<PAGE>
CHANCELLOR LGT
ASSET MANAGEMENT
OVER 25 YEARS
OF INVESTING
WORLDWIDE
G.T. GLOBAL
EASTERN EUROPE
FUND
SEMIANNUAL REPORT
APRIL 30, 1997
[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
The views of the Fund's manage-
ment as described in this report
are as of the date it was
written. Portfolio holdings and
allocations are as of April 30,
1997, unless otherwise noted.
Views, portfolio holdings and
allocations may have changed
subsequent to these dates.
</TABLE>
<PAGE>
[PICTURE]
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.
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.
G.T. GLOBAL EASTERN EUROPE FUND
MESSAGE FROM THE CHAIRMAN
Dear Investor,
This report is written in a style we hope you find enjoyable to read and easy
to understand. Our intention is to provide our shareholders with meaningful
information about the relative performance of GT Global Mutual Funds. We
think it is important to help investors develop a global perspective about
their investments, including developments in individual economies around the
world. Specifically, we address how macroeconomic and political events within
countries influence investment results and, ultimately, Fund performance.
We describe our management process and offer insights into the Fund's
investment strategy. Companies and countries in which the Fund invests are
discussed, as well as issues pertinent to decisions affecting the Fund.
Biographical information on portfolio managers' background and experience is
also included, and through our question and answer format, we make it
possible for shareholders to be included in the thought processes that form
the basis of their investment decisions.
We make every effort to communicate as clearly as possible because we want
you, our shareholders, to have a useful understanding of what is happening
with your investments in GT Global Mutual Funds, and why.
We would also like to emphasize that today--as global investing continues to
become increasingly complex, information travels as quickly as a keystroke,
and critical decisions must be made within shorter time frames--prudent
advice, professional management, global diversification and investing for the
long term have never been more important. As always, we appreciate and value
our shareholders in GT Global Mutual Funds.
Sincerely,
[SIGNATURE]
William J. Guilfoyle
CHAIRMAN OF THE BOARD AND PRESIDENT
GT GLOBAL MUTUAL FUNDS
1
<PAGE>
INTERVIEW WITH PORTFOLIO MANAGER SERGE SELFSLAGH
Q HOW HAS THE FUND PERFORMED?
A The Fund performed well over the six-month period to April 30, 1997,
returning a total of 17.28% based on net asset value. The share price of the
Fund, as traded on the New York Stock Exchange, rose by 7.3%. There is no
stated performance benchmark, as few benchmarks are available in this
relatively new market and none have gained widespread acceptance. We
anticipate that eastern European indices will be launched by major providers
and that an industry standard will emerge.
Strength varied considerably across eastern European markets over the
six-month period. Russia and Hungary enjoyed solid gains, while Poland and
the Czech markets, to different extents, suffered from economic overheating
problems and, hence, proved more sensitive to the rise in U.S. interest
rates.
It is useful to examine the performance of these markets in the context of
two separate periods. In general, for the three-and-a-half months to the end
of February, the main regional markets were fueled by global liquidity and a
search for higher returns. With expectations of an increase in U.S. interest
rates at the end of the month, markets consolidated as investors became
nervous and fled to more liquid instruments. As fears stabilized, regional
factors increasingly became a driving force. For example, uncertainties in
Poland and Czech precipitated a flow of funds into Russia and Hungary.
Q SPECIFICALLY, WHAT COMPANIES PERFORMED WELL?
A Hungarian companies contributed the lion's share to the Fund's returns.
Companies such as Graboplast, Magyar Olaj-es Gazipari (MOL) and BorsodChem
did particularly well. Graboplast, a producer of artificial leather and home
improvement materials, enjoyed strong gains as a result of strong growth in
construction and stable raw material prices. MOL, an integrated domestic oil
and gas company, performed strongly as results exceeded expectations.
Finally, BorsodChem benefited from relatively high growth, low labor costs
and expansion into higher-margin chemicals.
In Russia, Tatneft, one of the country's oil producers, performed well as the
stock was rerated on the back of its large, proven reserves. Mosenergo's
share price was driven by its deregulation potential given its low-cost power
generation and sales growth. Shareholder rights were bolstered as Mosenegro
dropped controversial proposals on voting restrictions and a dilutive new
share issue, reaffirming that some companies are slowly starting to realize
they have to play according to global rules if they want to be successful in
the international marketplace.
Q ARE THESE MARKETS BECOMING MORE LIQUID AND LESS SPECULATIVE?
