As filed with the Securities and Exchange Commission on February 26, 1998
File No. 811-7302
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7 / X /
GLOBAL HIGH INCOME PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
50 California Street, 27th Floor
San Francisco, California 94111
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 415-392-6181
Michael A. Silver, Esq.
Assistant General Counsel
Chancellor LGT Asset Management, Inc.
50 California Street, 27th Floor
San Francisco, California 94111
(Name and Address of Agent for Service)
<PAGE>
EXPLANATORY NOTE
This Amendment to the Registration Statement of Global High Income
Portfolio has been filed by the Registrant pursuant to Section 8(b) of the
Investment Company Act of 1940, as amended (the "1940 Act"). However, beneficial
interests in the Registrant have not been registered under the Securities Act of
1933, as amended (the "1933 Act"), since such interests are offered solely in
private placement transactions that do not involve any "public offering" within
the meaning of Section 4(2) of the 1933 Act. Investments in the Registrant may
only be made by investment companies, insurance company separate accounts,
common or commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in Regulation D under the 1933 Act. This
Amendment to the Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any beneficial interests in the Registrant.
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
CONTENTS OF REGISTRATION STATEMENT
This registration statement of Global High Income Portfolio contains the
following documents:
Facing Sheet
Contents of Registration Statement
Part A
Part B
Part C
Signature Page
Exhibits
<PAGE>
PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Responses to certain Items required to be included in Part A of this
Registration Statement are incorporated herein by reference from
Post-Effective Amendment No. 52 to the Registration Statement of G.T.
Investment Funds, Inc. (1940 Act File No. 811-5426), as filed with the
Securities and Exchange Commission ("SEC") on January 30, 1998 ("Feeder
Registration Statement"). Part A of the Feeder Registration Statement
includes the joint prospectus of the GT Global Income Funds ("Feeder's Part
A").
Item 4. General Description Of Registrant.
- ------------------------------------------
Global High Income Portfolio (the "Portfolio") is a non-diversified,
open-end management investment company which was organized, under its former
name, Global Utilities Portfolio, as a trust under the laws of the State of New
York on April 27, 1992.
Beneficial interests in the Portfolio are offered solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in Regulation D under the 1933 Act. This
Amendment to the Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any "security" within the meaning of the
1933 Act.
The Portfolio's investment manager is Chancellor LGT Asset Management,
Inc. ("Chancellor LGT"). Chancellor LGT and its worldwide affiliates are part of
Liechtenstein Global Trust, a provider of global asset management and private
banking products and services to individual and institutional investors.
Information on the Portfolio's investment objectives, the kinds of
securities in which the Portfolio principally invests, other investment
practices of the Portfolio and the risk factors associated with investments in
the Portfolio is incorporated herein by reference from the sections entitled
"Investment Objectives and Policies" and "Risk Factors" in the Feeder's Part A.
Additional investment techniques, features and limitations concerning the
Portfolio's investment program are described in Part B of this Registration
Statement.
<PAGE>
Item 5. Management Of The Portfolio.
- ------------------------------------
A description of how the business of the Portfolio is managed is
incorporated herein by reference from the section entitled "Management" in the
Feeder's Part A. The following list identifies the specific sections of the
Feeder's Part A under which the information required by Item 5 of Form N-1A may
be found; each listed section is incorporated herein by reference.
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Item 5(a) Management
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Item 5(b) Management--Investment Management and Administration
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Item 5(c) Management
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Item 5(d) Management
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Item 5(e) Other Information--Transfer Agent
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Item 5(f) Management; Prospectus Summary
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Item 5(g) Management
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Item 6. Capital Stock And Other Securities.
- -------------------------------------------
The Portfolio is organized as a trust under the laws of the State of New
York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in the
Portfolio may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. Investors in the
Portfolio (e.g., investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the Trustees of the Portfolio believe that the risk of
an investor in the Portfolio incurring financial loss on account of such
liability is limited to circumstances in which both inadequate insurance existed
and the Portfolio itself was unable to meet its obligations.
As of the date of this Registration Statement, GT Global High Income Fund
("High Income Fund") owns a majority interest in the Portfolio. However, the
High Income Fund has undertaken that, with respect to matters on which the
Portfolio seeks a vote of its interestholders, the High Income Fund will seek a
vote of its shareholders and will vote its interest in the Portfolio in
accordance with their instructions.
