<PAGE>
LGT ASSET MANAGEMENT
A PIONEER IN
GLOBAL
INVESTING
G.T. GLOBAL
DEVELOPING
MARKETS
FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1995
[LOGO]
<PAGE>
TABLE
OF CONTENTS
<TABLE>
<S> <C>
Report from the Fund
Managers............... 1
Report of Independent
Accountants............ F-1
Financial Statements... F-2
</TABLE>
REPORT FROM THE FUND MANAGERS
We are pleased to present the Annual Report of the G.T. Global Developing
Markets Fund, Inc. for the 12 months ended December 31, 1995. The Fund's primary
investment objective is long-term capital appreciation; its secondary objective
is income consistent with seeking long-term capital appreciation. The Fund
normally invests in the developing markets of Asia, Europe and Latin America, as
well as other markets we believe offer opportunities.
PERFORMANCE REVIEW
As of December 31, 1995, the Fund had 55.7% of its net assets invested in
emerging market equities, 41.6% in emerging market debt instruments and the
remainder in cash and other assets. The Fund's total return for the 12 months
ended December 31, 1995, based on net asset value (NAV), was -0.95%. The share
price of the Fund, as traded on the New York Stock Exchange, was at a 15.9%
discount to NAV on December 31.
In 1995, we experienced a year of high volatility throughout emerging markets.
Although emerging debt securities ended the year in positive territory, almost
every emerging equity market finished the year down in dollar terms.
MARKET REVIEW
Some of the decline in emerging markets was triggered by events that often had
little or no bearing on the underlying fundamental values of the affected
markets. These episodes included the Chiapas unrest in Mexico and the alleged
illicit campaign contributions to the Colombian presidential election. Much more
relevant was the hike in interest rates by the U.S. Federal Reserve (the Fed) in
early February 1994, and the devaluation of the Mexican peso on December 20,
1994.
The Fed's move set off a series of U.S. interest rate hikes that continued
through June 1995, provoking a generalized selloff of emerging market
securities. Well before the end of 1995, this trend reversed and global interest
rates began to decline once again.
The Mexican peso devaluation was more worrisome, as it put into question the
credibility of the Mexican authorities and their capacity and willingness to
face serious imbalances, such as a ballooning external trade deficit, without
resorting to inflationary measures. Because Mexico had become the benchmark of
emerging markets, the credibility issue spilled over into emerging market stock
and bond markets.
1
<PAGE>
Many emerging countries were forced to raise interest rates to maintain the
value of their currencies -- currencies that had previously been considered
sound. Mexico and Argentina had to raise rates while their economies were
falling into recession. Brazil managed a balancing act, using high interest
rates to slow the economy and maintain its foreign exchange rate. In Asia,
Thailand and Indonesia raised rates in an effort to keep their economies from
overheating. In India, the Mexican crisis encouraged a selloff, although other
domestic problems concerning politics and the budget were ultimately responsible
for the Bombay stock market's decline.
Less than six months into the crisis, volatility abated. By the end of October,
the bond markets demonstrated their resilience by recovering substantially all
the losses suffered due to the Mexican devaluation. Equities were not so
fortunate. Although a handful of markets such as Hong Kong, Argentina,
Singapore, Greece and South Africa ended the year positively, the ride was a
bumpy one. Other stock markets, such as The Philippines, India, Pakistan,
Brazil, Mexico and Colombia, ended the year with double-digit declines.
Some remnants of the crisis remain; for example, recessions in Mexico and
Argentina. We believe there is also increased awareness of these nations'
commitment to continue to implement sound policies despite recent adversities.
PORTFOLIO STRATEGY
As panic spread throughout emerging markets during the first quarter of 1995, we
increased our debt weighting. We did so with the view that in an environment of
such uncertainty, corporate earnings might disappoint, but sovereign issuers of
debt would continue to pay their bills, and even possibly experience an upward
rerating, given the depressed levels to which their debt had fallen.
We also aggressively diversified geographically and increased our debt position
in eastern Europe with purchases in Bulgaria, Poland and Russia. In addition, we
bought debt in Nigeria and reduced our holdings in Morocco. Later in the year,
we increased our overall equity portion as well, ending the year almost fully
invested.
OUTLOOK
While emerging markets have been volatile and economic activity may not be as
high as expected a year ago, we believe emerging economies continue to provide
considerable value and growth potential. In broad terms, we believe the emerging
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1995 A YEAR OF
DIVERGENCE ACROSS
EMERGING MARKETS*
<S> <C>
South Africa 19.98%
Argentina 12.86
Chile -2.66
Korea -3.32
Brazil -19.25
Mexico -21.94
Colombia -25.54
Venezuela -27.10
India -30.94
* Yearly return of the Morgan Stanley Capital
Indices.
Returns are in U.S. dollars with reinvested
dividends
</TABLE>
2
<PAGE>
countries of East and Southeast Asia are likely to continue their high growth
rates, though slightly slower than before. When we consider that several
countries have experienced growth of 7%-10% per year for several years, we
believe a slight slowdown may actually be healthy for long-term economic
performance, especially in light of an easing global interest rate environment.
Finally, we believe the Mexican crisis actually resulted in a strengthening of
many Latin American countries' economic fundamentals, such as diminishing
current account deficits, while reinforcing the need for a vigilant policy on
growth and inflation.
