G T GREATER EUROPE FUND, N-30D, 1996-07-09

G T GREATER EUROPE FUND
N-30D, 1996-07-09

Previous: GTECH HOLDINGS CORP, 10-Q, 1996-07-09

Next: PERSEPTIVE BIOSYSTEMS INC, 8-K, 1996-07-09

<PAGE>
LGT ASSET MANAGEMENT
OVER 25 YEARS
OF INVESTING
WORLDWIDE
G.T. GREATER
EUROPE FUND

SEMIANNUAL REPORT
APRIL 30, 1996

[LOGO]
<PAGE>
TABLE
OF CONTENTS

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

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

Financial
Statements........... F1
</TABLE>

<PAGE>

G.T. GREATER EUROPE FUND

RESTRUCTURING SUMMARY FOR G.T. GLOBAL EASTERN EUROPE FUND

Investors in the G.T. Greater Europe Fund voted to restructure the Fund on
February 9, 1996. The Fund offered to repurchase up to 55% of the issued and
outstanding shares of beneficial interest in the Fund. The repurchase price
of the shares was the net asset value (NAV) at the close of regular trading
on the New York Stock Exchange of May 10, 1996, less a repurchase fee equal
to 1.20% of NAV per share. The Fund's transfer agent, Boston Equiserve,
indicated that 11,240,421 shares were validly tendered and not withdrawn
prior to the expiration of the Fund's repurchase offer, leaving approximately
7.2 million shares outstanding. The repurchase offer was completed on May 17,
1996, and the Fund adopted its new name and new mandate as of June 3, 1996.

As an interval fund, the Fund is required to make annual offers to repurchase
a percentage of its outstanding shares, with redemption proceeds to be paid
to participating shareholders in cash. The percentage of outstanding shares
that the Fund will offer to repurchase in each annual offer will be
established by the Board of Trustees shortly before the commencement of the
offer, but it will not be less than 5% or more than 25% of the Fund's
outstanding shares at that time. The Board currently expects the first two
periodic offers in 1997 and 1998 to each be for 5% of outstanding shares.

MESSAGE FROM THE CHAIRMAN

June 21, 1996

Dear Shareholders:

We're pleased to send you this semiannual report for the G.T. Global Eastern
Europe Fund (NYSE:GTF), formerly the G.T. Greater Europe Fund. The Fund has
been successfully restructured, and we believe it is well positioned to
identify and act upon investment opportunities in the dynamic, fast-growing
region of eastern Europe.

The Fund will normally allocate 65% of its total assets to Germany and
eastern Europe and at least 50% in eastern Europe alone. We believe this
mandate sets it apart, as most European funds do not participate as
aggressively in these markets.

It is important to remember that many of the countries the Fund may invest in
have markets in the preliminary stages of development. These markets tend to
be smaller, less liquid, and more volatile than developed countries. We
expect the Fund to be substantially invested according to its new mandate
within three to six months.

The new, closed-end interval structure will allow the Fund to focus on the
potential for significant, long-term growth prospects, and provide liquidity
to shareholders beyond that of a traditional closed-end structure.

Sincerely,

/s/ DAVID A. MINELLA

David A. Minella
CHAIRMAN OF THE BOARD AND PRESIDENT

1
<PAGE>

INTERVIEW WITH THE MANAGEMENT TEAM

Q HOW DID THE FUND PERFORM?

A Over the six months to April 30, 1996, the Fund's total return based on
net asset value was 5.88%. The share price of the Fund, as traded on the New
York Stock Exchange, rose by 14.71% over the same period.

Q WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE
OVER THE SIX MONTHS TO APRIL 30, 1996?

A During the period a significant portion of the portfolio was liquidated in
anticipation of the repurchase offer made to shareholders. As a result, the
Fund had a high cash position for a good portion of the period under review.
Nevertheless, the Fund benefited overall from general strength in France,
Italy, Spain and Holland, and from its holdings in eastern Europe, which have
performed strongly in 1996.