Investments in the Portfolio have no preemptive or conversion rights and
are fully paid and nonassessable, except as set forth below. The Portfolio is
not required to hold annual meetings of investors but the Portfolio will hold
special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote. Investors have
the right to communicate with other investors to the extent provided in Section
16(c) of the 1940 Act in connection with requesting a meeting of investors for
A-2
<PAGE>
the purpose of removing one or more Trustees, which removal requires a
two-thirds vote of the Portfolio's beneficial interests. Investors also have
under certain circumstances the right to remove one or more Trustees without a
meeting. Upon liquidation of the Portfolio, investors would be entitled to share
PRO RATA in the net assets of the Portfolio available for distribution to
investors.
The Portfolio intends to distribute to its investors the Portfolio's net
investment income monthly and its net realized capital gains, if any, annually
after the end of the Portfolio's fiscal year on October 31.
Under the current method of the Portfolio's operation, it is not subject
to any income tax. However, each investor in the Portfolio is taxable on its
share (as determined in accordance with the governing instruments of the
Portfolio) of the Portfolio's taxable income, gain, loss, deductions and credits
in determining its income tax liability. The determination of such share will be
made in accordance with the Internal Revenue Code of 1986, as amended ("Code")
and regulations promulgated thereunder. It is intended that the Portfolio's
assets, income and distributions will be managed in such a way that an investor
in the Portfolio will be able to satisfy the requirements of Subchapter M of the
Code, assuming that the investor invested all of its assets in the Portfolio.
Investor inquiries may be directed to Chancellor LGT at the following
address: 50 California Stret, 27th Floor, San Francisco, CA 94111.
Item 7. Purchase Of Securities.
- -------------------------------
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See "General Description of
Registrant."
An investment in the Portfolio may be made without a sales load at the net
asset value next determined after an order is received in "good order" by the
Portfolio. There is no minimum initial or subsequent investment in the
Portfolio. However, investments must be made in federal funds (i.e., monies
credited to the account of the Portfolio's custodian bank by a Federal Reserve
Bank). Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each day the New York Stock Exchange ("NYSE") is open for trading.
Information on the time and method of valuation of the Portfolio's assets
is incorporated by reference from the section entitled "Calculation of Net Asset
Value" in the Feeder's Part A.
The Portfolio reserves the right to cease accepting investments at any
time or to reject any investment order.
A-3
<PAGE>
Item 8. Redemption Or Repurchase.
- ---------------------------------
An investor in the Portfolio may reduce any portion or all of its
investment at any time at the net asset value next determined after a request in
"good order" is furnished by the investor to the Portfolio. The proceeds of a
reduction will be paid by the Portfolio in federal funds normally on the next
business day after the reduction is effected, but in any event within seven
days. Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any reduction
may be suspended or the payment of the proceeds therefrom postponed during any
period (1) when the NYSE is closed (other than customary weekend or holiday
closings) or trading on the NYSE is restricted as determined by the SEC, (2)
when an emergency exists, as defined by the SEC, which would prohibit the
Portfolio in disposing of its portfolio securities or in fairly determining the
value of its assets, or (3) as the SEC may otherwise permit.
Item 9. Pending Legal Proceedings.
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Not applicable.
A-4
<PAGE>
APPENDIX A
RATINGS OF SECURITIES
A description of corporate bond and commercial paper ratings is
incorporated herein by reference from "Appendix A--Description of Debt Ratings"
in the Feeder's Part A.
A-5
<PAGE>
PART B
Part B of this Registration Statement should be read only in conjunction
with Part A. Capitalized terms used in Part B and not otherwise defined have the
meanings given them in Part A of this Registration Statement.
Responses to certain Items required to be included in Part B of this
Registration Statement are incorporated herein by reference from the Feeder
Registration Statement. Part B of the Feeder Registration Statement includes the
joint statement of additional information of the GT Global Income Funds
("Feeder's Part B").
Item 10. Cover Page.
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Not applicable.
Item 11. Table Of Contents.
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Page
General Information and History......................................B-1
Investment Objectives and Policies...................................B-1
Management of the Portfolio..........................................B-2
Control Persons and Principal Holders of Securities..................B-2
Investment Advisory and Other Services...............................B-3
Brokerage Allocation and Other Practices.............................B-3
Capital Stock and Other Securities...................................B-4
Purchase, Redemption and Pricing of Securities.......................B-5
Tax Status...........................................................B-6
Underwriters.........................................................B-6
Calculation of Performance Data......................................B-6
Financial Statements.................................................B-6
Item 12. General Information And History.