We believe the Latin American region is improving and think the tight monetary
and fiscal policies implemented in the aftermath of the Mexican crisis have
already produced the expected results, leaving room for a more accommodative
policy stance. Eastern and central Europe are now enjoying the strongest growth
in the last three years, and we believe monetary policy may also be relaxed in
Bulgaria, the Czech Republic and Hungary, if stability persists. If, as
expected, Russia bottoms at current levels, the growth potential for this group
of countries could exceed 6% in 1995, versus a 0.2% decline in 1994.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EMERGING MARKET BRADYS RALLY
JP MORGAN EMBI
DATE VALUE
<S> <C>
6-Jan 168.58
13-Jan 168.82
20-Jan 163.41
27-Jan 164.19
3-Feb 169.27
10-Feb 163.54
17-Feb 161.08
24-Feb 161.11
3-Mar 153.41
10-Mar 142.94
17-Mar 143.16
24-Mar 149.64
31-Mar 154.8
7-Apr 161.25
14-Apr 163.25
21-Apr 170.18
28-Apr 171.42
5-May 179.39
12-May 183.53
19-May 187.94
26-May 187.68
2-Jun 190.52
9-Jun 176.13
16-Jun 185.45
23-Jun 183.75
30-Jun 190.14
7-Jul 197.45
14-Jul 195.33
21-Jul 188.8
28-Jul 191.34
4-Aug 193.92
11-Aug 194.48
18-Aug 193.21
25-Aug 192.36
1-Sep 195.71
8-Sep 196.57
15-Sep 200.66
22-Sep 199.77
29-Sep 201.48
6-Oct 201.62
13-Oct 201.68
20-Oct 203.1
27-Oct 197.85
10-Nov 195.15
17-Nov 200.49
24-Nov 201.87
1-Dec 207.36
8-Dec 209.4
15-Dec 209.55
22-Dec 217.89
29-Dec 222.03
</TABLE>
In contrast to the largely negative performance across emerging stock markets,
emerging market Brady bonds had a volatile, but considerably strong year,
returning 31.7%.
* It includes the effect of reinvested dividends
Source: Bloomberg
Last, but not least, we will continue to diversify by investing in emerging
Asian markets, which have historically provided high growth rates, spurred by
high export growth.
CHRISTIAN WIGNALL SIMON NOCERA
CHIEF INVESTMENT OFFICER PORTFOLIO MANAGER
GLOBAL EQUITIES SAN FRANCISCO
JAMES M. BOGIN
PORTFOLIO MANAGER
SAN FRANCISCO
JANUARY 16, 1996
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
3
<PAGE>
KEY PORTFOLIO HOLDINGS*
PEREGRINE INVESTMENT HOLDINGS LTD. HONG KONG
Peregrine Investment is an investment holding company, active in corporate
finance, securities brokerage, trading of fixed income securities, direct
investment, and other financial services.
REMBRANDT GROUP LTD. SOUTH AFRICA
Rembrandt Group is an investment holding company, with activities in tobacco,
banking, forestry, printing, packaging and financial services. The group is also
involved in life insurance and medical services, and has interests in mining and
food and beverages.
BANCO LATINOAMERICANO DE EXPORTACIONES S.A. (BLADEX) MEXICO
This bank specializes in trade finance across Latin America and the Caribbean.
Bladex makes mainly short-term, dollar-denominated loans to banks in the region
who loan funds to businesses in their respective countries.
PANAMERICAN BEVERAGES, INC. MEXICO
Panamco is the largest soft drink bottler in Latin America and the largest Coca-
Cola bottler outside of the United States. The company's territory is comprised
of around 70 million people.
LONRHO PLC. UK
Lonrho is a diversified conglomerate whose key assets include mining, hotels and
assorted agricultural and industrial businesses. Though Lonrho is based in the
UK, many of its assets are in Africa.
PAKISTAN TELECOMMUNICATIONS CO., LTD. PAKISTAN
Pakistan Telecom is the national telephone company of Pakistan, providing basic
local and long-distance services. The company is in the process of
privatization, which is scheduled to be completed in August 1996. With line
penetration in Pakistan at only 2%, we believe there is considerable room for
network growth.
SINGER CO., N.V. HONG KONG
Singer is the largest sewing machine manufacturer in the world; it is also one
of the largest distributors/retailers of sewing machines and other consumer
durables in emerging markets, with over 40,000 distribution points including
over 1,100 stores. Singer recently reentered China, where sewing machine
consumption is 40% of world consumption.
COMMERCIAL BANK OF KOREA SOUTH KOREA
Commercial Bank of Korea provides commercial, retail and international banking
services. We anticipate a general recovery in Korea's banking sector earnings as
a result of a decline in the loan loss provision, healthy economic growth in
1996 and continued financial deregulation, which would give banks more
flexibility in establishing lending rates and lending targets.
KEPPEL CORP., LTD. SINGAPORE
Keppel Corp is a diversified conglomerate with shipbuilding and ship repair,
real estate, banking, telecommunications and engineering activities.
DICKSON CONCEPTS INTERNATIONAL LTD. HONG KONG
Dickson Concepts is a wholesale and retail distributor of watches, writing
instruments, jewelry, lighters, clothing, leather goods and other merchandise.
Sales in Hong Kong and Southeast Asia compose the majority of earnings. In the
UK, the company also owns Harvey Nichols, a high-end retailer.
- ------------------
* There can be no assurance the Fund will continue to hold these securities.
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
PORTFOLIO SUMMARY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GEOGRAPHIC ALLOCATION OF NET ASSETS
<S> <C>
AS OF DECEMBER 31, 1995
LATIN AMERICA 45.6
ASIA-PACIFIC 24.9
EUROPE 14.7
AFRICA 12.1
NORTH AMERICA & OTHER 2.7
SECTOR ALLOCATION OF NET ASSETS
AS OF DECEMBER 31, 1995
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS 35.5
FINANCE 19.4
MULTI-INDUSTRY/MISCELLANEOUS 13.8
SERVICES 7.6
CONSUMER NON-DURABLES 7.0
MATERIALS/BASIC INDUSTRIES 4.7
SOVEREIGN DEBT 4.7
OTHER EQUITY INVESTMENTS 3.2
CORPORATE BONDS 1.4
SHORT-TERM & OTHER 2.7
</TABLE>
ALLOCATIONS WILL CHANGE BASED ON CURRENT MARKET CONDITIONS.
4
<PAGE>
G.T. GLOBAL
DEVELOPING
MARKETS
FUND, INC.
FINANCIAL
STATEMENTS
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
G.T. Global Developing Markets Fund, Inc. ("Fund"):
We have audited the accompanying statement of assets and liabilities of G.T.