Q WHY DID THE MANDATE AND STRUCTURE OF THE FUND CHANGE?

A We believe the new structure and mandate for the G.T. Global Eastern
Europe Fund enables investors to more fully participate in the exciting
opportunities within eastern Europe. The newly established stock markets of
the region are growing rapidly as governments privatize state-run industries
and private sector companies seek listings. The Fund's mandate changed
primarily to give investors greater access to the region's potential.

In addition, we believe the interval structure will allow investors greater
freedom to realize the value of their investments. During its first five
years, the Fund was a closed-end fund and, at times, its price traded at a
large discount to net assets. With the goal of minimizing this discount in
future years, the Board of Trustees recommended that the structure of the
Fund be changed from a closed-end fund to a closed-end interval fund. This
will allow shareholders, should they so wish, to sell a portion of their
shares to the Fund at a price based on the Fund's net asset value on an
annual basis.

Q WHERE WILL THE FUND INVEST?

A Currently the Fund's investment policies provide that it will normally
invest at least 65% of its assets in Germany and eastern Europe, and at least
50% in eastern Europe alone. Eastern Europe countries the Fund may invest in
include Poland, the Czech Republic, Hungary, Slovakia and Russia. Investments
may also be made in the smaller countries of the Baltic Republics, in
particular, Estonia, as well as Croatia, the Ukraine and Romania.

Q WHAT DO YOU FIND ATTRACTIVE ABOUT THESE ECONOMIES?

A Looking back on the past five years, it is extraordinary how quickly and
successfully the major eastern European countries have progressed from a
communist to a free market/capitalist system. Such rapid progress has proved
extremely painful in terms of economic and corporate restructuring, but today
the more successful economies, Poland, the Czech Republic and Hungary, have a
growing financial system (nonexistent in the communist era). Companies are
finally beginning to produce goods consumers want to buy in the quantities
they need, as opposed to producing goods nobody wanted but were effectively
forced to buy. As a result, exports to western Europe are growing rapidly.

Furthermore, a cheap and well-educated workforce is attracting significant
levels of foreign direct investment as major multinational corporations from
the U.S., western Europe and even Korea establish manufacturing plants in the
major economies of eastern Europe.

Governments continue to reform their economies and, as a result, inflation
has fallen significantly in a number of eastern European countries over the
past few years. In addition, rising exports and growing foreign investment
are increasing foreign exchange reserves, which, in our opinion, is helping
to put these economies on a sound monetary footing.

We believe the expansion of privatization across the region is also providing
attractive opportunities for investors. This trend looks set to accelerate
over the coming years as previously state-owned but cash-strapped companies
seek external capital for expansion.

Q WHAT IS YOUR OUTLOOK ON THIS DEVELOPING REGION'S
LARGEST ECONOMY, RUSSIA?

A As Russia continues to move rapidly toward a market economy, we are
finding more companies we believe offer interesting and attractive investment
opportunities. Under President Yeltsin's reform program, thousands of
companies have been privatized. Inflation has fallen from over 40% per month
two years ago to a mere 2%. Shares in Russian companies can be traded in
Moscow by both domestic and foreign investors. The risks remain substantial,
however, and the forthcoming run- off elections in July of this year will be
critical for the future of the Russian reform program. Reflecting those
risks, equities are extremely undervalued by western standards as well as by
those of other emerging markets. Should Yeltsin win, we believe the political
and economic risks will fall, resulting in a significant rerating of Russian
assets.

Q WHAT IS YOUR LONGER-TERM OUTLOOK IN GENERAL?

A The past five years have been a period of transition and transformation
for eastern Europe as these

CONTINUED ON P.3

<PAGE>

INTERVIEW WITH THE MANAGEMENT TEAM CONTINUED

countries progress from communism to capitalism. It has not been an easy
time, with major upheaval being forced upon companies, politicians and the
general population. We believe, however, that the next five years and beyond
promise to be a period of strong growth as investment and demand accelerate.
Equity markets continue to be established throughout the region and
government privatization programs introduced. We believe opportunities for
investors in this region have never looked more promising.