A While domestic equity markets have been small and speculative, some are
becoming increasingly less so. Several of these markets appear more western
as they provide equity capital to enterprises on a larger scale. The degree
of transparency and liquidity, of course, varies across markets. Last year
Polish companies, for example, raised about $400 million through capital
increases and other public offerings. This figure is expected to rise sharply
this year, when 25 companies will be added to the existing 88 quoted
companies. As a result, market capitalization could double this year.
Positive assessments from ratings agencies have also paved the way for a
flood of eurobond issues, most of which were increased due to heavy demand.
This is important because it gives eastern European countries the ability to
tap foreign markets for cheaper and longer-term funds than are available from
local markets.
Q HOW WOULD YOU DESCRIBE YOUR INVESTMENT STYLE?
A We believe superior investment returns result from early identification of
undiscounted changes, either top down or bottom up, in companies or in their
surrounding environment. Our two-stage investment process is designed to
capture these two types of undiscounted change.
The top-down approach, or country selection process, is largely driven by the
regular country visits made by fund managers and members of our global
economics team. Bull markets have common characteristics: rising liquidity,
falling interest rates and inflation, falling political risk, corporate
earnings likely to exceed consensus, reform and deregulation, and an
appreciating real exchange rate. We consider a country a sell when its
economy begins to overheat, political risk increases or the consensus on
earnings exceeds our expectations.
The bottom-up approach, or stock selection process, is driven by company
visits and internal research. We favor companies with strong management,
comparative advantages, strong sales and earnings growth, leading market
share, technological and low-cost dominance, innovative products and a
favorable debt ratio. Company characteristics we consider unfavorable are
Continued p.3
2
<PAGE>
INTERVIEW WITH PORTFOLIO MANAGER SERGE SELFSLAGH CONTINUED
family ownership structures, vulnerability to risk and competition from
reform, deregulation of tariff protection, removal of monopoly powers, low
liquidity and weak accounting standards.
Q WHAT HAS DRIVEN THE IMPRESSIVE PERFORMANCE OF THE RUSSIAN MARKET?
A Again, the run-up in the Russian equities market can in part be attributed
to a flood of foreign investors seeking higher returns, a surge that also
highlights the market's potential. After seven years of negative growth, the
economy appears to have bottomed out.
Inflation has dropped from a high of 2,526% in 1992, with 16% forecast for
1997. The rouble has remained steady within a broad band against the dollar
for several months, and annual yields on government debt have fallen from
more than 200% before last summer's presidential election to less than 40%
this month. Moreover, expected within the coming months is an agreement with
the International Monetary Fund (IMF) to resume full disbursement of its
$10.1 billion budget support loan.
On the political front, Yeltsin's commitment to reform has been further
strengthened by the recent appointment of several reform-minded individuals
to his cabinet, including Anthony Chubais and Boris Nemtsov (former governor
of the Nizhny Novgrod region) as deputy prime ministers. Chubais is focusing
on tax reforms and public spending cuts, and Nemtsov is targeting reform of
natural monopolies.
A host of achievements highlight Russia's success. Last year, Russia
successfully rescheduled $70 billion of former Soviet debt. The country also
had its first international sovereign eurodollar issue since the 1917
Bolshevik revolution. At $1 billion, it was more than double the planned
amount, and the low 345-basis point premium exceeded the government's initial
expectations.
The country's largest natural gas provider, followed with its debut in
international security markets, a $430 million American Depository Receipt
(ADR). Additional progress has been made with the creation of ADRs by another
12 Russian companies (seven stocks trade as ADRs in the U.S.). Meanwhile,
equity investors jumped in, driving the market to double in dollar terms in
1996, with market cap shooting to $50 billion from $22 billion. Over the past
six months alone, the market has enjoyed an impressive run, a performance
difficult to match as ADRs significantly underperformed the local market and
new money chased local stocks.
Yet, despite progress, problems remain. Russia is going through an extremely
complex and profound transformation process, which is difficult to assess.
While it has the potential to become a major success story, further
structural reforms are needed, including a new tax code, tougher bankruptcy
procedures and reinforcement of ownership rights. This would increase
investor confidence and would give access to cheaper sources of funding. As
such, stock selection remains difficult. The most important companies are
regulated (oil, gas, telecom and electricity), and even old hands sometimes
do not seem to know the direction in which the regulatory framework is moving.