Global Developing Markets Fund, Inc., including the portfolio of investments, as
of December 31, 1995, the related statement of operations for the year then
ended, the statements of changes in net assets and the financial highlights for
the year then ended and for the period from January 11, 1994 (commencement of
operations) to December 31, 1994. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
G.T. Global Developing Markets Fund, Inc. as of December 31, 1995, the results
of its operations for the year then ended, the changes in its net assets and the
financial highlights for the year then ended and for the period from January 11,
1994 (commencement of operations) to December 31, 1994, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 12, 1996
F-1
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (19.4%)
Peregrine Investment Holdings Ltd. ........................ HK 9,955,000 $ 12,875,065 3.1
INVESTMENT MANAGEMENT
Banco LatinoAmericano de Exportaciones S.A. (Bladex) "E"{\/
} ....................................................... PAN 254,800 11,848,200 2.8
OTHER FINANCIAL
Commercial Bank of Korea .................................. KOR 900,280 9,174,569 2.2
BANKS-MONEY CENTER
Administradora de Fondos de Pensiones Provida S.A. - ADR{\/
} ....................................................... CHLE 248,400 6,862,050 1.6
OTHER FINANCIAL
Suramericana de Seguros S.A. ............................. COL 376,164 6,683,984 1.6
INSURANCE - MULTI-LINE
Uniao Bancos Brasileiras "A" Preferred ................... BRZL 167,100,000 6,534,733 1.5
BANKS-MONEY CENTER
Banco Ganadero S.A.: ...................................... COL -- -- 1.3
BANKS-REGIONAL
ADR{\/} ................................................. -- 387,500 5,037,500 --
144A GDR{\/} ........................................... -- 15,000 285,000 --
Banco Itau S.A. Preferred ................................. BRZL 18,540,000 5,170,670 1.2
BANKS-REGIONAL
Daewoo Securities Co. ..................................... KOR 198,460 5,168,096 1.2
SECURITIES BROKER
Bank Gdanski - GDR-/- {\/} ............................... POL 324,200 3,152,845 0.7
BANKS-REGIONAL
Samsung Securities Co., Ltd. .............................. KOR 75,670 2,546,071 0.6
SECURITIES BROKER
Banco de Colombia - 144A GDR{.} {\/} ...................... COL 357,200 1,786,000 0.4
BANKS-MONEY CENTER
Banco Commercial S.A.: ................................... URGY -- -- 0.4
BANKS-REGIONAL
Reg. S GDR(.) -/- {\/} .................................. -- 64,300 948,425 --
144A ADR{.} -/- {\/} .................................... -- 56,325 830,794 --
Hanshin Securities Co. .................................... KOR 93,090 1,656,107 0.4
SECURITIES BROKER
Banco Bradesco S.A. Preferred ............................. BRZL 159,956,279 1,399,226 0.3
BANKS-MONEY CENTER
Robinson's Land Corp. "B"-/- .............................. PHIL 4,364,000 616,055 0.1
REAL ESTATE
------------
82,575,390
------------
Multi Industry/Miscellaneous (13.8%)
Rembrandt Group Ltd. ...................................... SAFR 1,242,700 11,934,285 2.8
CONGLOMERATE
Lonrho PLC ................................................ UK 3,696,000 10,099,301 2.4
CONGLOMERATE
Keppel Corp., Ltd. ........................................ SING 1,019,000 9,080,198 2.2
CONGLOMERATE
Malbak Ltd. ............................................... SAFR 856,200 5,931,966 1.4
CONGLOMERATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Multi Industry/Miscellaneous (Continued)
Jardine Matheson Holding Ltd.{\/} ......................... HK 754,200 $ 5,166,270 1.2
CONGLOMERATE
ROC Taiwan Fund-/- ........................................ US 473,900 4,975,950 1.2
COUNTRY FUNDS
Grasim Industries Ltd.: ................................... IND -- -- 0.7
MISCELLANEOUS
144A GDR{.} {\/} ........................................ -- 113,000 2,203,500 --
144A GDR Tranche 2{.} -/- {\/} .......................... -- 44,000 858,000 --
Barlow Ltd. ............................................... SAFR 200,000 2,853,615 0.7
CONGLOMERATE
Aboitiz Equity Ventures, Inc.-/- .......................... PHIL 10,197,000 1,945,250 0.5
CONGLOMERATE
Mahindra & Mahindra Ltd. - GDR-/- {\/} .................... IND 88,000 1,132,560 0.3
MISCELLANEOUS
BHI Corp.{\/} ............................................. BLZ 49,000 771,750 0.2
CONGLOMERATE
Peregrine Indian Smaller Companies Fund - 144A{.} -/-
{\/} .................................................... UK 5,000 327,500 0.1
COUNTRY FUNDS
Jurong Shipyard Ltd. ...................................... SING 42,000 323,762 0.1
MISCELLANEOUS
------------
57,603,907
------------
Services (7.6%)
Pakistan Telecommunications Co., Ltd. - 144A GDR{.} -/- {\/
} ....................................................... PAK 110,409 9,384,765 2.2
TELEPHONE NETWORKS
Dickson Concepts International Ltd. ....................... HK 9,339,000 8,696,430 2.1
WHOLESALE & INTERNATIONAL TRADE
SPT Telecom-/- ........................................... CZCH 73,150 6,914,144 1.6