GEOGRAPHIC ALLOCATION OF NET ASSETS(1)

MAY 31, 1996 APRIL 30, 1996
------------ --------------
CROATIA 0.9% 1.0%
CZECH REPUBLIC 3.3% 2.4%
FRANCE 0.9% 1.1%
GERMANY 1.0% 0.9%
GREECE 4.8% 4.5%
GUERNSEY - 0.9%
HUNGARY 11.4% 8.6%
IRELAND 1.0% -
POLAND 0.5% -
RUSSIA 5.4% 1.3%
SPAIN - 0.3%
U.K. 2.6% 4.1%
U.S./SHORT-TERM & OTHER 68.2% 74.9%

(1) Geographic allocations may change as market conditions change.

3
<PAGE>

G.T. GLOBAL GREATER EUROPE FUND
10 LARGEST HOLDINGS(2) AS OF APRIL 30, 1996

<TABLE>
<CAPTION>
% of
Country Net Assets
------- ----------
<S> <C> <C>
ERGO BANK SA A commercial bank that operates through approximately 99 branches in Greece GREECE 4.5%
and one overseas.

INVESCO PLC Invesco PLC's subsidiaries are primarily international investment management groups, UK 4.1%
distributed throughout North America, Europe and the Pacific. They specialize in equity, fixed income and
real property investments and serve institutional, collective and individual investors.

GRABOPLAST Produces artificial leather, home improvement materials and book binding. The home HUNGARY 3.7%
improvement product group comprises floor coverings, wallpaper and insulation products. The company
exports to Germany, Austria, England and Netherlands.

PICK SZEGED RT GDR Raises livestock, and processes and distributes meat products. Operates HUNGARY 2.6%
eight retail outlets in Hungary in addition to supplying other retail stores and wholesalers.

SPT TELECOM AS The main provider of telephone and telecommunications in the Czech Republic. CZECH REP 2.2%
The company is owned by the Czech Republic (15%) and by a joint venture between Dutch and Swiss
phone companies for (27%).

MOL MAGYAR OLAJ-ES GAZIPARI RT GDR An integrated domestic oil and gas company. MOL owns HUNGARY 2.1%
and operates three refineries, oil and gas pipelines, service stations and natural gas storage facilities.
Along with its subsidiaries, the company produces crude oil, petroleum products, bitumens, lubricants
and natural gas.

SUN BREWING, LTD. GDR Owns controlling interests in five Russian closed, joint stock companies which RUSSIA 1.3%
operate breweries and malting plants.

ALBATROS INVESTISSEMENT The holding company for Bollore Technologies, a manufacturer of plastic film, FRANCE 1.1%
electronic components, packaging and cigarettes.

PLIVA D.D. Croatia's largest pharmaceutical group with international operations. CROATIA 1.0%

BALTIC REPUBLIC FUND Fund management company. IRELAND(3) 0.9%

</TABLE>

(2) There is no assurance the Fund will continue to hold any of the
securities mentioned above.

(3) An off-shore fund domiciled in Ireland, but with assets in Estonia.

4
<PAGE>
G.T. GREATER
EUROPE FUND

FINANCIAL
STATEMENTS
<PAGE>
G.T. GREATER EUROPE FUND

PORTFOLIO OF INVESTMENTS

April 30, 1996 (Unaudited)

