
Pacalta Resources Ltd., 10.75% due 6/15/04 -
144A{.} ............................................. USD 2,978,000 2,970,555 0.8
China (2.9%)
Panda Global Energy Co., 12.5% due 4/15/04 -
144A{.} ............................................. USD 7,559,000 7,105,460 1.9
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 3,210,000 2,929,125 0.8
Huaneng Power International PLC Convertible, 1.75% due
5/21/04 ............................................. USD 790,000 743,390 0.2
Dominican Republic (0.7%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............ USD 2,628,000 2,601,720 0.7
Hong Kong (1.1%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 2,434,000 2,281,875 0.6
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 2,100,000 1,958,250 0.5
India (1.1%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ........ USD 4,395,000 3,836,835 1.1
Indonesia (3.9%)
Polysindo International Finance, 8.9063%, due
4/22/99 ............................................. IDR 27,500,000,000 5,114,793 1.4
DGS International Finance Co., 10% due 6/1/07 -
144A{.} ............................................. USD 4,961,000 4,564,120 1.3
Tjiwi Kimia Financial Mauritius, 10% due 8/1/04 -
144A{.} ............................................. USD 2,964,000 2,645,370 0.7
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} ............................................. USD 2,141,000 1,884,080 0.5
Jamaica (1.1%)
Mechala Group Jamaica Ltd.:
12.75% due 12/30/99 - Series B ..................... USD 2,846,000 2,760,620 0.8
12.75% due 12/30/99 - Reg S{c} ..................... USD 1,288,000 1,249,360 0.3
Mexico (6.4%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} ......................... USD 8,768,000 8,044,640 2.2
8.85% due 9/15/07 - 144A{.} ........................ USD 4,388,000 4,217,965 1.2
Fideicomiso Petacalco Trust, 10.16% due 12/23/09 - Reg
S{c} ................................................ USD 2,720,000 2,720,000 0.7
TV Azteca, S.A. de C.V., 10.5% due 2/15/07 -
144A{.} ............................................. USD 2,350,000 2,393,851 0.7
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ..... USD 2,440,000 2,305,800 0.6
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} ............................................. USD 1,903,000 2,079,028 0.6
Hylsa, S.A. de C.V., 9.25% due 9/15/07{.} ............ USD 1,560,000 1,497,600 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
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)
Russia (1.3%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 2,283,000 $ 3,070,635 0.8
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 2,184,000 1,921,920 0.5
South Africa (4.3%)
Eskom, 11% due 6/1/08 ................................ ZAR 94,900,000 15,718,912 4.3
------------
Total Corporate Bonds (cost $103,242,812) ................ 95,059,764
------------
Sovereign Debt (12.8%)
Russia (12.8%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- .................................. USD 46,757,000 41,583,888 11.4
Participation ** -/- ............................... DEM 9,819,000 5,224,084 1.4
------------
Total Sovereign Debt (cost $25,217,395) .................. 46,807,972
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $331,218,334) ....... 336,195,394 91.9
------------ -----
<CAPTION>
UNDERLYING 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
$1,032,750) ........................................... USD 57,375,000 418,608 0.1
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<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 $8,950,000 U.S. Treasury Bonds,
8.875% due 8/15/17 (market value of collateral is
$11,741,829, including accrued interest).
(cost $11,510,781) ................................... 11,510,781 3.2
------------ -----
TOTAL INVESTMENTS (cost $343,761,865) * ................. 348,124,783 95.2
Other Assets and Liabilities ............................. 17,667,628 4.8
------------ -----
NET ASSETS ............................................... $365,792,411 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
++ 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.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
* For Federal income tax purposes, cost is $343,911,253 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,533,602
Unrealized depreciation: (22,320,072)
-------------
Net unrealized appreciation: $ 4,213,530
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 3,966,367 1.84950 11/6/97 $(268,070)
Indonesian Rupiah....................... 10,445,682 3,610.00000 11/5/97 (57,871)
South African Rand...................... 24,288,532 5.04500 1/30/98 (535,715)
South African Rand...................... 608,060 5.06350 1/30/98 (15,584)
-------------- --------------
Total Contracts to Sell (Receivable
amount $38,431,401).................. 39,308,641 (877,240)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 10.75%.
Total Open Forward Foreign Currency
Contracts............................ $(877,240)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (65.6%)
Argentina (2.0%)
Republic of Argentina:
Global Bond, 11% due 10/9/06 ....................... USD 5,618,000 $ 5,568,843 1.3
Global Bond, 11.375% due 1/30/17 ................... USD 3,177,000 3,034,035 0.7
Par Bond Series L, 5.5% due 3/31/23++ .............. USD 95,000 64,659 --
Australia (2.3%)
Commonwealth of Australia, 7.5% due 9/15/09 .......... AUD 12,500,000 9,869,508 2.3
Brazil (0.9%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24{./} ++ ...................................... USD 5,856,000 3,872,280 0.9
Bulgaria (2.0%)
Republic of Bulgaria:
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro{./} + ........................................ USD 6,486,000 4,260,491 1.0
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12{./} ++ ................................ USD 7,396,000 4,030,820 1.0
Canada (2.2%)
Canadian Government, 8.75% due 12/1/05 ............... CAD 10,500,000 9,075,362 2.2
Colombia (0.6%)
Republic of Colombia, 8.7% due 2/15/16 ............... USD 2,538,000 2,480,895 0.6
Costa Rica (0.9%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.5391% due 5/21/05
(effective maturity date 8/21/02)+ ................ USD 1,918,176 1,918,176 0.5
Principal Bond Series A, 6.25% due 5/21/10 ......... USD 1,900,000 1,653,000 0.4
Ecuador (0.9%)
Discount Bond, 6.6875% due 2/28/25 - Euro+ ........... USD 5,485,000 3,853,213 0.9
France (1.9%)
France O.A.T., 7.25% due 4/25/06 ..................... FRF 40,000,000 7,779,107 1.9
Germany (11.0%)
Deutschland Republic:
6% due 1/5/06 ...................................... DEM 35,500,000 21,219,716 5.0
8.25% due 9/20/01 .................................. DEM 24,000,000 15,532,850 3.7
Treuhandanstalt, 7.125% due 1/29/03 .................. DEM 15,000,000 9,474,050 2.3
Italy (4.3%)
Italian Buoni Poliennali del Tesoro (BTPS):
9.5% due 2/1/99 .................................... ITL 18,000,000,000 11,092,869 2.6
Italian Government, 7.25% due 11/1/26 ................ ITL 11,000,000,000 6,968,020 1.7
Mexico (5.8%)
United Mexican States:
Discount Bond Series A, 6.6925% due 12/31/19+
+/+ ............................................... USD 10,849,000 9,825,126 2.3
Global Bond, 11.5% due 5/15/26 ..................... USD 7,755,000 8,375,400 2.0
Global Bond, 9.875% due 1/15/07 .................... USD 3,045,000 3,079,256 0.7
Global Bond, 11.375% due 9/15/16 ................... USD 2,744,000 2,918,930 0.7
Discount Bond Series D, 6.8125% due 12/31/19+ ...... USD 672,000 608,580 0.1
Netherlands (1.5%)