TELEPHONE NETWORKS
South China Morning Post (Holdings) Ltd. .................. HK 8,940,000 5,463,205 1.3
BROADCASTING & PUBLISHING
Sears Roebuck de Mexico, S.A. de C.V. "B1"-/- ............ MEX 708,800 1,666,140 0.4
RETAILERS-OTHER
Genting Bhd. .............................................. MAL 1,500 12,524 --
LEISURE & TOURISM
Gran Cadena de Almacenes Colombianos S.A. ................. COL 10,000 11,307 --
RETAILERS-OTHER
Resorts World Bhd. ........................................ MAL 1,000 5,356 --
LEISURE & TOURISM
------------
32,153,871
------------
Consumer Non-Durables (7.0%)
Panamerican Beverages, Inc. "A"{\/} ....................... MEX 332,400 10,636,800 2.5
BEVERAGES - NON ALCOHOLIC
Amway Asia Pacific Ltd.{\/} ............................... HK 140,000 4,987,500 1.2
HOUSEHOLD PRODUCTS
Companhia Tecidos Norte de Mina Preferred-/- .............. BRZL 12,499,861 4,180,771 1.0
TEXTILES & APPAREL
Companhia Cervejaria Brahma Preferred ..................... BRZL 9,270,000 3,816,088 0.9
BEVERAGES - ALCOHOLIC
Bavaria ................................................... COL 953,038 2,597,882 0.6
BEVERAGES - ALCOHOLIC
Sudamtex de Venezuela - ADR{\/} ........................... VENZ 402,050 1,758,969 0.4
TEXTILES & APPAREL
JCT Limited - GDR-/- {\/} ................................. IND 124,000 682,000 0.2
TEXTILES & APPAREL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Noble China-/- ............................................ CAN 150,000 $ 604,263 0.1
BEVERAGES - ALCOHOLIC
South African Breweries Ltd. .............................. SAFR 12,400 454,219 0.1
BEVERAGES - ALCOHOLIC
------------
29,718,492
------------
Materials/Basic Industry (4.7%)
Cemex, S.A. de C.V. "B" ................................... MEX 1,550,375 5,637,727 1.3
CEMENT
Paranapanema S.A. Min., Ind. E Construacao Preferred ...... BRZL 380,000,000 4,888,340 1.2
METALS - NON-FERROUS
SA Iron & Steel Industrial Corp., Ltd. (ISCOR) ............ SAFR 3,130,000 2,816,957 0.7
METALS - STEEL
Gujarat Ambuja Cements - GDR{\/} .......................... IND 320,040 2,400,300 0.6
CEMENT
Venezolana de Prerreducidos Caroni C.A. (Venprecar) -
144AGDR{.} -/- {\/} ...................................... VENZ 598,293 2,168,812 0.5
METALS - STEEL
Indo Gulf Fertilizer & Chemical - GDR{\/} ................. IND 1,480,000 1,776,000 0.4
CHEMICALS
------------
19,688,136
------------
Consumer Durables (2.4%)
Singer Co. N.V.{\/} ....................................... HK 334,000 9,310,250 2.2
APPLIANCES & HOUSEHOLD
Tata Engineering and Locomotive Co. Ltd. - GDR{\/} ........ IND 48,000 630,240 0.2
AUTOMOBILES
------------
9,940,490
------------
Capital Goods (0.8%)
Hindalco Industries Ltd. - 144A GDR{.} -/- {\/} ........... IND 105,000 3,491,250 0.8
INDUSTRIAL COMPONENTS
------------ -----
TOTAL EQUITY INVESTMENTS (cost $260,246,091) ................ 235,171,536 55.7
------------ -----
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (35.5%)
Argentina (7.9%)
Republic of Argentina:
Floating Rate Bond, 6.8125% due 3/31/05+ ............. USD 17,600,000 12,463,000 3.0
Discount Bond, 6.5625% due 3/31/23+ ................... USD 13,500,000 8,808,750 2.1
Par Bond, 5% due 3/31/23++ ........................... USD 10,700,000 6,072,250 1.4
Bote 10, 5.6875% due 4/1/00+ .......................... USD 5,250,000 3,144,750 0.7
BOCON Pre 2, 5.9766% due 4/1/01[.] + .................. USD 3,000,000 2,925,000 0.7
Brazil (3.5%)
Federal Republic of Brazil:
C Bond, 4% due 4/15/14 (Effective rate at year end is
6.2825%, including "payment-in-kind" bonds.)[.] ++ ... USD 11,673,288 6,661,070 1.6
IDU Notes, 6.375% due 1/1/01+ ......................... USD 6,650,000 5,723,156 1.4
Par Z-L Bond, 6.8125% due 4/15/24++ ................... USD 4,200,000 2,218,125 0.5
Bulgaria (4.5%)
Bulgaria:
Discount Bond Series A, 6.75% due 7/28/24 - EURO+ ..... USD 32,000,000 17,060,000 4.0
Discount Bond Series A, 6.75% due 7/28/24 - 144A+
{.} .................................................. USD 4,000,000 2,132,500 0.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Costa Rica (0.2%)
Banco Central de Costa Rica, Principal Bond Series A,
6.25% due 5/21/10 ...................................... USD 1,300,000 $ 806,000 0.2
Ecuador (3.1%)
Ecuador:
Discount Bond, 6.8125% due 2/28/25 - EURO+ ............ USD 16,750,000 8,500,625 2.0
Par Bond, 3% due 2/28/25 - EURO++ ..................... USD 13,000,000 4,720,625 1.1
Mexico (1.8%)
United Mexican States:
Par Bond Series B, 6.25% due 12/31/19+/+ .............. USD 7,000,000 4,571,875 1.1
Par Bond Series A, 6.25% due 12/31/19+/+ .............. USD 3,500,000 2,285,938 0.5
Petroleos Mexicanos (PEMEX), 6.8125% due 3/8/99 - 144A+
{.} .................................................... USD 1,000,000 892,500 0.2
Nigeria (4.1%)
Central Bank of Nigeria, Par Bond, 6.25% due 11/15/20++
+/ + ................................................... USD 34,000,000 16,745,000 4.0
Nigeria Promissory Notes, 5.092% due 1/5/10++ ........... USD 1,350,000 500,344 0.1
Panama (0.2%)