RUSSIA: UNTAPPED POTENTIAL
Population 148.1 million
Land Mass 17.1 m sq km
Real GDP Growth (annual % change)
1997e 1992-94 avg
1% -11.5%
External Debt (% of GDP)
1997e 1992-94 avg
25% 52%
Russia is Richly Endowed (% World Share)
Gas Exports 40.0
Nickel Output 23.0
Platinum Output 16.0
Coal Reserves 11.7
Oil Output 9.4
On a per-head basis, Russia produces more than the United States in terms of
natural gas, oil, steel, aluminum, nickel, platinum, diamonds and many other
minerals.
Source: The Russian Federation, JP Morgan, April--June, 1997.
Q POLAND CONTINUES TO POST STRONG GROWTH. WHY HAS MARKET PERFORMANCE BEEN
WEAK?
A Economic growth, fueled by a boom in private enterprise, has averaged a
healthy 5%-7% each year over the past three years. In fact, Poland has become
the fastest-growing medium-sized economy in Europe. While it was treated
warily by foreign investors until 1994 when it rescheduled its foreign debt,
since then foreign investment has nearly doubled every year. Moreover, it is
now poised for the privatization of its banks, telecom
Continued p.4
3
<PAGE>
INTERVIEW WITH PORTFOLIO MANAGER SERGE SELFSLAGH CONTINUED
monopoly and other companies--assets worth several billion dollars--which
should ensure further inflows over the next several years. The Polish market
is also one of the most transparent and efficient markets in the region.
On the other hand, strong economic growth in Poland has spilled into
increased demand for imports, which, coupled with a deterioration in exports,
has put the trade deficit at a worrying level. Interest rates have already
risen by 3%, and another rise of similar magnitude may be necessary as
inflation starts to pick up. Corporate earnings have disappointed as margins
have been squeezed from a relatively high level through higher competition.
Additionally, we expect volatility to increase in the months ahead, with new
issues coming to market and political uncertainty in the run-up to this
autumn's parliamentary elections.
Banks, which account for 40% of the index, have been the main underperformers
of the Polish market this year. Although value is starting to emerge, the
sector is likely to continue to suffer from further tightening of liquidity
and increasing privatizations, some of which are likely to be offered at
around book value.
Q WHAT ACCOUNTS FOR YOUR POSITIVE VIEW ON HUNGARY?
A Hungary experienced several years of economic austerity, during which
Hungarian living standards fell 15% as resources were shifted and assets sold
off in an effort to stave off looming domestic and foreign debt. Following this
period, Hungary now appears to be poised for modest recovery. Economic
fundamentals are improving, external deficits are contracting and signs of
recovery are visible in output, incomes and consumption, forecasted to
contribute to growth in GDP of 3% or so this year.
Hungary has attracted more foreign direct investment than other markets,
amounting to US$1.8 billion last year, or 35% of total investment in the
region. Its automobile industry has been the largest beneficiary of foreign
funds and was the major factor behind an impressive growth of 19% in
machinery exports last year. Hungary is also perceived as possessing the
greatest financial sophistication and offering the greatest degree of legal
protection for investors.
Over the six-month period, the Hungarian market returned a more than
respectable 43.35% (in US$, based on the IFC Investable Index). Investor
sentiment was buoyed by strengthening fundamentals, which precipitated an
upgrade in Hungary's sovereign rating just before Christmas. In addition to
better overall trends, company fundamentals improved. At the same time,
increased local and foreign participation, coupled with new listings, has
increased liquidity and trading volumes.
Q WHY HAS THE CZECH MARKET EXPERIENCED DIFFICULTIES OF LATE?
A Czech is struggling with the consequences of an opaque and inefficient
market. Many of these problems are only being addressed belatedly, following
a series of bank failures and corruption scandals. Meanwhile, the pace of
privatization and restructuring has been slow. The failure of industry to
restructure is at the heart of the economy's inability to grow faster.
A contraction in economic output took place in the first several months of
the year, along with a downgrading of overall GDP growth to about 2%-4%. An
additional source of concern lies in Czech's strong demand for imports which,
combined with weak exports, has led to a rapidly growing trade deficit.
There are, however, signs that some companies are taking the initiative in
addressing some of these problems. SPT Telecom, for example, recently
announced its intention to cut 10,000 jobs. Market response has also been
positive to moves toward regulating stock market trading more aggressively
and imposing more transparency on reported trading.
ABOUT THE PORTFOLIO MANAGERs
SERGE SELFSLAGH -- Portfolio Manager for Chancellor LGT Asset Management and
LGT Asset Management PLC (London) since 1993. Previously, Mr. Selfslagh was a
Portfolio Manager for Schroder Investment Management from 1986-92, and an
economics lecturer at the Catholic University of Brussels. He received his
M.A. from the Catholic University of Louvain and his M.Sc. from Imperial
College, London.