Netherlands Government Bond, 5.75% due 2/15/07 ....... NLG 12,000,000 6,260,896 1.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 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)
New Zealand (1.9%)
New Zealand Government, 8% due 4/15/04 ............... NZD 12,000,000 $ 7,987,351 1.9
Nigeria (1.7%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20{./} +/+ .................................... USD 11,000,000 7,205,000 1.7
Panama (3.6%)
Republic of Panama:
Interest Reduction Bond, 3.75% due 7/17/14++ ....... USD 16,705,000 11,745,703 2.8
7.875% due 2/13/02 - 144A{.} ....................... USD 3,360,000 3,200,400 0.8
Peru (0.6%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17 - 144A++ {.} ................................. USD 4,776,000 2,722,320 0.6
South Africa (2.2%)
Republic of South Africa, 13% due 8/31/10 ............ ZAR 48,561,000 9,165,732 2.2
Spain (2.0%)
Spain Government, 10.5% due 10/30/03 ................. ESP 1,000,000,000 8,546,967 2.0
Sweden (1.3%)
Swedish Government, 8% due 8/15/07 ................... SEK 37,000,000 5,511,856 1.3
United Kingdom (6.6%)
United Kingdom Treasury, 7% due 6/7/02 ............... GBP 11,900,000 20,234,192 4.8
United Kingdom Conversion, 9.5% due 4/18/05 .......... GBP 3,800,000 7,429,344 1.8
United States (8.1%)
United States Treasury:
5.875% due 9/30/02{./} ............................. USD 12,865,000 12,935,356 3.1
6.875% due 8/15/25{./} {z} ......................... USD 8,000,000 8,686,250 2.1
6.375% due 8/15/27 ................................. USD 8,293,000 8,534,015 2.0
6.50% due 10/15/06{z} .............................. USD 3,500,000 3,639,111 0.9
Uruguay (0.3%)
Banco Central del Uruguay, Par Bond Series A, 6.75%
due2/19/21{./} +/+ .................................. USD 1,370,000 1,274,100 0.3
Venezuela (1.0%)
Republic of Venezuela:
Par Bond Series A, 6.75% due 3/31/20{./} +/+ ....... USD 4,880,000 4,083,950 1.0
------------
Total Government & Government Agency Obligations (cost
$281,695,109) ........................................... 275,717,729
------------
Corporate Bonds (10.5%)
Argentina (0.5%)
Impsa Corp., 9.5% due 5/31/02 - 144A{.} .............. USD 1,377,000 1,301,265 0.3
Acindar Industrial Argentina, 11.25% due 2/15/04 ..... USD 816,000 807,840 0.2
Brazil (0.3%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 1,278,000 1,246,050 0.3
China (1.1%)
Panda Global Energy Co., 12.5% due 4/15/04 -
144A{.} ............................................. USD 3,145,000 2,956,300 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 1,720,000 $ 1,569,500 0.4
Denmark (1.0%)
Realkredit Danmark, 6% due 10/1/26 ................... DKK 30,000,000 4,226,028 1.0
Dominican Republic (0.3%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............ USD 1,294,000 1,281,060 0.3
Ecuador (0.4%)
Pacalta Resources Ltd., 10.75% due 6/15/04 -
144A{.} ............................................. USD 1,601,000 1,596,998 0.4
Hong Kong (0.5%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 1,210,000 1,134,375 0.3
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 1,100,000 1,025,750 0.2
India (0.4%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ........ USD 2,151,000 1,877,823 0.4
Indonesia (1.1%)
DGS International Finance Co., 10% due 6/1/07 -
144A{.} ............................................. USD 2,717,000 2,499,640 0.6
Tjiwi Kimia Financial Mauritius, 10% due 8/1/04 -
144A{.} ............................................. USD 1,471,000 1,312,868 0.3
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} ............................................. USD 1,134,000 997,920 0.2
Jamaica (0.2%)
Mechala Group Jamaica, 12.75% due 12/30/99 - Reg
S{c} ................................................ USD 719,000 697,430 0.2
Mexico (2.5%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} ......................... USD 4,224,000 3,875,520 0.9
8.85% due 9/15/07 - 144A{.} ........................ USD 2,108,000 2,026,315 0.5
TV Azteca, S.A. de C.V., 10.5% due 2/15/07 -
144A{.} ............................................. USD 1,300,000 1,324,258 0.3
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} ............................................. USD 1,134,000 1,238,895 0.3
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ..... USD 1,140,000 1,077,300 0.3
Hylsa, S.A. de C.V., 9.25% due 9/15/07{.} ............ USD 760,000 729,600 0.2
Russia (0.7%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 1,526,000 2,052,470 0.5
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 1,040,000 915,200 0.2
South Africa (0.2%)
Eskom, 11% due 6/1/08 ................................ ZAR 6,175,000 1,022,806 0.2
United States (1.3%)
Chase Manhattan Corp., 6.25% due 1/15/06{z} .......... USD 2,835,000 2,774,864 0.7
General Motors Acceptance Corp., 6.625% due
10/15/05 ............................................ USD 2,700,000 2,719,405 0.6
------------
Total Corporate Bonds (cost $45,203,836) ................. 44,287,480
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Mortgage Backed (9.9%)
United States (9.9%)
Government National Mortgage Association TBA Pass Thru
Pool, 6.5% due11/15/27{*} ........................... USD 28,000,000 $ 27,693,764 6.6
Federal National Mortgage Association Pool:
#313439, 7% due 3/1/04 ............................. USD 9,718,752 9,837,204 2.3
7.25% due 6/20/02{./} .............................. NZD 7,000,000 4,382,081 1.0
------------
Total Mortgage Backed (cost $42,198,154) ................. 41,913,049
------------
Sovereign Debt (7.3%)
Russia (7.3%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- .................................. USD 31,585,000 28,090,723 6.7
Participation ** -/- ............................... DEM 4,566,000 2,429,287 0.6
------------
Total Sovereign Debt (cost $16,899,775) .................. 30,520,010
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $385,996,874) ....... 392,438,268 93.3
------------ -----
<CAPTION>
UNDERLYING 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
$567,036) ............................................. USD 31,502,000 229,839 0.1
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (6.6%)
United States (6.6%)
Ford Motor Credit Corp., effective yield 5.50%, due
11/19/97{./} ........................................ USD 19,000,000 18,947,940 4.5
General Electric Capital Corp., effective yield 5.50%,
due 11/19/97{./} .................................... USD 9,000,000 8,975,340 2.1
------------
Total Commercial Paper - Discounted (cost $27,923,280) ... 27,923,280
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $27,923,280) .......... $ 27,923,280 6.6
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 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 $7,860,000 U.S. Treasury
Bonds, 8.875% due 8/15/17 (market value of collateral
is $10,311,818, including accrued interest).
(cost $10,107,564) ................................... $ 10,107,564 2.4
------------ -----
TOTAL INVESTMENTS (cost $424,594,754) * ................. 430,698,951 102.4
Other Assets and Liabilities ............................. (10,075,156) (2.4)
------------ -----
NET ASSETS ............................................... $420,623,795 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
{z} All or part of the Fund's holdings in this security is segregated
as collateral for written futures. See Note 1 to the Financial
Statements.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
+ 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.
{*} Purchased on a forward commitment basis.