Panama, Interest Reduction Bond, When-issued - 3.5%, due
6/30/14 - 144A++ {.} -/- ............................... USD 2,200,000 1,001,000 0.2
Poland (4.5%)
Poland:
Past Due Interest Bond, 3.75% due 10/27/14 - 144A++
{.} .................................................. USD 17,112,000 11,144,190 2.6
Discount Bond, 6.875% due 10/27/24 - 144A+ {.} ........ USD 7,721,000 5,848,658 1.4
Par Bond, 2.75% due 10/27/24 - 144A++ {.} ............. USD 4,334,000 2,069,485 0.5
Par Bond, 2.75% due 10/27/24 - EURO++ ................. USD 65,000 31,038 --
Russia (0.9%)
Ministry Finance of Russia, 3% due 5/14/99 .............. USD 6,000,000 3,663,750 0.9
Turkey (0.5%)
Republic of Turkey, PPA Series B, 7.5% due 2/21/97+ .... USD 2,000,000 1,990,000 0.5
Venezuela (4.3%)
Republic of Venezuela:
Debt Conversion Bond, 6.5625% due 12/18/07+ ........... USD 21,250,000 11,647,656 2.8
Par Bond Series A, 6.75% due 3/31/20+/+ .............. USD 6,000,000 3,438,750 0.8
Par Bond Series B, 6.75% due 3/31/20+/+ .............. USD 5,000,000 2,865,625 0.7
------------
Total Government & Government Agency Obligations (cost
$139,292,051) .............................................. 149,931,660
------------
Sovereign Debt (4.7%)
Morocco (2.3%)
Kingdom of Morocco, Tranche A Loan Agreement, 6.5938% due
1/1/09+ ................................................ USD 14,250,000 9,583,125 2.3
Peru (2.4%)
Peru Loan Agreement (Citibank Issued) ** -/- ............ USD 12,500,000 9,062,500 2.1
Peru Loan Agreement ** -/- .............................. USD 1,500,000 1,087,500 0.3
------------
Total Sovereign Debt (cost $21,717,163) ..................... 19,733,125
------------
Corporate Bonds (1.4%)
Colombia (0.4%)
Celcaribe S.A. Units, 0% due 3/15/04 - 144A++ {.} -/- ... USD 2,000,000 1,810,000 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
India (0.4%)
Reliance Industries Ltd., Convertible Bond, 3.5% due
11/03/99 ............................................... USD 1,690,000 $ 1,711,125 0.4
Indonesia (0.2%)
Asia Pulp & Paper International Finance Co., Ltd., 11.75%
due 10/1/05 ........................................... USD 750,000 726,825 0.2
Peru (0.4%)
Tele 2000 S.A., Convertible Bond, 9.75% due 4/14/97 -
144A{.} ................................................ USD 2,000,000 1,700,000 0.4
------------
Total Corporate Bonds (cost $6,612,916) ..................... 5,947,950
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $167,622,130) .......... 175,612,735 41.6
------------ -----
<CAPTION>
No. of Market % of Net
Rights (0.0%) Country Rights Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Banco Bradesco S.A. Preferred Rights, expire 1/24/96-/- ... BRZL 3,740,099 6,163 --
BANKS-MONEY CENTER
------------ -----
TOTAL RIGHTS (cost $0) ..................................... 6,163 --
------------ -----
<CAPTION>
Principal Market % of Net
Short-Term Investments Currency Amount Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Treasury Bills (1.3%)
Mexico (1.3%)
Mexican Cetes: .......................................... MXN -- -- 1.3
Effective yield 45.60%, due 8/15/96 ................... -- 19,000,000 1,916,508 --
Effective yield 45.50%, due 9/26/96 ................... -- 19,000,000 1,841,421 --
Effective yield 48.10%, due 3/28/96 ................... -- 15,000,000 1,745,182 --
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $6,535,590) .............. 5,503,111 1.3
------------ -----
<CAPTION>
Market % of Net
Repurchase Agreement Value Assets {d}
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated December 29, 1995 with State Street Bank & Trust
Company, due January 2, 1996, for an effective yield of
5.55%, collateralized by $28,275,000 U.S. Treasury Notes,
6.125% due 5/15/98 (market value of collateral is
$29,050,538, including accrued interest).
(cost $28,483,167) ...................................... 28,483,167 6.7
------------ -----
TOTAL INVESTMENTS (cost $462,886,978) * ..................... 444,776,712 105.3
Other Assets and Liabilities ................................ (22,429,192) (5.3)
------------ -----
NET ASSETS .................................................. $422,347,520 100.0
------------ -----
------------ -----
</TABLE>
- ----------------
{d} Percentages indicated are based on net assets of $422,347,520.
{\/} U.S. currency denominated.
-/- Non-income producing security.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
<TABLE>
<C> <S>
(.) Restricted securities -- At December 31, 1995, the Fund owned the
following restricted security constituting 0.2% of net assets which
may not be publicly sold without registration under the Securities
Act of 1933 (Note 1). Additional information on the restricted
security is as follows:
Market
Value
Per
Share
Acquisition at
Description Acquisition Date Shares Cost 12/31/95
------------------------------------------------------------ ----------------- ------ ----------- -------
Banco Commercial S.A. -- Reg S. GDR......................... 3/31/95 64,300 $ 811,788 $14.75