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

<TABLE>
<CAPTION>
MARKET % OF NET
EQUITY INVESTMENTS COUNTRY SHARES VALUE ASSETS(A)
- -------------------------------------------------------------------------------- ------- ---------- -------------- ------------
<S> <C> <C> <C> <C>
Finance (8.6%)
Ergo Bank SA.................................................................... GK 100,000 $ 5,035,942 4.5
BANKS - MONEY CENTER
Invesco PLC..................................................................... UK 1,190,200 4,527,448 4.1
INVESTMENT MANAGEMENT
--------------
9,563,390
--------------
Consumer Non-Durables (7.6%)
Graboplast...................................................................... HGRY 178,161 4,104,258 3.7
HOUSEHOLD PRODUCTS
Pick Szeged RT GDR (b)(d)....................................................... HGRY 60,000 2,886,374 2.6
FOOD MANUFACTURER
Sun Brewing Ltd. GDR (b)(c)..................................................... RUS 226,000 1,440,750 1.3
BEVERAGES - ALCOHOL
--------------
8,431,382
--------------
Services (4.1%)
SPT Telecom AS (c).............................................................. CZCH 20,000 2,449,568 2.2
TELECOM - OTHER
Petersburg Long Distance, Inc. (c).............................................. US 140,000 700,000 0.6
TELEPHONE - LONG DISTANCE
Russian Telecommunication Development Corp...................................... US -- -- 0.8
TELEPHONE NETWORKS
Non-voting (c)(d)............................................................. -- 52,600 526,000 --
Voting (c)(d)................................................................. -- 38,400 384,000 --
Marco Iberica Distribucion de Ediciones SA...................................... SPN 55,925 379,138 0.3
CONSUMER SERVICES
Fotex (c)....................................................................... HGRY 145,700 162,453 0.2
RETAILERS - OTHER
Technoimpex (b)(c)(d)........................................................... HGRY 1,400 0 0.0
WHOLESALE & INTERNATIONAL TRADE
--------------
4,601,159
--------------
Multi-Industry/Miscellaneous (3.2%)
Albatros Investissement (c)..................................................... FR 64,222 1,195,811 1.1
MULTI-INDUSTRY
Pliva D.D. - Reg. S GDR (b)(c).................................................. CRT 34,000 1,092,250 1.0
MULTI-INDUSTRY
Baltic Republic Fund (b)(c)(d).................................................. IRE 9,000 1,044,000 0.9
COUNTRY FUND
Harvardsky Dividendov Investment Fund (c)....................................... CZCH 12,131 190,093 0.2
COUNTRY FUND
--------------
3,522,154
--------------
Energy (2.1%)
MOL Magyar Olaj-es Gazipari RT GDR (b)(c)....................................... HGRY 220,000 2,365,000 2.1
OIL & GAS
--------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
F1
<PAGE>
G.T. GREATER EUROPE FUND

- --------------
(a) Percentages indicated are based on net assets of $111,247,993.

(b) U.S. currency denominated.

(d) At April 30, 1996, the Fund owned the following restricted securities
constituting 4.4% of net assets which may not be publicly sold without
registration under the Securities Act of 1933 (Note 1). Additional
information on restricted securities is as follows:

<TABLE>
<CAPTION>
MARKET
ACQUISITION VALUE
ACQUISITION DATES SHARES COST PER SHARE
------------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Baltic Republic Fund..................... 09/02/94 9,000 $ 900,000 $116.00
Catalyst Energy Services................. 09/18/91 19,600 420,000 0.00
Pick Szeged RT GDR....................... 11/20/92-8/31/93 60,000 1,191,760 48.11
Russian Telecommunication Development
Corp.:
Non-voting............................. 12/20/93 52,600 526,000 10.00
Voting................................. 12/20/93 38,400 384,000 10.00
Technoimpex.............................. 11/22/90 1,400 2,989,406 0.00
</TABLE>

* For Federal income tax purposes, cost is $230,459,730 and appreciation
(depreciation) of securities is as follows:

<TABLE>
<C> <S> <C>
Unrealized
appreciation: $4,817,500
Unrealized depreciation: (4,281,087)
--------------
Net unrealized appreciation: $ 536,413
--------------
--------------
</TABLE>

Abbreviation:
GDR - Global Depository Receipt

The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
G.T. GREATER EUROPE FUND

The Fund's Portfolio of Investments at April 30, 1996 (unaudited) was
concentrated in the following countries:

<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS (A)
------------------------------
SHORT-TERM &
COUNTRY (COUNTRY CODE) EQUITY OTHER TOTAL
- -------------------------------------------------------------------------------- ----- -------------- -----
<S> <C> <C> <C>
Croatia (CRT)................................................................... 1.0 1.0
Czech Republic (CZCH)........................................................... 2.4 2.4
France (FR)..................................................................... 1.1 1.1
Germany (GER)................................................................... 0.9 0.9
Greece (GK)..................................................................... 4.5 4.5
Hungary (HGRY).................................................................. 8.6 8.6
Ireland (IRE)................................................................... 0.9 0.9
Russia (RUS).................................................................... 1.3 1.3
Spain (SPN)..................................................................... 0.3 0.3
United Kingdom (UK)............................................................. 4.1 4.1
United States (US).............................................................. 1.4 73.5 74.9
----- ------ -----
Total........................................................................... 26.5 73.5 100.0
----- ------ -----
----- ------ -----
</TABLE>

- --------------
(a) Percentages indicated are based on Net Assets of $111,247,993.

The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
G.T. GREATER EUROPE FUND

STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1996 (Unaudited)

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

<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $230,324,730) (Note 1).......................... $230,996,143
U.S. currency................................................................. $ 50
Foreign currencies (cost $4,951,222).......................................... 4,857,380 4,857,430
----------
Receivable for securities sold............................................................ 11,067,043
Dividends and interest receivable......................................................... 466,791
Dividend withholding tax reclaims receivable.............................................. 245,278
Receivable for forward foreign currency contracts -- closed, net (Note 1)................. 104,451
Prepaid expenses.......................................................................... 17,147
------------
Total assets.............................................................................. 247,754,283
------------
Liabilities:
Payable for fund shares redeemed (Note 5)................................................. 135,969,753
Payable for investment management fees (Note 2)........................................... 257,678
Payable for printing and postage expenses................................................. 112,054
Payable for administration fees (Note 2).................................................. 51,536
Payable for custodian fees................................................................ 51,529
Payable for professional fees............................................................. 36,070
Payable for Trustees' fees and expenses (Note 2).......................................... 11,079
Other liabilities......................................................................... 16,591
------------
Total liabilities......................................................................... 136,506,290
------------
Net assets.................................................................................. $111,247,993
------------
------------

Net asset value per share ($111,247,993 DIVIDED BY 7,220,405 shares outstanding)........... $ 15.41
------------
------------
Net assets consist of:
Paid in capital (Note 4).................................................................. $ 85,208,548
Accumulated net investment loss........................................................... (256,167)
Accumulated net realized gain on investments and foreign currency transactions (Note 1)... 25,972,264
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (348,065)
Net unrealized appreciation of investments................................................ 671,413
------------
Total -- representing net assets applicable to capital shares outstanding................. $111,247,993
------------
------------
</TABLE>

F4
<PAGE>
G.T. GREATER EUROPE FUND

STATEMENT OF OPERATIONS

For the six months ended April 30, 1996 (Unaudited)

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

<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividends (net of foreign withholding tax of $203,600)..................................... $ 1,357,858
Interest................................................................................... 1,186,437
-----------
Total investment income.................................................................... 2,544,295
-----------
Expenses:
Investment management fees (Note 2)........................................................ 1,511,624
Professional fees.......................................................................... 720,277
Administration fees (Note 2)............................................................... 302,325
Printing and postage expenses.............................................................. 116,399
Custodian fees............................................................................. 92,046
Transfer agent fees........................................................................ 20,657
Trustees' fees and expenses (Note 2)....................................................... 17,863
Other expenses............................................................................. 19,366
-----------
Total expenses............................................................................. 2,800,557
-----------
Net investment loss............................................................. (256,262)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies: (Note 1)
Net realized gain on investments.............................................. $37,469,062
Net realized loss on foreign currency transactions............................ (43,156)
-----------
Net realized gain during the period......................................... 37,425,906
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies........................................................ (251,893)
Net change in unrealized appreciation of investments.......................... (23,503,910)
-----------
Net unrealized depreciation during the period............................... (23,755,803)
-----------
Net realized and unrealized loss on investments and foreign currencies.......... 13,670,103
-----------
Net increase in net assets resulting from operations............................ $13,413,841
-----------
-----------
</TABLE>