* For Federal income tax purposes, cost is $425,319,173 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 21,044,316
Unrealized depreciation: (15,664,538)
-------------
Net unrealized appreciation: $ 5,379,778
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ ----------- -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 3,022,847 1.37155 11/6/97 $(112,283)
British Pounds.......................... 16,534,161 0.62123 2/5/98 485,452
British Pounds.......................... 11,608,739 0.60397 2/5/98 18,839
Danish Kroner........................... 7,886,019 6.86340 2/5/98 382,449
Deutsche Marks.......................... 25,918,384 1.77087 2/5/98 818,384
Deutsche Marks.......................... 24,380,246 1.81000 2/5/98 1,280,246
Deutsche Marks.......................... 11,573,533 1.74950 2/5/98 228,533
Deutsche Marks.......................... 5,831,060 1.70250 2/5/98 (42,655)
Deutsche Marks.......................... 4,932,669 1.82070 2/5/98 286,489
Deutsche Marks.......................... 3,702,605 1.77285 2/5/98 120,916
Italian Liras........................... 6,451,334 1,697.68000 2/5/98 1,355
Italian Liras........................... 3,240,396 1,766.50000 2/5/98 126,895
Netherland Guilders..................... 6,358,320 1.97453 2/5/98 144,185
Spanish Pasetas......................... 8,955,096 148.86800 2/5/98 222,526
------------ --------------
Total Contracts to Buy (Payable amount
$136,434,078)........................ 140,395,409 3,961,331
------------ --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 33.38%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 7,838,313 1.44611 11/6/97 (127,976)
Australian Dollars...................... 4,674,868 1.36032 11/6/97 213,680
British Pounds.......................... 11,858,437 0.61312 11/6/97 (327,267)
British Pounds.......................... 4,864,140 0.63386 11/6/97 (289,013)
British Pounds.......................... 11,724,826 0.62274 2/5/98 (371,820)
Canadian Dollars........................ 1,774,056 1.38250 11/6/97 34,262
Danish Kroner........................... 7,847,141 6.95000 11/6/97 (437,069)
Deutsche Marks.......................... 44,512,909 1.71600 2/5/98 (27,133)
Deutsche Marks.......................... 16,981,429 1.72000 2/5/98 (49,819)
Deutsche Marks.......................... 15,337,714 1.71800 2/5/98 (27,194)
Deutsche Marks.......................... 3,280,903 1.71600 2/5/98 (2,000)
Italian Lira............................ 9,691,730 1,696.15000 2/5/98 6,705
Netherland Guilders..................... 6,321,484 2.05140 11/6/97 (340,203)
New Zealand Dollars..................... 12,132,719 1.57878 11/6/97 212,247
South African Rand...................... 7,285,042 5.04500 1/30/98 (160,681)
Spanish Pesetas......................... 8,939,623 154.70000 11/6/97 (536,262)
------------ --------------
Total Contracts to Sell (Receivable
amount $172,835,791)................. 175,065,334 (2,229,543)
------------ --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 41.62%.
Total Open Forward Foreign Currency
Contracts, Net....................... $1,731,788
--------------
--------------
</TABLE>
- --------------
See Note 1 to the financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN FUTURES CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MATURITY NO. OF MARKET
DESCRIPTION DATE CONTRACTS CURRENCY VALUE
- ---------------------------------------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C>
U.S. 10-Year Bond Future (face
$8,849,548)............................ 12/19/97 80 USD $8,902,400
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------
HIGH
INCOME
GOVERNMENT FUND- STRATEGIC
INCOME CONSOLIDATED INCOME
FUND (NOTE 1) FUND
----------- ----------- ----------
<S> <C> <C> <C>
Assets:
Investments in securities, at value (cost $290,266,878; $343,761,865; and
$424,594,754, respectively) (Note 1)......................................... $290,274,619 3$48,124,783 $430,698,951
U.S. currency................................................................. 63 598,195 906,033
Foreign Currencies (Cost $562,392; $2,793,297; and $740,247, respectively).... 572,795 2,785,516 734,313
Interest receivable........................................................... 5,620,712 6,748,730 7,672,126
Receivable for Fund shares sold............................................... 1,790,045 757,060 523,422
Receivable for open forward foreign currency contracts (Note 1)............... 3,976,639 -- 1,731,788
Receivable for securities sold................................................ 12,795,967 21,411,490 16,967,090
Miscellaneous receivable...................................................... -- 17,246 105,000
----------- ----------- ----------
Total assets................................................................ 315,030,840 380,443,020 459,338,723
----------- ----------- ----------
Liabilities:
Payable for custodian fees (Note 1)........................................... 13,985 19,132 31,825
Payable for Directors' and Trustees' fees and expenses (Note 2)............... 7,943 10,881 5,472
Payable for forward foreign currency contracts -- closed (Note 1)............. 6,013,174 -- 3,799,153
Payable for fund accounting fees (Note 2)..................................... 6,285 9,778 9,847
Payable for Fund shares repurchased (Note 2).................................. 13,090,101 3,038,650 1,446,639
Payable for investment management and administration fees (Note 2)............ 177,596 341,976 278,408
Payable for loan outstanding (Note 1)......................................... 4,451,000 -- --
Payable for open forward foreign currency contracts (Note 1).................. -- 877,240 --
Payable for printing and postage expenses..................................... 109,344 79,859 85,448
Payable for professional fees................................................. 37,427 52,845 28,107
Payable for registration and filing fees...................................... 16,015 5,502 14,782
Payable for securities purchased.............................................. 8,707,277 9,848,640 32,628,138
Payable for service and distribution expenses (Note 2)........................ 160,788 285,897 310,485
Payable for transfer agent fees (Note 2)...................................... 121,280 60,286 63,713
Payable for variation margin.................................................. -- -- 5,000
Payable for written options, at value......................................... 406 -- --
Other accrued expenses........................................................ 8,741 19,823 7,911
----------- ----------- ----------
Total liabilities........................................................... 32,921,362 14,650,509 38,714,928
Minority interest (Notes 1 & 2)............................................. -- 100 --
----------- ----------- ----------
Net assets...................................................................... $282,109,478 3$65,792,411 $420,623,795
----------- ----------- ----------
----------- ----------- ----------
Class A:
Net asset value and offering price per share ($154,272,250 DIVIDED BY
17,888,878; $133,972,818 DIVIDED BY 8,609,881; and $138,714,970 DIVIDED BY
11,557,042 shares outstanding, respectively)................................... $ 8.62 $ 15.56 $ 12.00
----------- ----------- ----------
----------- ----------- ----------
Maximum offering price per share (100/95.25 of $8.62; 100/95.25 of $15.56; and
100/95.25 of $12.00, respectively) *........................................... $ 9.05 $ 16.34 $ 12.60
----------- ----------- ----------
----------- ----------- ----------
Class B:+
Net asset value and offering price per share ($127,721,696 DIVIDED BY
14,819,308; $228,100,869 DIVIDED BY 14,675,701; and $281,375,602 DIVIDED BY
23,423,332 shares outstanding, respectively)................................... $ 8.62 $ 15.54 $ 12.01
----------- ----------- ----------
----------- ----------- ----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share
($115,532 DIVIDED BY 13,411; $3,718,724 DIVIDED BY 239,667; and $533,223
DIVIDED BY 44,355 shares outstanding, respectively)............................ $ 8.61 $ 15.52 $ 12.02
----------- ----------- ----------
----------- ----------- ----------
Net assets consist of:
Paid in capital (Note 4)...................................................... $424,806,101 2$94,116,233 $485,352,425
Undistributed net investment income/(distribution in excess of income)........ -- 303,600 (3,351,006)
Accumulated net realized gain (loss) on investments........................... (146,657,834) 67,929,136 (69,137,537)
Net unrealized appreciation (depreciation) on translation of assets and
liabilities in foreign currencies............................................ 3,909,203 (919,476) 1,745,551
Net unrealized appreciation of investments.................................... 52,008 4,362,918 6,014,362
----------- ----------- ----------
Total -- representing net assets applicable to capital shares outstanding....... $282,109,478 3$65,792,411 $420,623,795
----------- ----------- ----------
----------- ----------- ----------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------
HIGH
INCOME
GOVERNMENT FUND- STRATEGIC
INCOME CONSOLIDATED INCOME
FUND (NOTE 1) FUND
----------- ----------- -----------
<S> <C> <C> <C>
Investment income:
Interest income................................................. $24,435,113 $40,562,334 $36,075,707
Other income.................................................... 51,190 -- 26,003
----------- ----------- -----------
Total investment income....................................... 24,486,303 40,562,334 36,101,710
----------- ----------- -----------
Expenses:
Investment management and administration fees (Note 2).......... 2,403,043 4,107,638 3,474,804
Amortization of organization costs (Note 1)..................... -- 34,678 --
Custodian Fees (Note 1)......................................... 203,911 182,500 256,523
Directors' and Trustees' fees and expenses (Note 2)............. 14,600 19,345 13,962
Fund accounting fees (Note 2)................................... 85,149 116,607 123,309
Printing and postage expenses................................... 131,035 88,337 144,457
Professional fees............................................... 79,570 119,674 81,841
Registration and filing fees (Note 1)........................... 52,925 68,590 44,726
Service and distribution expenses: (Note 2)