</TABLE>
+ The coupon rate shown on floating rate note represents the rate at
period end.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
** Underlying loan agreement currently in default.
[.] Bond pays stated or additional interest with 'payment-in-kind'
(PIK) bonds.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
* For Federal income tax purposes, cost is $463,327,773 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 33,457,636
Unrealized depreciation: (52,008,697)
-------------
Net unrealized depreciation: $ (18,551,061)
-------------
-------------
Abbreviations:
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1995, was concentrated in
the following countries:
<TABLE>
<CAPTION>
Percentage of Net Assets {d}
-------------------------------------------
Fixed Income,
Rights & Short-Term
Country(Country Code/Currency Code) Equity Warrants & Other Total
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) ................. 7.9 7.9
Belize (BLZ/BZD) ..................... 0.2 0.2
Bulgaria (BUL/LEV) ................... 4.5 4.5
Brazil (BRZL/BRL) .................... 6.1 3.5 9.6
Canada (CAN/CAD) ..................... 0.1 0.1
Chile (CHLE/CLP) ..................... 1.6 1.6
Colombia (COL/COP) ................... 3.9 0.4 4.3
Costa Rica (CR/CRI) .................. 0.2 0.2
Czech Republic (CZCH/CSK) ........... 1.6 1.6
Ecuador (ECDR/ECS) .................. 3.1 3.1
Hong Kong (HK/HKD) ................... 11.1 11.1
India (IND/INR) ...................... 3.2 0.4 3.6
Indonesia (INDO/IDR) ................. 0.2 0.2
Korea (KOR/KRW) ...................... 4.4 4.4
Mexico (MEX/MXN) ..................... 4.2 1.8 1.3 7.3
Morocco (MOR/MAD) .................... 2.3 2.3
Nigeria (NGE/NEN) .................... 4.1 4.1
Pakistan (PAK/PKR) .................. 2.2 2.2
Panama (PAN/PND) ..................... 2.8 0.2 3.0
Peru (PERU/PES) ...................... 2.8 2.8
Philippines (PHIL/PHP) ............... 0.6 0.6
Poland (POL/PLZ) ..................... 0.7 4.5 5.2
Russia (RUS/SUR) ..................... 0.9 0.9
Singapore (SING/SGD) ................. 2.3 2.3
South Africa (SAFR/ZAR) .............. 5.7 5.7
Turkey (TRKY/TRL) .................... 0.5 0.5
United Kingdom (UK/GBP) .............. 2.5 2.5
United States (US/USD) ............... 1.2 1.4 2.6
Uruguay (URGY/UYP) ................... 0.4 0.4
Venezuela (VENZ/VEB) ................. 0.9 4.3 5.2
------ --- --- -----
Total ............................... 55.7 41.6 2.7 100.0
------ --- --- -----
------ --- --- -----
<FN>
- ----------------
{d} Percentages indicated are based on net assets of $422,347,520.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $462,886,978)
(Note 1).............................................. $ 444,776,712
U.S. currency.............................. $ 621
Foreign currencies (cost $99,739).......... 99,609 100,230
-------
Interest receivable.................................... 4,063,954
Segregated cash for when-issued securities (Note 1).... 900,000
Dividends and dividend withholding tax reclaims
receivable............................................ 457,587
Unamortized organizational costs (Note 1).............. 215,191
Cash held as collateral for securities loaned (Note
1).................................................... 6,186,800
-------------
Total assets......................................... 456,700,474
-------------
Liabilities:
Distribution payable (Note 1).......................... 26,292,834
Payable for securities purchased on a when-issued basis
(Note 1).............................................. 855,250
Payable for investment management and administration
fees (Note 2)......................................... 612,538
Payable for professional fees.......................... 79,791
Payable for insurance expenses......................... 68,801
Payable for printing and postage expenses.............. 35,296
Payable for custodian fees (Note 1).................... 35,205
Payable for transfer agent fees (Note 2)............... 9,404
Payable for fund accounting fees (Note 1).............. 9,121
Payable for Directors' fees and expenses (Note 2)...... 4,611
Other accrued expenses................................. 163,303
Collateral for securities loaned (Note 1).............. 6,186,800
-------------
Total liabilities.................................... 34,352,954
-------------
Net assets............................................... $ 422,347,520
-------------
-------------
Net asset value per share ($422,347,520 DIVIDED BY
36,416,667 shares outstanding).......................... $ 11.60
-------------
-------------
Net assets consist of:
Paid in capital (Notes 2 & 5).......................... $ 545,109,494
Accumulated net investment loss........................ (7,034)
Accumulated net realized loss on investments and
foreign currency transactions......................... (104,643,097)
Net unrealized depreciation on translation of assets
and liabilities in foreign currencies................. (1,577)
Net unrealized depreciation of investments............. (18,110,266)
-------------
Total -- representing net assets applicable to capital
shares outstanding...................................... $ 422,347,520
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
STATEMENT OF OPERATIONS
Year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income............................................. $ 28,315,639
Dividend income (net of foreign withholding tax of
$320,516).................................................. 5,464,965
------------
Total investment income................................... 33,780,604
------------
Expenses:
Investment management fees (Note 2)......................... 5,836,422
Administration fees (Note 2)................................ 1,042,218
Custodian fees (Note 1)..................................... 225,974
Fund accounting fees (Note 2)............................... 104,918
Amortization of organization costs (Note 1)................. 70,755
Audit fees.................................................. 55,863
Transfer agent fees (Note 2)................................ 45,779
Directors' fees and expenses (Note 2)....................... 36,554
Printing and postage expenses............................... 34,758
Legal fees.................................................. 11,600
Insurance expenses.......................................... 380
Other expenses.............................................. 47,193
------------
Total expenses before reductions.......................... 7,512,414
------------
Expense reductions (Notes 1 & 6)........................ (107,710)
------------
Total net expenses........................................ 7,404,704
------------
Net investment income......................................... 26,375,900
------------
Net realized and unrealized gain (loss) on
investments and foreign currencies: (Note 1)
Net realized loss on investments........... $(78,313,020)
Net realized loss on foreign currency
transactions.............................. (66,538)
------------
Net realized loss during the year......................... (78,379,558)
Net change in unrealized depreciation on
translation of assets and liabilities in
foreign currencies........................ (3,021)
Net change in unrealized depreciation of
investments............................... 47,401,359
------------
Net unrealized appreciation during the year............... 47,398,338
------------
Net realized and unrealized loss on investments and foreign
currencies................................................... (30,981,220)
------------
Net decrease in net assets resulting from operations.......... $ (4,605,320)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUARY 11, 1994
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income...................... $ 26,375,900 $ 12,914,104
Net realized loss on investments and
foreign currency transactions............. (78,379,558) (23,044,511)
Net change in unrealized appreciation
(depreciation) on translation of assets
and liabilities in foreign currencies..... (3,021) 1,444
Net change in unrealized appreciation
(depreciation) of investments............. 47,401,359 (65,511,625)
----------------- -----------------
Net decrease in net assets resulting from
operations.............................. (4,605,320) (75,640,588)
----------------- -----------------
Distributions to shareholders: (Note 1)
From net investment income................. (26,292,834) (12,745,833)
In excess of net realized gain on
investments............................... -- (3,641,667)
----------------- -----------------
Total distributions...................... (26,292,834) (16,387,500)
----------------- -----------------
Capital share transactions: (Notes 2 & 5)
Increase from capital shares sold and
reinvested................................ -- 544,800,000
Adjustment to estimate of initial offering
expenses..................................... 373,757 --
----------------- -----------------
Total increase (decrease) in net
assets.................................. (30,524,397) 452,771,912
Net assets:
Beginning of year.......................... 452,871,917 100,005
----------------- -----------------
End of year................................ $422,347,520 $452,871,917
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
JANUARY 11, 1994
YEAR ENDED (COMMENCEMENT OF OPERATIONS)
DECEMBER 31, 1995 TO DECEMBER 31, 1994
------------------ -----------------------------
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.44 $ 15.00
---------- ----------
Income from investment operations:
Net investment income................. 0.72 0.35
Net realized and unrealized loss on
investments.......................... (0.84) (2.46)
---------- ----------
Net decrease from investment
operations......................... (0.12) (2.11)
---------- ----------
Distributions to shareholders:
From net investment income............ (0.72) (0.35)
From net realized gain on
investments.......................... -- (0.10)
---------- ----------
Total distributions................. (0.72) (0.45)
---------- ----------
Net asset value, end of period.......... $ 11.60 $ 12.44
---------- ----------
---------- ----------
Market value, end of period............. $ 9.75 $ 9.75
---------- ----------
---------- ----------
Total investment return (based on market
value)................................. 6.60 % (32.16)%+
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 422,348 $ 452,872
Ratio of net investment income to
average net assets..................... 6.33 % 2.75 %++
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
6)..................................... 1.77 % 2.01 %++
Without expense reductions............ 1.80 % 2.01 %++
Portfolio turnover rate................. 75 % 56 %
</TABLE>
- ----------------
+ Not annualized.