F5
<PAGE>
G.T. GREATER EUROPE FUND

STATEMENTS OF CHANGES IN NET ASSETS

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1996 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1995
---------------- ----------------
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss).................................................. $ (256,262) $ 1,832,586
Net realized gain on investments and foreign currency transactions............ 37,425,906 6,614,420
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies........................................................ (251,893) (181,924)
Net change in unrealized appreciation of investments.......................... (23,503,910) (12,593,055)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations............... 13,413,841 (4,327,973)

Distributions to shareholders: (Note 1)
From net investment income.................................................... (1,912,552) (352,937)
From net realized gain on investments......................................... (981,975) (5,230,782)
---------------- ----------------
(2,894,527) (5,583,719)
Capital share transactions (Note 5)
Cost of shares redeemed pursuant to tender offer.............................. (135,969,753) --
---------------- ----------------
Total decrease in net assets.................................................... (125,450,439) (9,911,692)
Net assets:
Beginning of period........................................................... 236,698,432 246,610,124
---------------- ----------------
End of period................................................................. $111,247,993 $236,698,432
---------------- ----------------
---------------- ----------------
</TABLE>

F6
<PAGE>
G.T. GREATER EUROPE 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 and market price data for the shares.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1996 --------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period..... $ 14.75 $ 15.37 $ 14.07 $ 10.37 $ 10.94
------------ ------------ ----------- ------------ ------------
Income from investment operations:
Net investment income (loss)........... (0.02) 0.11 0.02 0.12 0.13
Net realized and unrealized gain (loss)
on investments........................ 0.86 (0.38) 1.52 3.58 (0.59)
------------ ------------ ----------- ------------ ------------
Net increase (decrease) from investment
operations............................ 0.84 (0.27) 1.54 3.70 (0.46)
------------ ------------ ----------- ------------ ------------
Distributions to shareholders from:
Net investment income.................. (0.12) (0.02) (0.12) -- (0.02)
Net realized gain on investments....... (0.06) (0.33) (0.12) -- (0.09)
------------ ------------ ----------- ------------ ------------
Total distributions.................. (0.18) (0.35) (0.24) -- (0.11)
------------ ------------ ----------- ------------ ------------
Net asset value, end of period........... $ 15.41 $ 14.75 $ 15.37 $ 14.07 $ 10.37
------------ ------------ ----------- ------------ ------------
------------ ------------ ----------- ------------ ------------
Market value, end of period.............. $ 14.63 $ 12.75 $ 13.00 $ 14.25 $ 9.38
------------ ------------ ----------- ------------ ------------
------------ ------------ ----------- ------------ ------------
Total investment return (based on market
value).................................. 16.31%(a) 0.73% (7.25)% 52.0% (0.2)%

Ratios and supplemental data:
Net assets, end of period (in 000's)..... $111,248 $ 236,698 $ 246,610 $ 225,231 $ 166,042
Ratio of net investment income (loss) to
average net assets...................... (0.21)%(b) 0.80% 0.15% 1.04% 1.20%
Ratio of expenses to average net
assets.................................. 2.33%(b) 1.79% 1.87% 1.88% 1.92%
Portfolio turnover rate.................. 5%(a) 57% 65% 87% 109%
</TABLE>

- --------------
(a) Not annualized.

(b) Annualized.

The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
G.T. GREATER EUROPE FUND

NOTES TO
FINANCIAL STATEMENTS
April 30, 1996 (Unaudited)

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

1. SIGNIFICANT ACCOUNTING POLICIES
GT Greater Europe Fund ("Fund") is organized as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended ("1940
Act"), as a non-diversified, closed-end management investment company. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of the financial statements. The policies are in
conformity with generally accepted accounting principles and the financial
statements may include certain estimates made by management.