Class A....................................................... 672,237 605,133 560,886
Class B....................................................... 1,392,802 2,653,190 3,185,408
Transfer agent fees (Note 2).................................... 734,235 676,490 831,440
Other expenses (Note 1)......................................... 132,382 187,152 264,542
----------- ----------- -----------
Total expenses before reductions.............................. 5,901,889 8,859,334 8,981,898
----------- ----------- -----------
Expense reductions (Note 1)................................... (543,589) (234,784) (460,682)
----------- ----------- -----------
Total net expenses.............................................. 5,358,300 8,624,550 8,521,216
----------- ----------- -----------
Net investment income............................................. 19,128,003 31,937,784 27,580,494
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments: (Note 1)
Net realized gain (loss) on investments......................... (6,424,453) 65,778,885 35,321,536
Net realized gain on foreign currency transactions.............. 6,670,567 3,923,861 4,176,477
----------- ----------- -----------
Net realized gain during the year............................. 246,114 69,702,746 39,498,013
----------- ----------- -----------
Net change in unrealized appreciation(depreciation) on
translation of assets and liabilities in foreign currencies.... 5,553,094 (1,099,793) 2,627,595
Net change in unrealized appreciation of investments............ (11,452,067) (36,470,606) (26,190,807)
----------- ----------- -----------
Net unrealized depreciation during the year................... (5,898,973) (37,570,399) (23,563,212)
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign
currencies....................................................... (5,652,859) 32,132,347 15,934,801
----------- ----------- -----------
Net increase in net assets resulting from operations.............. $13,475,144 $64,070,131 $43,515,295
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
GT GLOBAL
----------------------------------------------------------------------------
HIGH INCOME
GOVERNMENT INCOME FUND FUND-CONSOLIDATED STRATEGIC INCOME FUND
------------------------ ------------------------ ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income................. $19,128,003 $31,802,934 $31,937,784 $37,117,017 $27,580,494 $40,286,756
Net realized gain (loss) on
investments and foreign currency
transactions......................... 246,114 (1,896,895) 69,702,746 62,517,472 39,498,013 36,675,981
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... 5,553,094 2,319,205 (1,099,793) 174,082 2,627,595 1,913,734
Net change in unrealized appreciation
(depreciation) of investments........ (11,452,067) (1,121,083) (36,470,606) 31,730,913 (26,190,807) 27,794,834
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations.................... 13,475,144 31,104,161 64,070,131 131,539,484 43,515,295 106,671,305
----------- ----------- ----------- ----------- ----------- -----------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............ (6,827,721) (15,504,590) (12,555,399) (13,418,057) (10,228,265) (12,520,881)
From net realized gain on
investments.......................... -- (8,183,323) (2,751,509) (1,230,117) -- --
In excess of net investment income.... (4,449,488) -- -- -- (775,601) (1,097,884)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............ (4,503,257) (9,165,193) (17,789,317) (18,753,394) (18,434,103) (22,200,673)
From net realized gain on
investments.......................... -- (5,303,358) (3,911,565) (1,719,241) -- --
In excess of net investment income.... (2,934,682) -- -- -- (1,397,843) (1,946,649)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............ (4,070) (7,915) (1,289,469) (505,715) (43,148) (46,547)
From net realized gain on
investments.......................... -- (2,893) (264,339) (46,362) -- --
In excess of net investment income.... (2,653) -- -- -- (3,272) (4,081)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................. (18,721,871) (38,167,272) (38,561,598) (35,672,886) (30,882,232) (37,816,715)
----------- ----------- ----------- ----------- ----------- -----------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 667,541,828 386,482,407 561,523,639 583,133,415 335,031,026 335,665,174
Decrease from capital shares
repurchased.......................... (787,794,141) (592,826,606) (665,858,246) (592,743,855) (445,823,540) (432,196,117)
----------- ----------- ----------- ----------- ----------- -----------
Net decrease from capital share
transactions....................... (120,252,313) (206,344,199) (104,334,607) (9,610,440) (110,792,514) (96,530,943)
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net
assets................................. (125,499,040) (213,407,310) (78,826,074) 86,256,158 (98,159,451) (27,676,353)
Net assets:
Beginning of year..................... 407,608,518 621,015,828 444,618,485 358,362,327 518,783,246 546,459,599
----------- ----------- ----------- ----------- ----------- -----------
End of year *........................ $282,109,478 $407,608,518 $365,792,411 $444,618,485 $420,623,795 $518,783,246
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
* Includes undistributed (distributions
in excess of) net investment income.. $ -- $ 364,918 $ 303,600 $ -- $(3,351,006) $ --
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F18
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 (D) 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.74 $ 8.81 $ 8.63 $ 11.07 $ 9.83
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.52 0.57 0.62 0.65 0.74
Net realized and unrealized gain
(loss) on investments................ (0.13) 0.03 0.15 (1.52) 1.34
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.39 0.60 0.77 (0.87) 2.08
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.31) (0.57) (0.59) (0.65) (0.74)
From net realized gain on
investments.......................... -- (0.10) -- (0.27) --
In excess of net investment income.... (0.20) -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- (0.55) --
Return of capital..................... -- -- -- (0.10) --
From sources other than net investment
income............................... -- -- -- -- (0.10)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.51) (0.67) (0.59) (1.57) (0.84)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.62 $ 8.74 $ 8.81 $ 8.63 $ 11.07
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 4.78% 7.11% 9.22% (8.87)% 21.9%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 154,272 $ 240,945 $ 385,404 $ 502,094 $ 708,301
Ratio of net investment income to
average net assets..................... 6.04% 6.52% 6.98% 6.87% 7.1%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.34% 1.34% 1.35% 1.33% 1.4%
Without expense reductions............ 1.51% 1.39% 1.38% N/A N/A
Portfolio turnover rate++............... 241% 268% 385% 625% 495%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F19
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 (D) 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.74 $ 8.80 $ 8.64 $ 11.07 $ 9.83
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.46 0.51 0.55 0.59 0.67
Net realized and unrealized gain
(loss) on investments................ (0.12) 0.04 0.14 (1.52) 1.34
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.34 0.55 0.69 (0.93) 2.01
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.28) (0.51) (0.53) (0.59) (0.67)
From net realized gain on
investments.......................... -- (0.10) -- (0.27) --
In excess of net investment income.... (0.18) -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- (0.54) --
Return of capital..................... -- -- -- (0.10) --
From sources other than net investment
income............................... -- -- -- -- (0.10)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.46) (0.61) (0.53) (1.50) (0.77)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.62 $ 8.74 $ 8.80 $ 8.64 $ 11.07
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 4.00% 6.54% 8.22% (9.39)% 21.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 127,722 $ 166,577 $ 235,481 $ 262,405 $ 182,972
Ratio of net investment income to
average net assets..................... 5.39% 5.87% 6.33% 6.22% 6.5%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.99% 1.99% 2.00% 1.98% 2.0%
Without expense reductions............ 2.16% 2.04% 2.03% N/A N/A
Portfolio turnover rate++............... 241% 268% 385% 625% 495%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F20
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
-----------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (D) 1996 (D) 1995 (D)
------------ ------------ -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.73 $ 8.80 $ 8.98
------------ ------------ -------------
Income from investment operations:
Net investment income................. 0.55 0.60 0.26
Net realized and unrealized gain
(loss) on investments................ (0.13) 0.03 (0.19)
------------ ------------ -------------
Net increase (decrease) from
investment operations.............. 0.42 0.63 0.07
------------ ------------ -------------
Distributions to shareholders:
From net investment income............ (0.33) (0.60) (0.25)
From net realized gain on
investments.......................... -- (0.10) --
In excess of net investment income.... (0.21) -- --
In excess of net realized gain on
investments.......................... -- -- --
Return of capital..................... -- -- --
From sources other than net investment
income............................... -- -- --
------------ ------------ -------------
Total distributions................. (0.54) (0.70) (0.25)
------------ ------------ -------------
Net asset value, end of period.......... $ 8.61 $ 8.73 $ 8.80
------------ ------------ -------------
------------ ------------ -------------
Total investment return (c)............. 5.15 % 7.49 % 0.83%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 116 $ 86 $ 131
Ratio of net investment income to
average net assets..................... 6.39 % 6.87 % 7.33%(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 0.99 % 0.99 % 1.00%(a)
Without expense reductions............ 1.16 % 1.04 % 1.03%(a)
Portfolio turnover rate++............... 241 % 268 % 385%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F21