ALLAN CONWAY -- Head of Global Emerging Markets. Prior to joining Chancellor
LGT Asset Management in 1997, Mr. Conway spent 23 years in the financial
services industry. Most recently, from 1992-97 he was the Director,
International Equities at Hermes Investment Management. He received a B.A.
from the University of York, England.
4
<PAGE>
G.T. Global Eastern Europe Fund
Geographic Allocation of Net Assets%
April 30, 1997
Russia 41.3
Hungary 23.4
Poland 18.6
Czech Republic 6.0
Slovakia 3.8
Croatia 1.7
Ireland 1.7
Romania 1.3
Greece 1.0
U.S. & Other 1.2
Allocations may change as market conditions change.
G.T. Global Eastern Europe Fund
Key Holdings*
% of
Country Net Assets
TATNEFT A vertically integrated oil company that Russia 6.6
explores, drills, produces and refines oil and gas in
Tatarstan, the company is currently developing 58 fields
with more than 20,000 wells. Tatneft has established
several successful joint ventures with major French,
German and U.S. companies.
LUKOIL HOLDING Russia's largest oil and gas company. Russia 6.3
LUKoil holds 18% of the Russian oil and gas extracting
market and 11% of its refining market. The company's oil
reserves are estimated to be the second largest in
the world.
UNIFIED ENERGY SYSTEMS A state monopoly in the power Russia 5.5
utility sector, the company fully owns 35 of the largest
power stations and all of the high voltage network --
controlling over 85% of the domestic energy supply.
Export markets include Kazakhstan, Finland and Mongolia.
GEDEON RICHTER A manufacturer of pharmaceutical products, Hungary 5.4
it exports to the CIS, the Baltic States, Poland, the U.S.
and Japan.
BANK SLASKI A commercial bank whose activities include Poland 3.3
financing and settling of foreign transactions, and
brokerage and consulting services.
MOSENERGO Produces and distributes electric and thermal Russia 3.3
energy. The company owns sufficient capacity to accommodate
any pickup in demand over the next two years.
SURGUTNEFTEGAZ The sole exploration and production Russia 3.2
subsidiary of the third largest (as measured on crude
production and reserves) Russian, vertically integrated oil
and gas holding company of the same name. Surgutneftegaz is
also the largest natural gas producer among Russian oil
companies.
ELEKTRIM SPOLKA AKCYJNA S.A. Elektrim operates through Poland 3.1
five main divisions: power equipment, electrical machinery
and apparatus, telecommunications, the cable industry and
lighting technology. The company has export/import
activities throughout Europe, the U.S., U.K., Korea
and Russia.
BORSODCHEM RT Manufactures and supplies a diversified Hungary 3.0
line of chemical products and produces and processes raw
materials. BorsodChem mainly supplies western European
markets with its products.
EGIS RT Develops and manufactures pharmaceutical Hungary 2.9
products, including more than 2,100 different medicines,
as well as nutrition supplements. It distributes most
of its products through the wholesale company MEDIMPEX to
Europe, North America and Japan.
Source: Bloomberg.
* There is no assurance the Fund will continue to hold these or any other
securities mentioned in this report.