(A) PORTFOLIO VALUATION
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 closing of business on the day the
securities are being valued, or, lacking any sales, are valued at the mean
between closing bid and asked prices. In cases where securities are traded on
more than one exchange, or traded both on an exchange and over the counter, the
securities are valued on the exchange or in the market determined by LGT Asset
Management, Inc. ("LGT") to be the primary market.

Fixed income investments are valued at the mean of representative quoted bid and
asked prices for such investments or, if such prices are not available, at
prices for investments of comparative maturity, quality and type; however, when
LGT deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments with a maturity of 60 days
or less are valued at amortized cost, adjusted for foreign exchange translation
and market fluctuation, if any.

Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Fund's Board of 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 Fund's Board of Trustees.

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

The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.

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

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

(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be

F8
<PAGE>
G.T. GREATER EUROPE FUND

used. If an option expires on its stipulated expiration date or if the Fund
enters into a closing purchase transaction, a gain or loss is realized without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a written call option is
exercised, a gain or loss is realized from the sale of the underlying security
and the proceeds of the sale are increased by the premium originally received.
If a written put option is exercised, the cost of the underlying security
purchased would be decreased by the premium originally received. The Fund can
write options only on a covered basis, which, for a call, requires that the Fund
hold the underlying security and, for a put, requires the Fund to set aside
cash, U.S. government securities, or other liquid, high grade debt securities in
an amount not less than the exercise price or otherwise provide adequate cover
at all times while the put option is outstanding. The Fund may use options to
manage its exposure to the stock market and to fluctuations in currency values
or interest rates.

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

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

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

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

(H) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income and capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$11,442,388 which expires in 2000.

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

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

(K) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the period, restricted
securities (excluding 144A issues) are shown at the end of the Portfolio of
Investments.

F9
<PAGE>
G.T. GREATER EUROPE FUND

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

2. RELATED PARTIES
LGT is the Fund's investment manager. The Fund pays LGT management fees, which
are calculated and paid monthly, at the annualized rate of 1.25% of the Fund's
average weekly adjusted net assets (which, for this purpose, means the average
weekly value of the total assets of the Fund, minus the sum of the accrued
liabilities of the Fund, other than borrowings used for investment purposes).

Princeton Administrators, L.P. ("Princeton") acts as administrator of the Fund.
The Fund pays administration fees to Princeton, calculated and paid monthly, at
the annualized rate of 0.25% of the Fund's average weekly adjusted net assets.

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

3. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 1996, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated $7,921,180
and $219,828,817, respectively. There were no purchases or sales of U.S.
government obligations by the Fund for the six months ended April 30, 1996.

4. CAPITAL SHARES
At April 30, 1996, there were an unlimited number of shares of beneficial
interest authorized, at $0.01 par value per share.

5. REORGANIZATION
At the Reconvened Special Meeting of the Shareholders held on February 9, 1996
(the "Special Meeting"), shareholders of the Fund approved a proposal to approve
an Amended and Restated Declaration Trust providing for the restructuring of the
Fund (the "Restructuring Proposal"). The Restructuring Proposal included (a)
changing the name of the Fund to "G.T. Global Eastern Europe Fund" so as to
reflect that, under normal circumstances, at least 65% of the Fund's total
assets be invested in equity and debt securities of issuers located in Eastern
Europe, and (b) converting the Fund to an interval structure, pursuant to which
the Fund would make annual offers to repurchase at least 5%, but not more than
25%, of its outstanding shares.

In connection with the above, two separate lawsuits were filed by plaintiff
shareholders seeking to, among other things, enjoin the vote at the Special
Meeting and to force the Fund to adopt open-end status. The U.S. District Court
denied the plaintiffs' requests to enjoin the vote at the Special meeting. The
Fund, G.T. Capital Management, Inc., the predecessor to LGT Asset Management and
the Board of Directors of the Fund have reached an agreement in principle with
the plantiffs, such agreement being at no cost to the Fund, to settle the claims
made in the two lawsuits, and to permit the Fund to implement the Restructuring
Proposal. There can be no assurance that this agreement in principle will result
in a written settlement agreement acceptable to the parties, or that such
written settlement will be approved by the court.