- -----------------------------------------
Prior to October 20, 1992, the name of Global High Income Portfolio was
"Global Utilities Portfolio."
Item 13. Investment Objectives And Policies.
- --------------------------------------------
Part A contains basic information about the investment objectives,
policies and limitations of the Portfolio. This Part B supplements the
discussion in Part A of the investment objectives, policies and limitations of
the Portfolio.
Information on the fundamental investment limitations and the
non-fundamental investment policies and limitations of the Portfolio, the types
of securities bought and investment techniques used by the Portfolio, and
certain risks attendant thereto, as well as other information on the Portfolio's
B-1
<PAGE>
investment programs, is incorporated by reference from the sections entitled
"Investment Objectives and Policies," "Options, Futures and Currency
Strategies," "Risk Factors," "Investment Limitations" and "Execution of
Portfolio Transactions" in the Feeder's Part B.
Item 14. Management Of The Portfolio.
- -------------------------------------
Information about the Trustees and officers of the Portfolio, and their
roles in management of the Portfolio and other GT Global Funds, is incorporated
herein by reference from the section entitled "Directors, Trustees and Executive
Officers" in the Feeder's Part B.
The Board of Trustees has a Nominating and Audit Committee, composed of
Ms. Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Portfolio and
recommending firms to serve as independent auditors of the Portfolio. Each of
the Trustees and officers of the Portfolio is also a Director and officer of
G.T. Investment Funds, Inc., G.T. Global Floating Rate Fund Inc. and G.T.
Investment Portfolios, Inc., and a Trustee and officer of G.T. Global Growth
Series, G.T. Global Eastern Europe Fund, G.T. Global Variable Investment Trust,
GT Global Series Trust, G.T. Global Variable Investment Series, Growth
Portfolio, Floating Rate Portfolio, and Global Investment Portfolio which also
are registered investment companies managed by Chancellor LGT. Each Trustee and
officer serves in total as a Director or Trustee and officer, respectively, of
12 registered investment companies with 43 series managed or administered by
Chancellor LGT.
The Portfolio pays each Trustee who is not a director, officer or employee
of Chancellor LGT or any affiliated company an annual fee of $500 a year, plus
$150 for each meeting of the Board attended, and reimbursed travel and other
expenses incurred in connection with attending Board meetings. Other Trustees
and officers receive no compensation or expense reimbursement from the
Portfolio. For the fiscal year ended October 31, 1997, the Portfolio paid Mr.
Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley $1,975, $1,975, $1,525,
$1,975, respectively. For the year ended October 31, 1997, Mr. Anderson, Mr.
Bayley, Mr. Patterson and Ms. Quigley, who are not directors, officers or
employees of Chancellor LGT or any affiliated company, received total
compensation of $117,303, $114,386, $88,350 and $111,687, respectively, from the
investment companies managed or administered by Chancellor LGT for which he or
she serves as a Director or Trustee. Fees and expenses disbursed to the Trustees
contained no accrued or payable pension or retirement benefits.
As of the fiscal year ended October 31, 1997, the officers and Trustees
and their families as a group owned in the aggregate beneficially or of record
less than 1% of the outstanding shares of the Portfolio.
Item 15. Control Persons And Principal Holders Of Securities.
- -------------------------------------------------------------
As of the date of this filing, GT Global High Income Fund owned 99.9% of
the value of the outstanding interests in the Portfolio. Because GT Global High
Income Fund controls the Portfolio, GT Global High Income Fund may take actions
affecting its Portfolio without the approval of any other investor.
B-2
<PAGE>
GT Global High Income Fund has informed the Portfolio that whenever it is
requested to vote on any proposal of the Portfolio, it will hold a meeting of
shareholders and will cast its vote as instructed by its shareholders. It is
anticipated that other investors in the Portfolio will follow the same or a
similar practice.
The address of GT Global High Income Fund is 50 California Street, 27th
Floor, San Francisco, CA 94111.
Item 16. Investment Advisory And Other Services.
- ------------------------------------------------
Information on the investment management and other services provided for
or on behalf of the Portfolio is incorporated herein by reference from the
sections entitled "Management," "Directors, Trustees and Executive Officers" and
"Additional Information" in the Feeder's Part B. The following list identifies
the specific sections in the Feeder's Part B under which the information
required by Item 16 of Form N-1A may be found; each section is incorporated
herein by reference.