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.85 $ 11.70 $ 12.56 $ 14.92 $ 11.43
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 1.19 1.27 1.35 0.94 0.78
Net realized and unrealized gain
(loss) on investments................ 0.93 3.09 (1.09) (1.87) 3.92
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.12 4.36 0.26 (0.93) 4.70
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (1.18) (1.11) (1.03) (0.94) (0.78)
From net realized gain on
investments.......................... (0.23) (0.10) (0.03) (0.27) --
In excess of net realized gain on
investments.......................... -- -- -- (0.22) --
Return of capital..................... -- -- (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- (0.43)
---------- ---------- ---------- ---------- ----------
Total distributions................. (1.41) (1.21) (1.12) (1.43) (1.21)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 15.56 $ 14.85 $ 11.70 $ 12.56 $ 14.92
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 14.46% 39.05% 2.81% (6.45)% 43.6%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 133,973 $ 178,318 $ 142,002 $ 167,974 $ 143,171
Ratio of net investment income to
average net assets..................... 7.39% 9.52% 11.85% 7.00% 6.40%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.53% 1.69% 1.75% 1.57% 2.20%
Without expense reductions............ 1.58% 1.69% 1.75% 1.57% 2.20%
Ratio of interest expense to average net
assets................................. N/A 0.04% N/A 0.22% N/A
Portfolio turnover rate++............... 214% 290% 213% 178% 195%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F22
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.83 $ 11.69 $ 12.56 $ 14.90 $ 11.43
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 1.09 1.17 1.27 0.86 0.70
Net realized and unrealized gain
(loss) on investments................ 0.93 3.09 (1.09) (1.85) 3.90
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.02 4.26 0.18 (0.99) 4.60
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (1.08) (1.03) (0.96) (0.86) (0.70)
From net realized gain on
investments.......................... (0.23) (0.09) (0.03) (0.27) --
In excess of net realized gain on
investments.......................... -- -- -- (0.22) --
Return of capital..................... -- -- (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- (0.43)
---------- ---------- ---------- ---------- ----------
Total distributions................. (1.31) (1.12) (1.05) (1.35) (1.13)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 15.54 $ 14.83 $ 11.69 $ 12.56 $ 14.90
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 13.77% 38.16% 2.07% (6.99)% 42.6%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 228,101 $ 251,002 $ 214,897 $ 232,423 $ 127,035
Ratio of net investment income to
average net assets..................... 6.74% 8.87% 11.20% 6.35% 5.8%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.18% 2.34% 2.40% 2.22% 2.8%
Without expense reductions............ 2.23% 2.34% 2.40% 2.22% 2.8%
Ratio of interest expense to average net
assets................................. N/A 0.04% N/A 0.22% N/A
Portfolio turnover rate++............... 214% 290% 213% 178% 195%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F23
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
--------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (D) 1996 (D) 1995
----------- ----------- ------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.83 $ 11.71 $ 11.44
----------- ----------- ------------
Income from investment operations:
Net investment income................. 1.22 1.34 0.57
Net realized and unrealized gain
(loss) on investments................ 0.93 3.05 0.17
----------- ----------- ------------
Net increase (decrease) from
investment operations.............. 2.15 4.39 0.74
----------- ----------- ------------
Distributions to shareholders:
From net investment income............ (1.23) (1.16) (0.44)
From net realized gain on
investments.......................... (0.23) (0.11) --
In excess of net realized gain on
investments.......................... -- -- --
Return of capital..................... -- -- (0.03)
From sources other than net investment
income............................... -- -- --
----------- ----------- ------------
Total distributions................. (1.46) (1.27) (0.47)
----------- ----------- ------------
Net asset value, end of period.......... $ 15.52 $ 14.83 $ 11.71
----------- ----------- ------------
----------- ----------- ------------
Total investment return (c)............. 14.72% 39.38% 6.54 %(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 3,719 $ 15,298 $ 1,463
Ratio of net investment income to
average net assets..................... 7.74% 9.87% 12.20 %(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.18% 1.34% 1.40 %(a)
Without expense reductions............ 1.23% 1.34% 1.40 %
Ratio of interest expense to average net
assets................................. N/A 0.04% N/A
Portfolio turnover rate++............... 214% 290% 213 %(a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F24
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 1996 (D) 1995 (D) 1994 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.76 $ 10.32 $ 10.88 $ 13.61 $ 11.25
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.74 0.89 0.97 0.79 0.96
Net realized and unrealized gain
(loss) on investments................ 0.34 1.44 (0.69) (2.14) 2.85
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.08 2.33 0.28 (1.35) 3.81
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.78) (0.82) (0.80) (0.79) (0.96)
From net realized gain on
investments.......................... -- -- -- (0.38) (0.37)
In excess of net investment income.... (0.06) (0.07) -- -- --
Return of capital..................... -- -- (0.04) (0.21) --
From sources other than net investment
income............................... -- -- -- -- (0.12)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.84) (0.89) (0.84) (1.38) (1.45)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 12.00 $ 11.76 $ 10.32 $ 10.88 $ 13.61
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 9.40% 23.00% 3.06% (10.44)% 37.0%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 138,715 $ 185,126 $ 188,165 $ 275,241 $ 287,870
Ratio of net investment income to
average net assets..................... 6.18% 8.09% 9.64% 6.74% 7.2%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.35% 1.38% 1.42% 1.40% 1.7%
Without expense reductions............ 1.44% 1.40% 1.45% N/A N/A
Ratio of interest expenses to average
net assets............................. N/A N/A N/A 0.10% N/A
Portfolio turnover rate++............... 149% 177% 238% 583% 310%
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F25
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 1996 (D) 1995 (D) 1994 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.77 $ 10.33 $ 10.88 $ 13.60 $ 11.24
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.67 0.82 0.91 0.73 0.89
Net realized and unrealized gain
(loss) on investments................ 0.33 1.44 (0.69) (2.14) 2.85
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.00 2.26 0.22 (1.41) 3.74
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.71) (0.75) (0.73) (0.72) (0.89)
From net realized gain on
investments.......................... -- -- -- (0.38) (0.37)
In excess of net investment income.... (0.05) (0.07) -- -- --
Return of capital..................... -- -- (0.04) (0.21) --
From sources other than net investment
income............................... -- -- -- -- (0.12)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.76) (0.82) (0.77) (1.31) (1.38)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 12.01 $ 11.77 $ 10.33 $ 10.88 $ 13.60
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 8.70% 22.15% 2.48% (11.02)% 36.2%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 281,376 $ 333,178 $ 357,852 $ 458,550 $ 310,431
Ratio of net investment income to
average net assets..................... 5.53% 7.44% 8.99% 6.09% 6.5%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.00% 2.03% 2.07% 2.05% 2.4%
Without expense reductions............ 2.09% 2.05% 2.10% N/A N/A
Ratio of interest expenses to average
net assets............................. N/A N/A N/A 0.10% N/A
Portfolio turnover rate++............... 149% 177% 238% 583% 310%
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F26
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
-----------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 (D) 1995 (D)
------------ ------------ -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.77 $ 10.33 $ 10.32
------------ ------------ -------------
Income from investment operations:
Net investment income................. 0.79 0.93 0.41
Net realized and unrealized gain
(loss) on investments................ 0.34 1.44 (0.04)
------------ ------------ -------------
Net increase (decrease) from
investment operations.............. 1.13 2.37 0.37
------------ ------------ -------------
Distributions to shareholders:
From net investment income............ (0.82) (0.86) (0.34)
From net realized gain on
investments.......................... -- -- --
In excess of net investment income.... (0.06) (0.07) --
Return of capital..................... -- -- (0.02)
From sources other than net investment
income............................... -- -- --
------------ ------------ -------------
Total distributions................. (0.88) (0.93) (0.36)
------------ ------------ -------------
Net asset value, end of period.......... $ 12.02 $ 11.77 $ 10.33
------------ ------------ -------------
------------ ------------ -------------
Total investment return (c)............. 9.86 % 23.39 % 3.72%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 533 $ 479 $ 443
Ratio of net investment income to
average net assets..................... 6.53 % 8.44 % 9.99%(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.00 % 1.03 % 1.07%(a)
Without expense reductions............ 1.09 % 1.05 % 1.10%(a)
Ratio of interest expenses to average
net assets............................. N/A N/A N/A
Portfolio turnover rate++............... 149 % 177 % 238%
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F27
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Government Income Fund, GT Global High Income Fund, GT Global
Strategic Income Fund ("Funds") are non-diversified separate series of G.T.