In connection with the Restructuring Proposal, on April 3, 1996, the Fund
offered to repurchase up to 55% of the issued and outstanding shares of
beneficial interest in the Fund as of May 3, 1996. The repurchase price of the
shares was the Net Asset Value at the close of regular trading on the New York
Stock Exchange on May 10, 1996, less a repurchase fee equal to 1.20% of NAV per
share.

6. SUBSEQUENT EVENTS
The Fund's transfer agent, Boston Equiserve, indicated that 11,240,421 shares
were validly tendered and not withdrawn prior to the expiration of the Fund's
repurchase offer (see Note 5). The shares accepted for tender (8,824,940 shares
representing 55%) received cash at a repurchase offer price of $15.36, which was
equal to the Fund's net asset value of $15.54 as of May 10, 1996, less the
repurchase fee. On May 11, 1996, the fund completed its repurchase offer. This
amount has been reflected in the Financial Statements at April 30, 1996. After
the repurchase offer, the Fund has approximately 7.2 million shares outstanding.

Effective June 3, 1996, the Fund changed its name to G.T. Global Eastern Europe
Fund.

F10
<PAGE>
G.T. GREATER EUROPE FUND

7. PROXY RESULTS
During the six month period ended April 30, 1996, GT Greater Europe Fund
shareholders voted on the following proposals at a reconvened special
shareholders' meeting on February 9, 1996. The description of each proposal and
number of shares voted are as follows:

<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
<S><C> <C> <C> <C>
1. Consideration of an Amended and Restated Agreement and Declaration of 5,893,159 2,384,553 295,708
Trust: (See Note 5)
</TABLE>

<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED
FOR AGAINST ABSTAIN
-------------- -------------- --------------
<S><C> <C> <C> <C>
2. Consideration of conversion of the Fund from a closed-end investment 2,910,572 5,308,215 354,633
company
to an open-end investment company: (See Note 5)
</TABLE>

<TABLE>
<CAPTION>
SHARES VOTED SHARES WITHHELD
FOR APPROVAL
-------------- -----------------
<S><C> <C> <C>
3. To elect two Trustees to hold office until their successors have been
duly elected and have qualified:
Arthur C. Patterson................................................ 6,540,678 2,022,030
Ruth H. Quigley.................................................... 6,538,269 2,024,439
</TABLE>

F11
<PAGE>
G.T. GREATER EUROPE FUND

NOTES

- --------------------------------------------------------------------------------
<PAGE>
G.T. GREATER EUROPE FUND

NOTES

- --------------------------------------------------------------------------------
<PAGE>
G.T. GREATER EUROPE FUND

NOTES

- --------------------------------------------------------------------------------
<PAGE>
G.T. GREATER EUROPE FUND

GT GLOBAL MUTUAL FUNDS

GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR INVESTMENT COUNSELOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580. THE PROSPECTUS CONTAINS MORE COMPLETE
INFORMATION, INCLUDING CHARGES, EXPENSES AND RISKS. INVESTORS SHOULD READ
THE PROSPECTUS CAREFULLY BEFORE INVESTING.

GROWTH FUNDS

/ / GLOBALLY DIVERSIFIED FUNDS

GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.

GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside the U.S.

GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies

/ / GLOBAL THEME FUNDS

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

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

GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide

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

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

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

/ / REGIONALLY DIVERSIFIED FUNDS

GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan

GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe

GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America

/ / SINGLE COUNTRY FUNDS

GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies

GT GLOBAL AMERICA GROWTH FUND
Concentrates on small and medium-sized companies in the U.S.

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

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

GROWTH AND INCOME FUND

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

INCOME FUNDS

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

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

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

MONEY MARKET FUND

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

worldwide for stability and preservation of capital

[LOGO]
<PAGE>
[LOGO]

GT Global, Inc.
Fifty California Street
27th Floor
San Francisco, California
94111-4624

DATED MATERIAL
PLEASE EXPEDITE

GT GREATER EUROPE FUND
GRESAR606002.2M