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Item 16(a) Management; Additional Information
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Item 16(b) Management
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Item 16(c) Not Applicable
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Item 16(d) Management
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Item 16(e) Not Applicable
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Item 16(f) Not Applicable
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Item 16(g) Not Applicable
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Item 16(h) Additional Information
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Item 16(i) Not Applicable
- --------------------------------------------------------------------------------
For the fiscal years ended October 31, 1995, 1996 and 1997, the Portfolio
paid investment management and administration fees of $2,411,786, $3,014,924 and
$2,971,167, respectively, to Chancellor LGT.
Item 17. Brokerage Allocation And Other Practices.
- --------------------------------------------------
A description of the Portfolio's brokerage allocation and other practices
is incorporated herein by reference from the section entitled "Execution of
Portfolio Transactions" in the Feeder's Part B.
B-3
<PAGE>
Item 18. Capital Stock And Other Securities.
- --------------------------------------------
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate PRO
RATA in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share PRO RATA in the Portfolio's net assets available for distribution to its
investors. Investments in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except as set
forth below. Investments in the Portfolio may not be transferred. Certificates
representing an investor's beneficial interest in the Portfolio are issued only
upon the written request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interest in the Portfolio may elect all of the Trustees of the Portfolio if they
choose to do so and in such event the other investors in the Portfolio would not
be able to elect any Trustee. The Portfolio is not required to hold annual
meetings of investors but the Portfolio will hold special meetings of investors
when in the judgment of the Portfolio's Trustees it is necessary or desirable to
submit matters for an investor vote. No material amendment may be made to the
Portfolio's Declaration of Trust without the affirmative majority vote of
investors (with the vote of each being in proportion to the amount of their
investment).
The Portfolio may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by the vote of two-thirds of its
investors (with the vote of each being in proportion to the amount of their
investment), except that if the Trustees of the Portfolio recommend such sale of
assets, the approval by vote of a majority of the investors (with the vote of
each being in proportion to the amount of their investment) will be sufficient.
The Portfolio may also be terminated (i) upon liquidation and distribution of
its assets, if approved by the vote of two-thirds of its investors (with the
vote of each being in proportion to the amount of their investment), or (ii) by
the Trustees of the Portfolio by written notice to its investors.
The Portfolio is organized as a trust under the laws of the State of New
York. Investors in the Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Portfolio in the event that there is imposed upon an investor a greater portion
of the liabilities and obligations of the Portfolio than its proportionate
beneficial interest in the Portfolio. The Declaration of Trust also provides
that the Portfolio shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the Portfolio,
its investors, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of an investor incurring financial loss on
account of investor liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The Declaration of Trust provides
B-4
<PAGE>
that the trustees and officers will be indemnified by the Portfolio against
liabilities and expenses incurred in connection with litigation in which they
may be involved because of their offices with the Portfolio, unless, as to
liability to the Portfolio or its investors, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect to any
other matter it is finally adjudicated that they did not act in good faith in
the reasonable belief that their actions were in the best interests of the
Portfolio. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable determination, based upon a review of
readily available facts, by vote of a majority of disinterested Trustees or in a
written opinion of independent counsel, that such officers or Trustees have not
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
Item 19. Purchase, Redemption And Pricing Of Securities.
- --------------------------------------------------------
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act of 1933, as amended.
Information on the method followed by the Portfolio in determining its net
asset value and the timing of such determination is incorporated by reference
from the section entitled "Valuation of Fund Shares" in the Feeder's Part B. See
also Items 7 and 8 in Part A.
The Portfolio reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by
the Portfolio and valued as they are for purposes of computing the Portfolio's
net asset value (a redemption in kind). If payment is made in securities, an
investor may incur transaction expenses in converting these securities into
cash. The Portfolio has elected, however, to be governed by Rule 18f-1 under the
1940 Act as a result of which the Portfolio is obligated to redeem beneficial
interests with respect to any one investor during any 90 day period, solely in
cash up to the lesser of $250,000 or 1% of the net asset value of the Portfolio
at the beginning of the period.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each day that the NYSE is open for trading. At the close of
trading, on each such day, the value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage representing that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or reductions which are to be effected
on that day will then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be recomputed as the percentage
equal to the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of trading on such day plus or
minus, as the case may be, the amount of net additions to or reductions in the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of trading on such day plus or minus, as the case may be, the amount of
the net additions to or reductions in the aggregate investments in the Portfolio
by all investors in the Portfolio. The percentage so determined will then be
B-5
<PAGE>
applied to determine the value of the investor's interest in the Portfolio as of
the close of trading on the following day the NYSE is open for trading.