Investment Funds, Inc. ("Company"). Collectively, these Funds are known as the
"GT Global Income Funds". The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as an open-end management investment company. The Company has thirteen series of
shares in operation, each series corresponding to a distinct portfolio of
investments.
The GT Global High Income Fund invests substantially all of its investable
assets in Global High Income Portfolio ("Portfolio"). The Portfolio is organized
as a New York Trust and is registered under the 1940 Act as a non-diversified,
open-end management investment company.
The Portfolio has investment objectives, policies and limitations substantially
identical to those of its corresponding Fund. Therefore, the financial
statements of the Fund and its respective Portfolio have been presented on a
consolidated basis, and represent all activities of both the Fund and Portfolio.
Through October 31, 1997, all of the shares of beneficial interest of the
Portfolio were owned by either its Fund or Chancellor LGT Asset Management, Inc.
(the "Manager"), which has a nominal ($100) investment in the Portfolio.
The Funds offer Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges 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 Funds 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
Funds. 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 Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Funds calculate the net asset value of and complete orders to purchase,
exchange, or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by the Manager to be the
primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality, and type; however, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments are valued at
amortized cost adjusted for foreign exchange translation and market fluctuation,
if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors or the Trust's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors or
the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund and Portfolio are maintained in U.S.
dollars. The market values of foreign securities, currency holdings, and other
assets and liabilities are recorded in the books and records of the Funds or
Portfolio (the phrase "Funds or Portfolio" hereinafter refers to the GT Global
Government Income Fund, the GT Global Strategic Income Fund, and the Global High
Income Portfolio) after translation to U.S. dollars based on the exchange rates
on that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange rates
when earned or incurred.
A Fund or Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
F28
<PAGE>
GT GLOBAL INCOME FUNDS
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on a
Fund's or Portfolio's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains or losses arise
from changes in the value of assets and liabilities other than investments in
securities at period end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by a Fund or Portfolio, it is
the Fund's or Portfolio's policy to always receive, as collateral, United States
government securities or other high quality debt securities of which the value,
including accrued interest, is at least equal to the amount to be repaid to the
Fund or Portfolio under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by a Fund or Portfolio as an unrealized gain or loss.
When the Forward Contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference between the value at the time it was opened
and the value at the time it was closed. Forward Contracts involve market risk
in excess of the amount shown in the Fund's or Portfolio's "Statement of Assets
and Liabilities". A Fund or Portfolio could be exposed to risk if a counterparty
is unable to meet the terms of the contract or if the value of the currency
changes unfavorably. A Fund or Portfolio may enter into Forward Contracts in
connection with planned purchases or sales of securities, or to hedge against
adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When a Fund or Portfolio writes a call or put option, an amount equal to the
premium received is included in the Fund's or Portfolio's "Statement of Assets
and Liabilities" as an asset and an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the option. The current market value of an option listed on a traded exchange
is valued at its last bid price, or, in the case of an over-the-counter option,
is valued at the average of the last bid prices obtained from brokers, unless a
quotation from only one broker is available, in which case only that broker's
price will be used. If an option expires on its stipulated expiration date or if
the Fund or Portfolio enters into a closing purchase transaction, a gain or loss
is realized without regard to any unrealized gain or loss on the underlying
security and the liability related to such option is extinguished. If a written
call option is exercised, a gain or loss is realized from the sale of the
underlying security and the proceeds of the sale are increased by the premium
originally received. If a written put option is exercised, the cost of the
underlying security purchased would be decreased by the premium originally
received. The Fund or Portfolio can write options only on a covered basis,
which, for a call, requires that the Fund or Portfolio hold the underlying
security and, for a put, requires the Fund or Portfolio to set aside cash, U.S.
government securities or other liquid securities in an amount not less than the
exercise price, or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund or Portfolio may use options to manage its
exposure to the stock market and to fluctuations in currency values or interest
rates.
The premium paid by the Fund or Portfolio for the purchase of a call or put
option is included in the Fund's or Portfolio's "Statement of Assets and
Liabilities" as an investment and subsequently "marked-to-market" to reflect the
current market value of the option. If an option which the Fund or Portfolio has
purchased expires on the stipulated expiration date, the Fund or Portfolio
realizes a loss in the amount of the cost of the option. If the Fund or
Portfolio enters into a closing sale transaction, the Fund or Portfolio realizes
a gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund or Portfolio
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund or Portfolio
exercises a put option, it realizes a gain or loss from the sale of the
underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund or Portfolio may forego
the opportunity of profit if the market value of the underlying security or
index increases and the option is exercised. The risk in writing a put option is
that the Fund or Portfolio may incur a loss if the market value of the
underlying security or index decreases and the option is exercised. In addition,
there is the risk the Fund or Portfolio may not be able to enter into a closing
transaction because of an illiquid secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract a
Fund or Portfolio is required to pledge to the broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the exchange on
which the contract is traded. Pursuant to the contract, the Fund or Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Fund or Portfolio as unrealized gains
or losses. When the contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The potential risk
to the Fund or Portfolio is that the change in value of the underlying
securities may not correlate to the change in value of the contracts. A Fund or
F29
<PAGE>
GT GLOBAL INCOME FUNDS
Portfolio may use futures contracts to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out-basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. A Fund or Portfolio may
trade securities on other than normal settlement terms. This may increase the
risk if the other party to the transaction fails to deliver and causes the Fund
or Portfolio to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value listed below were on loan to
brokers. The loans were secured by cash collateral received by the Funds:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31,
-------------------------------- 1997
AGGREGATE VALUE CASH --------------
ON LOAN COLLATERAL FEES RECEIVED
--------------- -------------- --------------
<S> <C> <C> <C>
GT Global Government Income Fund........ $ 29,895,986 $ 31,386,675 $543,589
Global High Income Portfolio............ $ 25,907,465 $ 32,857,776 $234,784
GT Global Strategic Income Fund......... $ 37,623,556 $ 43,190,488 $460,682
</TABLE>
For international securities, cash collateral is received by a Fund or Portfolio
against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by a Fund or Portfolio against loaned securities in the
amount at least equal to 102% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
100% of the market value of the loaned securities during the period of the loan.