5
<PAGE>
G.T. GLOBAL
EASTERN EUROPE
FUND
FINANCIAL
STATEMENTS
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
PORTFOLIO OF INVESTMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS(A)
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Energy (34.1%)
Tatneft .................................................. RUS -- -- 6.6
OIL & GAS
Common (b)(e) .......................................... -- 50,000 $ 3,600,000 --
Sponsored ADR (b)(e) ................................... -- 30,000 2,160,000 --
Sponsored ADR Reg. S Shares (b)(e)(h) .................. -- 28,600 2,145,000 --
LUKoil Holding - ADR (b) ................................. RUS 134,200 7,615,850 6.3
OIL & GAS
Unified Energy Systems (b)(e) ............................ RUS 26,450,000 6,718,300 5.5
ELECTRICAL & GAS UTILITIES
Mosenergo ................................................ RUS -- -- 3.3
ENERGY SOURCES
Sponsored ADR 144A (b)(d) .............................. -- 64,800 2,608,200 --
Sponsored ADR Reg. S Shares (b)(h) ..................... -- 33,500 1,348,375 --
Surgutneftegaz Sponsored ADR (b) ......................... RUS 102,000 3,927,000 3.2
ELECTRICAL & GAS UTILITIES
Elektrim Spolka Akcyjna SA (b) ........................... POL 424,745 3,814,914 3.1
ENERGY SOURCES
Magyar Olaj-es Gazipari RT GDR (b) ....................... HGRY 153,000 2,754,000 2.3
OIL & GAS
Ceske Energeticke Zavody AS (e) .......................... CZCH 63,600 1,981,910 1.6
ENERGY SOURCES
Bydgoska Fabryka Kabli SA (b)(e) ......................... POL 175,000 1,328,273 1.1
ENERGY SOURCES
Nafta Gbely AS (e) ....................................... SLVK 30,000 1,318,573 1.1
OIL & GAS
------------
41,320,395
------------
Finance (10.4%)
Bank Slaski SA (b) ....................................... POL 46,659 3,962,031 3.3
BANKS - MONEY CENTER
Bank Rozwoju Eksportu SA (b) ............................. POL 148,700 3,550,553 2.9
BANKS - MONEY CENTER
Ceska Sporitelna GDR (b)(e) .............................. CZCH 212,000 2,120,000 1.8
BANKS - MONEY CENTER
Zagrebacka Banka GDR (b)(e) .............................. HGRY 48,940 1,731,253 1.4
BANKS - MONEY CENTER
Ergo Bank SA ............................................. GK 19,167 1,263,582 1.0
BANKS - MONEY CENTER
------------
12,627,419
------------
Materials/Basic Industry (9.0%)
BorsodChem RT Sponsored GDR (b) .......................... HGRY 99,000 3,588,750 3.0
CHEMICALS
Vychodoslovenske Zeleziarne AS (e) ....................... SLVK 150,000 3,307,608 2.7
METALS - STEEL
Pannonplast RT (b) ....................................... HGRY 60,000 2,991,125 2.5
MISC. MATERIALS & COMMODITIES
TKI "B" Shares (b) ....................................... POL 975 585,000 0.5
MISC. MATERIALS & COMMODITIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
F1
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS(A)
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Mezogep RT (b)(g) ........................................ HGRY 25,000 $ 301,304 0.3
CHEMICALS
------------
10,773,787
------------
Consumer Non-Durables (8.9%)
Russkie Samotsvety (b)(g) ................................ RUS 50,000 2,650,000 2.2
PERSONAL CARE
Graboplast RT ............................................ HGRY 56,000 2,567,766 2.1
HOUSEHOLD PRODUCTS
Pick Szeged RT 144A GDR (b)(d) ........................... HGRY 40,000 2,500,000 2.1
FOOD MANUFACTURER
Agros Holdings SA ........................................ POL -- -- 1.6
FOOD & BEVERAGE
C Series (b) ........................................... -- 35,700 1,016,129 --
D Series (b) ........................................... -- 34,930 994,213 --
Sun Brewing Ltd. GDR (b)(e) .............................. RUS 129,600 1,036,800 0.9
BEVERAGES - ALCOHOL
------------
10,764,908
------------
Health Care (8.3%)
Gedeon Richter RT (b) .................................... HGRY 86,000 6,501,589 5.4
PHARMACEUTICALS
Egis RT .................................................. HGRY 56,022 3,560,070 2.9
PHARMACEUTICALS
------------
10,061,659
------------
Services (7.7%)
SPT Telecom AS (e) ....................................... CZCH 30,000 3,171,165 2.6
TELECOM - OTHER
Rostelecom (b)(e) ........................................ RUS 610,000 2,379,000 2.0
TELEPHONE - LONG DISTANCE
Vimpel Communications Sponsored ADR (b)(e) ............... RUS 71,550 2,164,388 1.8
TELECOM - OTHER
Russian Telecommunication Development Corp. .............. RUS -- -- 0.7
TELEPHONE NETWORKS
Non-voting (b)(c)(e)(g) ................................ -- 52,600 526,000 --
Voting (b)(c)(e)(g) .................................... -- 38,400 384,000 --
PLD Telekom, Inc. (e) .................................... RUS 140,000 743,750 0.6
TELEPHONE - LONG DISTANCE
Technoimpex (b)(c)(e)(g) ................................. HGRY 1,400 -- --
WHOLESALE & INTERNATIONAL TRADE
------------
9,368,303
------------
Investment Funds (3.0%)
Baltic Republic Fund (b)(c)(e)(g) ........................ IRE 9,000 2,052,000 1.7
COUNTRY FUND
Societe Generale Romania Fund (b)(e) ..................... ROM 15,000 1,590,000 1.3