Item 20. Tax Status.
- --------------------
Information on the taxation of the Portfolio is incorporated by reference
herein from the section entitled "Taxes" in the Feeder's Part B.
Item 21. Underwriters.
- ----------------------
Not applicable.
Item 22. Calculation Of Performance Data.
- -----------------------------------------
Not applicable.
Item 23. Financial Statements.
- ------------------------------
Audited financial statements for the Portfolio for the fiscal year ended
October 31, 1997 are included herein, in reliance on the report of Coopers &
Lybrand L.L.P., independent auditors, given on the authority of said firm as
experts in auditing and accounting.
B-6
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Trustees of
Global High Income Portfolio:
We have audited the accompanying statement of assets and liabilities of Global
High Income Portfolio, including the portfolio of investments as of October 31,
1997, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the supplementary data for each of the five years in the period then
ended and for the period from October 22, 1992 (commencement of operations) to
October 31, 1992. These financial statements and the supplementary data are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and the supplementary data 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
supplementary data are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1997 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and the supplementary data referred to
above present fairly, in all material respects, the financial position of Global
High Income Portfolio as of October 31, 1997, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the supplementary data for each of the five years in
the period then ended and for the period from October 22, 1992 (commencement of
operations) to October 31, 1992, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997
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<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (52.9%)
Argentina (5.2%)
Republic of Argentina:
Global Bond, 11% due 10/9/06 ....................... USD 11,919,000 $ 11,814,709 3.2
Par Bond Series L, 5.50% due 3/31/23++ ............. USD 6,610,000 4,498,931 1.2
Global Bond, 11.375% due 1/30/17 ................... USD 3,048,000 2,910,840 0.8
Brazil (2.0%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24++ ........................................... USD 11,384,000 7,527,670 2.1
Bulgaria (5.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12++ ..................................... USD 18,357,000 10,004,565 2.7
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro+ ............................................. USD 13,522,000 8,882,264 2.4
Costa Rica (1.7%)
Interest Bond Series A, 6.5391% due 5/21/05
(effective maturity date 8/21/02)+ .................. USD 4,270,656 4,270,656 1.2
Principal Bond Series A, 6.25% due 5/21/10 ........... USD 1,900,000 1,653,000 0.5
Ecuador (2.1%)
Republic of Ecuador Discount Bond, 6.6875% due 2/28/25
- EURO+ ............................................. USD 11,069,000 7,775,973 2.1
Mexico (11.6%)
United Mexican States:
Discount Bond Series D, 6.8125% due 12/31/19+ ...... USD 24,328,000 22,032,045 6.0
Global Bond, 11.5 due 5/15/26 ...................... USD 7,290,000 7,873,200 2.2
Global Bond, 9.875% due 1/15/07 .................... USD 6,430,000 6,502,338 1.8
Global Bond, 11.375% due 9/15/16 ................... USD 5,793,000 6,162,304 1.7
Nigeria (3.3%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20+/+ ......................................... USD 18,750,000 12,281,250 3.3
Panama (3.4%)
Republic of Panama, Interest Reduction Bond, 3.75% due
7/17/14++ ........................................... USD 17,850,000 12,550,781 3.4
Peru (1.6%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17 - 144A{.} .................................... USD 10,086,000 5,749,020 1.6
South Africa (5.0%)
Republic of South Africa, 13% due 8/31/10{./} ........ ZAR 97,113,000 18,329,766 5.0
United States (7.5%)
United States Treasury:
6.375% due 8/15/27 ................................. USD 15,337,000 15,782,732 4.3
5.875% due 9/30/02{./} ............................. USD 11,747,000 11,811,242 3.2
Uruguay (2.1%)
Banco Central del Uruguay:
Debt Conversion Bond Series B, 6.8125% due
2/18/07+ .......................................... USD 4,000,000 4,000,000 1.1
Par Bond Series A, 6.75% due 2/19/21+/+ ............ USD 2,290,000 2,129,700 0.6