++ Annualized.
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
NOTES TO
FINANCIAL STATEMENTS
December 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
G.T. Global Developing Markets Fund, Inc. ("Fund") is organized as a Maryland
corporation 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, therefore, 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, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by LGT Asset Management, Inc.
("LGT", formerly known as G.T. Capital Management, Inc.) to be the primary
market.
Fixed income investments are valued at the mean of representative quoted bid and
asked prices for securities or, if such prices are not available, at prices for
securities of comparative maturity, quality and type; however, when LGT, the
Fund's investment manager, deems it appropriate, prices obtained for the day of
valuation from a bond pricing service will be used. Short-term investments with
a maturity of 60 days or less are valued at amortized cost, adjusted for foreign
exchange translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Fund's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Fund's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
existing from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term investments, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from 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. LGT is responsible for determining that the value of
these underlying securities remain at least equal to the resale price.
F-12
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of a contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid, 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 and bond markets and to fluctuations in currency values or interest
rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-
F-13
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
out basis, unless otherwise specified. Dividends are recorded on the ex-dividend
date. Interest income is recorded on the accrual basis. Where a high level of
uncertainty exists as to collection of income on securities, income is recorded
net of all withholding tax with any rebate recorded when received. The Fund may
trade securities on other than normal settlement terms. This may increase the
market risk if the other party to the transaction fails to deliver and causes
the Fund to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At December 31, 1995, stocks with an aggregate value of approximately $5,850,725
were on loan to brokers. The loans were secured by cash collateral of $6,186,800
received by the Fund. For international securities, cash collateral is received
by the Fund against loaned securities in an amount at least equal to 105% of the
market value of the loaned securities at the inception of each loan. This
collateral must be maintained at not less than 103% of the market value of the
loaned securities during the period of the loan. For domestic securities, cash
collateral is received by the Fund against loaned securities in an amount at
least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of each loan. For
the year ended December 31, 1995, the Fund received securities lending income of
$25,975 which was used to reduce the Fund's custodian fees.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$97,642,512 of which $19,638,152 expires in 2002 and $78,004,360 expires in
2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
aggregated $353,775. These expenses are being amortized on a straightline basis
over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(O) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
The Fund may trade securities on a when-issued or forward commitment basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Portfolio of Investments. The Fund
has set aside sufficient cash or liquid high grade debt securities as collateral
for these purchase commitments.
F-14
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
2. INITIAL CAPITALIZATION AND OFFERING OF SHARES
The Fund was established as a Maryland Corporation on November 5, 1993. During
the period November 5, 1993 to January 10, 1994, the Fund had no operations
other than those related to organizational matters, including the initial
capital contribution of $100,005 and the issuance of 6,667 shares of beneficial
interest to LGT.
On January 11, 1994 (commencement of operations), the Fund completed the initial
public offering of 36,410,000 shares for which it received gross proceeds of
$546,150,000, before deducting $976,243 of initial offering expenses.
3. RELATED PARTIES
LGT is the Fund's investment manager and administrator. The Fund pays LGT
investment management fees, which are computed weekly and paid monthly, at the
annualized rate of 1.40% of the Fund's average weekly net assets. LGT also acts
as administrator of the Fund. The Fund pays LGT administration fees, which are
computed and paid monthly, at an annualized rate of 0.25% of the Fund's average
weekly net assets.
Effective July 1, 1995, LGT has assumed the role of pricing and accounting agent
for the Fund. The monthly fee for these services to LGT is a percentage, not to
exceed 0.03% annually, of the Fund's average daily net assets. The annual fee
rate is derived by applying 0.03% of the first $5 billion of assets of all
registered mutual funds advised by LGT ("GT Funds") and 0.02% to the assets in
excess of $5 billion and dividing the result by the aggregate assets of the GT
Funds. For the year ended December 31, 1995, the Fund paid fund accounting fees
of $45,399 to LGT.
The Fund pays each of its Directors 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 attended by the Directors.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1995, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $303,069,740 and $293,328,048, respectively. There were
no purchases or sales of U.S. government obligations by the Fund for the year.
5. CAPITAL SHARES
At December 31, 1995, the Fund is authorized to issue 100 million shares of
capital stock, $0.001 par value, all of which is classified as Common Stock.
6. EXPENSE REDUCTIONS
LGT has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses. For the year ended December 31, 1995, the Fund's expenses were
reduced by $81,735 under these arrangements.