COUNTRY FUND
------------
3,642,000
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS(A)
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Capital Goods (2.7%)
Exbud SA (b)(e) .......................................... POL 218,719 $ 2,670,004 2.2
CONSTRUCTION
Stomil Olsztyn SA (b)(e) ................................. POL 45,467 560,788 0.5
PLASTICS & RUBBER
------------
3,230,792
------------
Multi-Industry/Miscellaneous (1.7%)
Pliva D.D. GDR Reg. S shares (b)(e)(h) ................... CRT 125,800 2,063,120 1.7
MULTI-INDUSTRY
------------ -----
TOTAL EQUITY INVESTMENTS (cost $89,898,452) ................ 103,852,383 85.8
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS AMOUNT (NOTE 1) ASSETS(A)
- ------------------------------------------------------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (13.0%)
Russia When Issued, FRN, due 1/15/21 (b)(e) .............. RUS 11,000,000 6,435,000 5.3
Republic of Poland, PDI Bonds, 4.00%, due 10/27/14
(b)(f) .................................................. POL 5,000,000 4,056,250 3.4
Russian Treasury Bill, 0%, due 6/09/97 (b) ............... RUS 3,600,000 3,545,784 2.9
Hungarian Government Bond, Series 97Z2, 30.00%, due
7/5/1997 (g) ............................................ HGRY 289,000,000 1,693,909 1.4
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $13,612,566) .......... 15,730,943 13.0
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS (0.0%) AMOUNT (NOTE 1) ASSETS(A)
- ------------------------------------------------------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Russian Ministry of Finance Bond 5/14/99, Call Option,
strike $86.625, expires 5/07/97 (cost $33,681) (g) ...... US 2,173,000 652 --
------------ -----
GOVERNMENT/AGENCY
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (11.0%) (NOTE 1) ASSETS(A)
- ------------------------------------------------------------ ------------ -------------
<S> <C> <C> <C> <C>
Dated April 30, 1997, with State Street Bank & Trust
Company, due May 1, 1997, for an effective yield of 5.27%
collateralized by $12,975,000 U.S. Treasury Bonds, 7.25%
due 5/15/16 (market value of collateral is $13,689,225
including accrued interest). (cost $13,324,000) ......... $ 13,324,000 11.0
------------ -----
TOTAL INVESTMENTS (cost $116,868,699) * .................... 132,907,978 109.8
Other Assets and Liabilities ............................... (11,869,927) (9.8)
------------ -----
NET ASSETS ................................................. $121,038,051 100.0
------------ -----
------------ -----
</TABLE>
- --------------
(a) Percentages indicated are based on net assets of $121,038,051.
(b) U.S. currency denominated.
(c) At April 30, 1997, the Fund owned the following restricted
securities constituting 2.4% of net assets which may not be
publicly sold without registration under the Securites Act of 1933
(Note 1). Additional information on restricted securities is as
follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION VALUE
DATE SHARES COST PER SHARE
----------- ------ ----------- ------------
<S> <C> <C> <C> <C>
Baltic Republic Fund.................... 09/02/94 9,000 $ 900,000 $228.00
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>
(d) 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.
(e) Non-income producing security.
(f) Coupon will increase periodically based upon a predetermined
schedule. Stated interest rate in effect at April 30, 1997.
(g) Valued in good faith at fair value using procedures approved by the
Board of Directors (see Note 1 of Notes to Financial Statements).
(h) Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
* For Federal income tax purposes, cost is $117,197,199 and
appreciation (depreciation) of securities is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 23,844,514
Unrealized depreciation: (8,133,735)
-------------
Net unrealized appreciation: $ 15,710,779
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
FRN--Floating Rate Note
GDR--Global Depository Receipt
PDI--Past Due Interest
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at April 30, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS(A)
-------------------------------------------
FIXED
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY INCOME OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Croatia (CRT/HRK) .................... 1.7 1.7
Czech Republic (CZCH/CZK) ............ 6.0 6.0
Greece (GK/GRD) ...................... 1.0 1.0
Hungary (HGRY/HUF) ................... 22.0 1.4 23.4
Ireland (IRE/IEP) .................... 1.7 1.7
Poland (POL/PLN) ..................... 15.2 3.4 18.6
Romania (ROM/ROL) .................... 1.3 1.3
Russia (RUS/RUR) ..................... 33.1 8.2 41.3
Slovakia (SLVK/SKK) .................. 3.8 3.8
Short-term & Other ................... 0.0 1.2 1.2
------ ----- ----- -----
Total ............................... 85.8 13.0 1.2 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
(a) Percentages indicated are based on Net Assets of $121,038,051.