Par Bond Series B, 6.75% due 2/19/21+/+ ............ USD 1,500,000 1,395,000 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Venezuela (2.3%)
Republic of Venezuela, Par Bond Series A, 6.75% due
3/31/20+/+ .......................................... USD 10,025,000 $ 8,389,672 2.3
------------
Total Government & Government Agency Obligations (cost
$202,758,127) ........................................... 194,327,658
------------
Corporate Bonds (25.6%)
Argentina (1.7%)
Supermercados Norte, 10.875% due 2/9/04 - 144A{.} .... USD 2,655,000 2,469,150 0.7
Impsa Corp., 9.5% due 5/31/02 - 144A{.} .............. USD 2,409,000 2,276,505 0.6
Acindar Industrial Argentina, 11.25% due 2/15/04 ..... USD 1,497,000 1,482,030 0.4
Brazil (0.6%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 2,273,000 2,216,175 0.6
Canada (0.8%)
Pacalta Resources Ltd., 10.75% due 6/15/04 -
144A{.} ............................................. USD 2,978,000 2,970,555 0.8
China (2.9%)
Panda Global Energy Co., 12.5% due 4/15/04{.} ........ USD 7,559,000 7,105,460 1.9
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 3,210,000 2,929,125 0.8
Huaneng Power International PLC Convertible, 1.75% due
5/21/04 ............................................. USD 790,000 743,390 0.2
Dominican Republic (0.7%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............ USD 2,628,000 2,601,720 0.7
Hong Kong (1.1%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 2,434,000 2,281,875 0.6
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 2,100,000 1,958,250 0.5
India (1.0%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ........ USD 4,395,000 3,836,835 1.0
Indonesia (3.8%)
Polysindo International Finance, 8.9063%, due
4/22/99 ............................................. IDR 27,500,000,000 5,114,793 1.4
DGS International Finance Co., 10% due 6/1/07 -
144A{.} ............................................. USD 4,961,000 4,564,120 1.2
Tjiwi Kimia Financial Mauritius, 10% due 8/1/04 -
144A{.} ............................................. USD 2,964,000 2,645,370 0.7
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} ............................................. USD 2,141,000 1,884,080 0.5
Jamaica (1.1%)
Mechala Group Jamaica:
12.75% due 12/30/99 - Series B ..................... USD 2,846,000 2,760,620 0.8
12.75% due 12/30/99 - Reg S{c} ..................... USD 1,288,000 1,249,360 0.3
Mexico (6.3%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} ......................... USD 8,768,000 8,044,640 2.2
8.85% due 9/15/07 - 144A{.} ........................ USD 4,388,000 4,217,965 1.1
Fideicomiso Petacalco Trust, 10.16% due 12/23/09 - Reg
S{c} ................................................ USD 2,720,000 2,720,000 0.7
TV Azteca, S.A. de C.V., 10.5% due 2/15/07 -
144A{.} ............................................. USD 2,350,000 2,393,851 0.7
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ..... USD 2,440,000 2,305,800 0.6
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} ............................................. USD 1,903,000 2,079,028 0.6
Hylsa, S.A. de C.V., 9.25% due 9/15/07{.} ............ USD 1,560,000 1,497,600 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Russia (1.3%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 2,283,000 $ 3,070,635 0.8
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 2,184,000 1,921,920 0.5
South Africa (4.3%)
Eskom, 11% due 6/1/08 ................................ ZAR 94,900,000 15,718,912 4.3
------------
Total Corporate Bonds (cost $103,242,812) ................ 95,059,764
------------
Sovereign Debt (12.7%)
Russia (12.7%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- .................................. USD 46,757,000 41,583,888 11.3
Participation ** -/- ............................... DEM 9,819,000 5,224,084 1.4
------------
Total Sovereign Debt (cost $25,217,395) .................. 46,807,972
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $331,218,334) ....... 336,195,394 91.2
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Federal Republic of Brazil Debt Conversion Bond, Call
Option, strike 82.25, expires 1/12/98 (cost
$1,032,750) ........................................... USD 57,375,000 418,608 0.1
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57% collateralized by $8,950,000 U.S. Treasury Bonds,
8.875% due 8/15/17 (market value of collateral is
$11,741,829, including accrued interest).