Fees received from securities loaned were used to reduce the Funds' or
Portfolios' custodian and other administrative expenses.
(I) TAXES
It is the intended policy of the Funds and Portfolios to meet the requirements
for qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended ("Code"). It is also the intention of the Funds and
Portfolios to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made for
Federal taxes on income, capital gains, or unrealized appreciation of securities
held, and excise tax on income and capital gains. The GT Global Government
Income Fund has a capital loss carryforward of $139,369,056 of which
$123,623,470 expires in 2002, and $15,745,586 expires in 2003. The GT Global
Strategic Income Fund has a capital loss carryforward of $65,749,433 which
expires in 2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Funds or Portfolio and timing
differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the GT Global High Income Fund and the Portfolio in
connection with their organization, their initial registration with the
Securities and Exchange Commission and with various states and the initial
public offering of its shares aggregated $149,100 and $25,000, respectively.
These expenses were amortized on a straightline basis over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's or Portfolio's investment in emerging
market countries may involve greater risks than investments in more developed
markets and the price of such investments may be volatile. These risks of
investing in foreign and emerging markets may include foreign currency exchange
rate fluctuations, perceived credit risk, adverse political and economic
developments and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
A Fund or Portfolio may invest in indexed securities whose value is linked
either directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
(N) RESTRICTED SECURITIES
A Fund or Portfolio is permitted to invest in privately placed restricted
securities. These securities may be resold in transactions exempt from
registration or to the public if the securities are registered. Disposal of
these securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) are shown at the end of the Fund's
or Portfolio's Portfolio of Investments.
F30
<PAGE>
GT GLOBAL INCOME FUNDS
(O) LINE OF CREDIT
Each of the Funds, along with certain other funds ("GT Funds") advised or
administered by the Manager, has a line of credit with BankBoston. GT Global
Income Funds, along with certain other funds ("GT Funds") advised or
administered by the Manager, has a line of credit with State Street Bank & Trust
Company. The arrangements with the banks allow all specified funds and the GT
Funds to borrow an aggregate maximum amount of $200,000,000. Each Fund is
limited to borrowing up to 33 1/3% of the value of each Fund's total assets. On
October 31, 1997, GT Global Government Income Fund had $4,451,000 in loans
outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for GT Global Government Income Fund, GT Global High Income Fund, and GT Global
Strategic Income Fund was $7,107,892, $11,820,513 and $10,277,220 respectively,
with a weighted average interest rate of 6.33%, 6.47% and 6.38%, respectively.
Interest expense for the GT Global Government Income Fund, GT Global High Income
Fund and GT Global Strategic Income Fund for the year ended October 31, 1997 was
$103,696, $165,711 and $230,880, respectively, included in "Other Expenses" on
the Statement of Operations.
(P) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
A Fund or Portfolio may trade securities on a when-issued or forward commitment
basis, with payment and delivery scheduled for a future date. These transactions
are subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund or Portfolio will generally purchase these securities with the intention of
acquiring such securities, they may sell such securities before the settlement
date. These securities are identified on the accompanying Portfolio of
Investments. The Fund or Portfolio has set aside sufficient cash or liquid
securities as collateral for these purchase commitments.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds' and Portfolio's investment
manager and administrator. The GT Global Government Income Fund and GT Global
Strategic Income Fund each pays the Manager investment management and
administration fees at the annualized rate of 0.725% on the first $500 million
of the average daily net assets of the Fund; 0.70% on the next $1 billion;
0.675% on the next $1 billion; and 0.65% on amounts thereafter. The GT Global
High Income Fund pays administration fees to the Manager at the annualized rate
of 0.25% of its average daily net assets. These fees are computed daily and paid
monthly.
The Global High Income Portfolio pays investment management and administration
fees to the Manager at the annualized rate of 0.475% on the first $500 million
of average daily net assets of the Portfolio; 0.45% on the next $1 billion;
0.425% on the next $1 billion; and 0.40% on amounts thereafter, plus 2% of the
Portfolio's total investment income calculated in accordance with generally
accepted accounting principles, adjusted daily for currency revaluations, on a
mark to market basis, of the Portfolio's assets; provided, however, that during
any fiscal year this amount shall not exceed 2% of the Portfolio's total
investment income calculated in accordance with generally accepted accounting
principles. These fees are computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Funds'
distributor. The Funds offer Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Funds' current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1997, GT Global retained the
following sales charges: $10,240 for the GT Global Government Income Fund,
$65,982 for the Global High Income Fund, and $29,451 for the GT Global Strategic
Income Fund. Purchases of Class A shares exceeding $500,000 may be subject to a
contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Funds' current prospectus. GT Global collected CDSCs for the year ended
October 31, 1997, as follows: $5,273 for the GT Global Government Income Fund,
$18,156 for the Global High Income Fund, and $0 for the GT Global Strategic
Income Fund. GT Global also makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Funds' current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of: $1,118,343 for the GT Global Government Income Fund, $1,598,989
for the Global High Income Fund, and $1,750,253 for the GT Global Strategic
Income Fund. In addition, GT Global makes ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class B shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Funds' Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which a Fund
reimburses GT Global for a portion of its shareholder servicing and
distributions expenses. Under the Class A Plan, a Fund may pay GT Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for GT Global's expenditures incurred in
servicing and maintaining shareholder accounts, and may pay GT Global a
distribution fee at the annualized rate of up to 0.35% of the average daily net
assets of the Fund's Class A shares, less any amounts paid by the Fund as the
aforementioned service fee, for GT Global's expenditures incurred in providing
services as distributor. All expenses for which GT Global is reimbursed under
the Class A Plan will have been incurred within one year of such reimbursement.
F31
<PAGE>
GT GLOBAL INCOME FUNDS
Pursuant to the Fund's Class B Plan, a Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
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 each GT Global
Government Income Fund's and GT Global Strategic Income Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary expense)
to the maximum annual rate of 1.85%, 2.50%, and 1.50% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class shares, respectively.