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $116,868,699) (Note 1).............................. $132,907,978
U.S. currency...................................................................... $ 810
Foreign currencies (cost $4,361)................................................... 4,257 5,067
---------
Receivable for securities sold................................................................ 1,035,428
Dividends and interest receivable............................................................. 816,841
Prepaid expenses.............................................................................. 18,196
-----------
Total assets................................................................................ 134,783,510
-----------
Liabilities:
Payable for securities purchased.............................................................. 7,080,164
Payable for fund shares redeemed (Note 5)..................................................... 6,372,018
Payable for investment management fees (Note 2)............................................... 128,534
Payable for printing and postage expenses..................................................... 55,402
Payable for professional fees................................................................. 43,095
Payable for administration fees (Note 2)...................................................... 25,707
Payable for custodian fees.................................................................... 17,302
Payable for Trustees' fees and expenses (Note 2).............................................. 7,721
Other liabilities............................................................................. 15,516
-----------
Total liabilities........................................................................... 13,745,459
-----------
Net assets...................................................................................... $121,038,051
-----------
-----------
Net asset value per share ($121,038,051 DIVIDED BY 6,859,397 shares outstanding)................ $ 17.65
-----------
-----------
Net assets consist of:
Paid in capital (Note 4)...................................................................... $92,621,300
Undistributed net investment income........................................................... 610,497
Accumulated net realized gain on investments and foreign currency transactions (Note 1)....... 11,888,617
Net unrealized depreciation on translation of assets and liabilities in foreign currencies.... (121,642)
Net unrealized appreciation of investments.................................................... 16,039,279
-----------
Total -- representing net assets applicable to capital shares outstanding....................... $121,038,051
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest and other......................................................................... $ 1,143,650
Dividends (net of foreign withholding tax of $4,211)....................................... 23,863
-----------
Total investment income.................................................................. 1,167,513
-----------
Expenses:
Investment management fees (Note 2)........................................................ 772,612
Administration fees (Note 2)............................................................... 154,523
Professional fees.......................................................................... 75,154
Printing and postage expenses.............................................................. 73,236
Custodian fees............................................................................. 42,815
Transfer agent fees........................................................................ 17,839
Trustees' fees and expenses (Note 2)....................................................... 14,956
Other expenses............................................................................. 23,804
-----------
Total expenses........................................................................... 1,174,939
-----------
Net investment loss.......................................................................... (7,426)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments.............................................. $12,557,398
Net realized loss on foreign currency transactions............................ (340,346)
-----------
Net realized gain during the period...................................................... 12,217,052
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies........................................................ (98,499)
Net change in unrealized appreciation of investments.......................... 6,546,242
-----------
Net unrealized depreciation during the period............................................ 6,447,743
-----------
Net realized and unrealized gain on investments and foreign currencies....................... 18,664,795
-----------
Net increase in net assets resulting from operations......................................... $18,657,369
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED
1997 OCTOBER 31,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss)............................................... $ (7,426) $ 2,032,527
Net realized gain on investments and foreign currency transactions......... 12,217,052 37,161,643
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies......................................... (98,499) 73,029
Net change in unrealized appreciation of investments....................... 6,546,242 (14,682,286)
------------- ------------
Net increase in net assets resulting from operations....................... 18,657,369 24,584,913
Distributions to shareholders: (Note 1)
From net investment income................................................. (486,813) (1,912,552)
From net realized gain on investments...................................... (12,964,260) (981,975)
------------- ------------
Total distributions...................................................... (13,451,073) (2,894,527)
Capital share transactions: (Note 4)
Cost of shares redeemed pursuant to tender offer (Note 5).................. (6,372,018) (136,185,045)
------------- ------------
Total decrease in net assets............................................. (1,165,722) (114,494,659)
Net assets:
Beginning of period........................................................ 122,203,773 236,698,432
------------- ------------
End of period.............................................................. $121,038,051* $122,203,773**
------------- ------------
------------- ------------
<FN>
- --------------
* Including undistributed net investment income of $610,497.