F-15
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
7. QUARTERLY RESULTS OF OPERATIONS (000'S OMITTED) (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL INVESTMENT
NET INVESTMENT
INCOME INCOME
----------------- -----------------
PER PER
FOR THE PERIOD TOTAL SHARE TOTAL SHARE
- -------------------------------------------------- ------- -------- ------- --------
<S> <C> <C> <C> <C>
January 11, 1994 (commencement of operations)
through
March 31, 1994................................... $ 3,937 $ .11 $ 1,973 $ .05
April 1, 1994 through June 30, 1994............... 4,826 .13 2,452 .07
July 1, 1994 through September 30, 1994........... 5,646 .16 3,128 .09
October 1, 1994 through December 31, 1994......... 7,944 .21 5,361 .14
------- -------- ------- --------
Total........................................... $22,353 $ .61 $12,914 $ 0.35
------- -------- ------- --------
------- -------- ------- --------
January 1, 1995 through March 31, 1995............ $ 8,590 $0.24 $ 6,627 $ 0.18
April 1, 1995 through June 30, 1995............... 8,994 0.24 6,946 0.19
July 1, 1995 through September 30, 1995........... 8,789 0.24 7,644 0.21
October 1, 1995 through December 31, 1995 7,408 0.21 5,159 0.14
------- -------- ------- --------
Total........................................... $33,781 $0.93 $26,376 $ 0.72
------- -------- ------- --------
------- -------- ------- --------
<CAPTION>
NET REALIZED AND
UNREALIZED GAIN NET INCREASE
(LOSS) ON
INVESTMENTS AND (DECREASE) IN NET
FOREIGN ASSETS RESULTING
CURRENCIES FROM OPERATIONS
----------------- -----------------
PER PER
FOR THE PERIOD TOTAL SHARE TOTAL SHARE
- -------------------------------------------------- -------- ------ -------- ------
<S> <C> <C> <C> <C>
January 11, 1994 (commencement of operations)
through
March 31, 1994................................... $(67,500) $(1.85) $(65,527) $(1.80)
April 1, 1994 through June 30, 1994............... (26,167) (0.76) (23,715) (.69)
July 1, 1994 through September 30, 1994........... 75,473 2.07 78,601 2.16
October 1, 1994 through December 31, 1994......... (70,361) (1.92) (65,000) (1.78)
-------- ------ -------- ------
Total........................................... $(88,555) $(2.46) $(75,641) $(2.11)
-------- ------ -------- ------
-------- ------ -------- ------
January 1, 1995 through March 31, 1995............ $(92,278) $(2.53) $(85,651) $(2.35)
April 1, 1995 through June 30, 1995............... 49,525 1.35 56,471 1.54
July 1, 1995 through September 30, 1995........... 8,909 0.25 16,553 0.46
October 1, 1995 through December 31, 1995 2,863 0.09 8,022 0.23
-------- ------ -------- ------
Total........................................... $(30,981) $(0.84) $ (4,605) $(0.12)
-------- ------ -------- ------
-------- ------ -------- ------
</TABLE>
8. PER SHARE SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE MARKET PRICE*
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
January 11, 1994 (commencement of operations) through March 31, 1994.............. $ 15.53 $ 13.71 $ 15.250 $ 11.625
April 1, 1994 through June 30, 1994............................................... 13.16 12.17 12.500 10.500
July 1, 1994 through September 30, 1994........................................... 14.71 12.53 13.125 10.750
October 1, 1994 through December 31, 1994......................................... 14.78 12.44 12.375 9.625
January 1, 1995 through March 31, 1995............................................ $ 11.73 $ 9.41 $ 10.125 $ 7.250
April 1, 1995 through June 30, 1995............................................... 11.84 10.28 10.000 8.500
July 1, 1995 through September 30, 1995........................................... 12.29 11.94 10.125 9.250
October 1, 1995 through December 31, 1995......................................... 12.09 11.38 9.875 8.875
<CAPTION>
VOLUME**
-----------
<S> <C>
January 11, 1994 (commencement of operations) through March 31, 1994.............. 11,998
April 1, 1994 through June 30, 1994............................................... 5,259
July 1, 1994 through September 30, 1994........................................... 6,592
October 1, 1994 through December 31, 1994......................................... 10,224
January 1, 1995 through March 31, 1995............................................ 10,326
April 1, 1995 through June 30, 1995............................................... 6,144
July 1, 1995 through September 30, 1995........................................... 7,991
October 1, 1995 through December 31, 1995......................................... 11,822
</TABLE>
- ------------------
* As reported on the New York Stock Exchange.
** In thousands, as reported on all exchanges.
PROXY RESULTS (UNAUDITED)
During the year ended December 31, 1995, G.T. Global Developing Markets Fund,
Inc. stockholders voted on the following proposals. The proposals were approved
at the first annual meeting of the stockholders on June 21, 1995. The
description of the proposals and number of shares voted are as follows:
<TABLE>
<CAPTION>
SHARES VOTED
SHARES VOTED WITHHELD
FOR AUTHORITY
------------ -----------------
<S> <C> <C> <C> <C>
1. To elect the Fund's Board of Directors: C. Derek Anderson 31,356,761 1,244,850
Frank S. Bayley 31,365,753 1,235,859
David A. Minella 31,356,487 1,245,125
Arthur C.
Patterson 31,358,369 1,243,242
Ruth H. Quigley 31,363,468 1,238,143
<CAPTION>
SHARES VOTED SHARES VOTED SHARES VOTED
FOR AGAINST ABSTAIN
------------ ------------ -----------------
<S> <C> <C> <C> <C>
2. To elect Coopers & Lybrand L.L.P. as the Fund's independent
accountants: 31,652,922 737,148 211,541
</TABLE>
F-16
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
NOTES
- --------------------------------------------------------------------------------
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
NOTES
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
GT Global, Inc.
Fifty California Street
27th Floor
San Francisco, California
94111-4624
DATED MATERIAL
PLEASE EXPEDITE