Similarly, they voluntarily have undertaken to limit GT Global High Income
Fund's expenses to the maximum annual rate of 2.20%, 2.85%, and 1.85% of the
average daily net assets of the Fund's Class A, Class B, and Advisor Class
shares, respectively. If necessary, this limitation will be effected by waivers
by the Manager of investment management and administration fees, waivers by GT
Global of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or GT Global of portions of the Fund's other
operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 1.75%, 2.40%, and 1.40% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and LGT and GT Global, is the transfer agent of the Funds. For performing
shareholder servicing, reporting, and general transfer agent services, GT
Services receives an annual maintenance fee of $17.50 per account, a new account
fee of $4.00 per account, a per transaction fee of $1.75 for all transactions
other than exchanges and per exchange fee of $2.25. GT Services also is
reimbursed by the Fund for its out-of-pocket expenses for such items as postage,
forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Funds and Portfolio. The
monthly fee for these services to the Manager is a percentage, not to exceed
0.03% annually, of a Fund or Portfolio's average daily net assets. The annual
fee rate is derived by applying 0.03% to the first $5 billion of assets of all
registered mutual funds advised by the Manager and 0.02% to the assets in excess
of $5 billion and allocating the result according to each Fund's average daily
net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager or any other affiliated company, $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director. Each Portfolio pays each of its Trustees who is not an employee,
officer, or director of the Manager, GT Global or GT Services $500 per year plus
$150 for each meeting of the board or any committee thereof attended by the
Trustees.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by each Fund or Portfolio for the year ended
October 31, 1997:
PURCHASE AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PURCHASES
------------------------------
U.S. GOVERNMENT
AND GOVERNMENT
AGENCIES OTHER ISSUES
--------------- ------------
<S> <C> <C>
GT Global Government Income Fund................................................ $133,075,601 $576,675,060
Global High Income Portfolio.................................................... $ 27,699,458 $829,268,070
GT Global Strategic Income Fund................................................. $ 67,247,574 $607,924,472
</TABLE>
<TABLE>
<CAPTION>
SALES
------------------------------
U.S. GOVERNMENT
AND GOVERNMENT
AGENCIES OTHER ISSUES
--------------- ------------
<S> <C> <C>
GT Global Government Income Fund................................................ $118,888,065 $702,800,147
Global High Income Portfolio.................................................... $ 11,689,150 $933,111,597
GT Global Strategic Income Fund................................................. $ 47,239,453 $728,047,126
</TABLE>
F32
<PAGE>
GT GLOBAL INCOME FUNDS
4. CAPITAL SHARES
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, 400,000,000 were
classified as shares of the GT Global Telecommunications Fund; 400,000,000 were
classified as shares of GT Global Government Income Fund; 200,000,000 were
classified as shares of GT Global Developing Markets 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; 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; 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 fifteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified. Transactions in capital shares of the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
GT GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 48,767,558 $ 419,503,866 19,126,586 $ 164,293,090
Shares issued in connection with
reinvestment of distributions......... 741,916 6,372,599 1,643,833 14,228,931
--------------- ------------------ --------------- ------------------
49,509,474 425,876,465 20,770,419 178,522,021
Shares repurchased...................... (59,180,268) (509,133,563) (36,969,597) (318,856,283)
--------------- ------------------ --------------- ------------------
Net decrease............................ (9,670,794) $ (83,257,098) (16,199,178) $ (140,334,262)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 27,713,479 $ 237,734,254 23,047,364 $ 198,774,141
Shares issued in connection with
reinvestment of distributions......... 452,575 3,886,536 956,866 8,282,950
--------------- ------------------ --------------- ------------------
28,166,054 241,620,790 24,004,230 207,057,091
Shares repurchased...................... (32,406,087) (278,645,805) (31,688,935) (273,022,079)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,240,033) $ (37,025,015) (7,684,705) $ (65,964,988)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 4,551 $ 38,769 105,543 892,487
Shares issued in connection with
reinvestment of distributions......... 680 5,804 1,345 10,808
--------------- ------------------ --------------- ------------------
5,231 44,573 106,888 903,295
Shares repurchased...................... (1,717) (14,773) (111,905) (948,244)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 3,514 $ 29,800 (5,017) $ (44,949)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
F33
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL HIGH INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 17,142,418 $ 272,139,950 25,694,335 $ 346,426,450
Shares issued in connection with
reinvestment of distributions......... 574,707 9,164,383 607,445 8,023,249
--------------- ------------------ --------------- ------------------
17,717,125 281,304,333 26,301,780 354,449,699
Shares repurchased...................... (21,118,898) (335,756,037) (26,422,858) (355,715,247)
--------------- ------------------ --------------- ------------------
Net decrease............................ (3,401,773) $ (54,451,704) (121,078) $ (1,265,548)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 13,848,218 $ 221,702,040 14,568,804 $ 194,636,619
Shares issued in connection with
reinvestment of distributions......... 721,148 11,494,889 765,798 10,086,445
--------------- ------------------ --------------- ------------------
14,569,366 233,196,929 15,334,602 204,723,064
Shares repurchased...................... (16,813,796) (270,094,630) (16,793,522) (225,719,415)
--------------- ------------------ --------------- ------------------
Net decrease............................ (2,244,430) $ (36,897,701) (1,458,920) $ (20,996,351)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,868,282 $ 45,874,009 1,706,101 $ 23,413,749
Shares issued in connection with
reinvestment of distributions......... 72,440 1,148,368 40,101 546,903
--------------- ------------------ --------------- ------------------
2,940,722 47,022,377 1,746,202 23,960,652
Shares repurchased...................... (3,732,584) (60,007,579) (839,670) (11,309,193)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. (791,862) $ (12,985,202) 906,532 $ 12,651,459
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
GT GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 13,750,221 $ 167,009,888 15,025,486 $ 168,473,834
Shares issued in connection with
reinvestment of distributions......... 615,860 7,488,021 829,046 9,085,802
--------------- ------------------ --------------- ------------------
14,366,081 174,497,909 15,854,532 177,559,636
Shares repurchased...................... (18,557,237) (225,311,673) (18,331,797) (204,237,090)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,191,156) $ (50,813,764) (2,477,265) $ (26,677,454)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 11,499,580 $ 140,731,511 12,778,909 $ 141,835,937
Shares issued in connection with
reinvestment of distributions......... 896,610 10,918,610 1,206,362 13,216,165
--------------- ------------------ --------------- ------------------
12,396,190 151,650,121 13,985,271 155,052,102
Shares repurchased...................... (17,287,235) (211,600,543) (20,318,197) (224,904,917)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,891,045) $ (59,950,422) (6,332,926) $ (69,852,815)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 712,165 $ 8,839,212 278,551 $ 3,010,280
Shares issued in connection with
reinvestment of distributions......... 3,581 43,784 3,931 43,156
--------------- ------------------ --------------- ------------------
715,746 8,882,996 282,482 3,053,436
Shares repurchased...................... (712,116) (8,911,324) (284,638) (3,054,110)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 3,630 $ (28,328) (2,156) $ (674)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
F34
<PAGE>
GT GLOBAL INCOME FUNDS
5. WRITTEN OPTIONS:
The GT Global Government Income Fund's and the GT Global Strategic Income Fund's
written options contract activity for the year ended October 31, 1997 was as
follows:
COVERED CALL AND PUT OPTION WRITTEN
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT IN
GT GLOBAL GOVERNMENT INCOME FUND USD PREMIUMS
- -------------------------------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Options outstanding at October 31, 1996................................................................. $ -- $ --
Options written......................................................................................... 213,530,000 1,091,938
Options cancelled in closing purchase transactions...................................................... (14,700,000) (93,163)
Options expired prior to exercise....................................................................... (193,990,000) (954,102)
Options exercised....................................................................................... -- --
----------- ---------
Options outstanding at October 31, 1997................................................................. $ 4,840,000 $ 44,673
----------- ---------
----------- ---------
</TABLE>
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT IN
GT GLOBAL STRATEGIC INCOME FUND USD PREMIUMS
- -------------------------------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Options outstanding at October 31, 1996................................................................. $ -- $ --
Options written......................................................................................... 5,208,000 301,543
Options cancelled in closing purchase transactions...................................................... -- --
Options expired prior to exercise....................................................................... -- --
Options exercised....................................................................................... (5,208,000) (301,543)
----------- ---------
Options outstanding at October 31, 1997................................................................. $ -- $ --
----------- ---------
----------- ---------
</TABLE>
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as capital gain dividends for the fiscal year ended October
31, 1997:
<TABLE>
<CAPTION>
CAPITAL GAIN
FUND DIVIDEND
- -------------------------------------------------------------------------------------------------------- ------------
<S> <C>
GT Global Government Income Fund........................................................................ --
GT Global High Income Fund.............................................................................. $ 6,927,413
GT Global Strategic Income Fund......................................................................... --
</TABLE>
F35
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL FUNDS
GT Global offers a broad range of 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 NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme Funds
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Offers portfolio diversity by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Provides access to the growth potential of developing economies
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Focuses on worldwide opportunities from the demand for consumer products and
services
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL INFRASTRUCTURE FUND
Invests in companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to 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 small and medium-sized companies in
the U.S.
GT GLOBAL AMERICA VALUE FUND
Looks for equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government
securities from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Seeks to earn 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 of emerging markets
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
This report must be accompanied or preceded by a current prospectus.
<PAGE>
INCAR712XXXJR.626
December, 1997
DATED MATERIAL
PLEASE EXPEDITE
[GRAPHIC]