** Including undistributed net investment income of $1,104,736.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1997 ----------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 16.92 $ 14.75 $ 15.37 $ 14.07 $ 10.37 $ 10.94
------------ ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.00 0.24 0.11 0.02 0.12 0.13
Net realized and unrealized gain
(loss) on investments................ 2.59 2.11 (0.38) 1.52 3.58 (0.59)
------------ ---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.59 2.35 (0.27) 1.54 3.70 (0.46)
------------ ---------- ---------- ---------- ---------- ----------
Distributions to shareholders from:
Net investment income................. (0.07) (0.12) (0.02) (0.12) 0.00 (0.02)
Net realized gain on investments...... (1.79) (0.06) (0.33) (0.12) 0.00 (0.09)
------------ ---------- ---------- ---------- ---------- ----------
Total distributions................. (1.86) (0.18) (0.35) (0.24) 0.00 (0.11)
------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 17.65 $ 16.92 $ 14.75 $ 15.37 $ 14.07 $ 10.37
------------ ---------- ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ---------- ----------
Market value, end of period............. $ 14.75 $ 13.75 $ 12.75 $ 13.00 $ 14.25 $ 9.38
------------ ---------- ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ---------- ----------
Total investment return (based on market
value)................................. 22.33 %(a) 9.35% 0.73% (7.25)% 52.0% (0.2)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 121,038 $ 122,204 $ 236,698 $ 246,610 $ 225,231 $ 166,042
Ratio of net investment income (loss) to
average net assets..................... (0.01)%(b) 1.09% 0.80% 0.15% 1.04% 1.20%
Ratio of expenses to average net
assets................................. 1.92 %(b) 1.87% 1.79% 1.87% 1.88% 1.92%
Portfolio turnover rate................. 102 %(b) 69% 57% 65% 87% 109%
Average commission rate paid on
portfolio transactions................. $ 0.1326 $ 0.0420 N/A N/A N/A N/A
</TABLE>
- ----------------
(a) Not annualized.
(b) Annualized.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
NOTES TO
FINANCIAL STATEMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
G.T. Global Eastern 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 close 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 Chancellor
LGT Asset Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
asked prices for 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
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
F10
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
bid prices obtained from brokers, unless a quotation from only one broker is
available, in which case only that broker's price will be used. If an option
expires on its stipulated expiration date or if the Fund enters into a closing
purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security and, for a put, requires the Fund to set aside cash, U.S. government
securities, or other liquid securities, in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock 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. Dividend income is 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 counterparty 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.
(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.
F11
<PAGE>
G.T. GLOBAL EASTERN 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
Chancellor LGT Asset Management, Inc. is the Fund's investment manager. The Fund
pays the Manager 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 the Manager or any of it's 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, 1997, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$59,037,205 and $62,782,739, respectively. There were no purchases or sales of
U.S. government obligations by the Fund for the six months ended April 30, 1997.
4. CAPITAL SHARES
At April 30, 1997, there were an unlimited number of shares of beneficial
interest authorized, at $0.01 par value per share. 16,045,345 shares were issued
and 6,859,397 shares remained outstanding.
5. ANNUAL REPURCHASE OFFER
Pursuant to the Fund's policy of conducting annual repurchase offers, on March
26, 1997, the Fund offered to repurchase up to 5% of the issued and outstanding
shares of beneficial interest in the Fund. The repurchase offer expired on April
18, 1997 and the shares were repurchased at the Net Asset Value at the close of
regular trading on the New York Stock Exchange on May 2, 1997, less a repurchase
fee equal to 1.473% of NAV per share.
The Fund's agent, Boston Equiserve, indicated that 3,248,692 shares were validly
tendered and not withdrawn prior to the expiration of the Fund's repurchase
offer. The shares accepted for tender (361,021 shares representing 5%) received
cash at a repurchase offer price of $17.39, which was equal to the Fund's net
asset value of $17.65 as of May 2, 1997, less the repurchase fee. After the
repurchase offer, the Fund has approximately 6.9 million shares outstanding;
361,021 shares were returned to the Fund's Treasury.
F12
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
G.T. GLOBAL EASTERN EUROPE FUND
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
FUNDS, PLEASE CONTACT YOUR INVESTMENT ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580. THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING
CHARGES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET INVESTING.
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
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
Seeks companies that build, improve or maintain 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 MID CAP GROWTH FUND
Concentrates on 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 securities
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
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
[LOGO]
<PAGE>
[LOGO]
GT Global, Inc.
Fifty California Street
27th Floor
San Francisco, California
94111-4624
DATED MATERIAL
PLEASE EXPEDITE
GT GLOBAL EASTERN EUROPE FUND
GRESAR7XXXXM.XXX