(cost $11,510,781) ................................... 11,510,781 3.1
------------ -----
TOTAL INVESTMENTS (cost $343,761,865) * ................. 348,124,783 94.4
Other Assets and Liabilities ............................. 20,515,067 5.6
------------ -----
NET ASSETS ............................................... $368,639,850 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
* For Federal income tax purposes, cost is $343,911,253 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,533,602
Unrealized depreciation: (22,320,072)
-------------
Net unrealized appreciation: $ 4,213,530
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 3,966,367 1.84950 11/6/97 $(268,070)
Indonesian Rupiah....................... 10,445,682 3,610.00000 11/5/97 (57,871)
South African Rand...................... 24,288,532 5.04500 1/30/98 (535,715)
South African Rand...................... 608,060 5.06350 1/30/98 (15,584)
------------ --------------
Total Contracts to Sell (Receivable
amount $38,431,401).................. 39,308,641 (877,240)
------------ --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 10.66%.
Total Open Forward Foreign Currency
Contracts............................ $(877,240)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL HIGH INCOME PORTFOLIO
SUPPLEMENTARY DATA
Contained below are ratios and supplemental data that have ben derived from
information provided in the financial statements.
<TABLE>
<CAPTION>
OCTOBER 22, 1992
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
------------------------------------------------------ OPERATIONS) TO
1997 1996 1995 1994 1993 OCTOBER 31, 1992
------------ ------------ ------------ ------------ ------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 368,640 $ 447,071 $ 358,681 $ 400,911 $ 256,740 $ 200
Ratio of net investment income to
average net assets..................... 8.23% 10.31% 12.8% 7.93% 8.0% N/A(a)
Ratio of expenses to average net
assets................................. N/A 0.83 0.78% 0.72% 0.9% N/A(a)
With expense reductions (Notes 1 &
4)................................... .69 0.83% 0.78% 0.72% 0.9% N/A(a)
Without expense reductions............ .74 0.83% 0.78% 0.72% 0.9% N/A(a)
Ratio of interest expense to average net
assets................................. N/A N/A N/A 0.22% N/A N/A
Portfolio turnover rate................. 214% 290% 213% 178% 195% none
</TABLE>
- --------------
(a)Ratios are not meaningful due to short period of operation.
The accompanying notes are an integral part of the financial statements.
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $343,761,865)
(Note 1)................................................... $348,124,783
U.S. currency................................... $ 598,195
Foreign currencies (cost $2,793,297)............ 2,785,516 3,383,711
----------
Receivable for securities sold.............................. 21,411,490
Interest receivable......................................... 6,748,730
Miscellaneous receivable.................................... 16,554
Receivable for Fund shares sold............................. 100
------------
Total assets.............................................. 379,685,368
------------
Liabilities:
Payable for securities purchased............................ 9,848,640
Payable for open forward foreign currency contracts, net
(Note 1)................................................... 877,240
Payable for investment management and administration fees
(Note 2)................................................... 246,670
Payable for printing and postage expenses................... 22,733
Payable for custodian fees (Note 1)......................... 19,132
Payable for professional fees............................... 17,411
Payable for Trustees' fees and expenses (Note 2)............ 2,323
Other accrued expenses...................................... 11,369
------------
Total liabilities......................................... 11,045,518
------------
Net assets.................................................... $368,639,850
------------
------------
Net assets consist of:
Paid in capital (Note 4).................................... $127,463,623
Accumulated net investment income........................... 158,169,241
Accumulated net realized gain on investments and foreign
currency transactions...................................... 79,563,544
Net unrealized depreciation on translation of assets and
liabilities in foreign currencies.......................... (919,476)
Net unrealized appreciation of investments.................. 4,362,918
------------
Total -- representing net assets applicable to shares of
beneficial interest outstanding.............................. $368,639,850
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income:
Interest income........................................................................... $40,562,334
-----------
Total investment income................................................................. 40,562,334
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 2,971,167
Custodian fees (Note 1)................................................................... 182,500
Audit fees................................................................................ 12,222
Trustees' fees and expenses (Note 2)...................................................... 6,570
Legal fees................................................................................ 5,110
Amortization of organization costs (Note 1)............................................... 4,876
Other expenses (Note 1)................................................................... 178,028
-----------
Total expenses before reductions........................................................ 3,360,473
-----------
Expense reductions (Notes 1 & 5)...................................................... (234,784)
-----------
Total net expenses...................................................................... 3,125,689
-----------
Net investment income....................................................................... 37,436,645
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments............................................. $65,778,886
Net realized gain on foreign currency transactions........................... 3,923,861
-----------
Net realized gain during the year....................................................... 69,702,747
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... (1,099,793)
Net change in unrealized appreciation of investments......................... (36,470,606)
-----------
Net unrealized depreciation during the year............................................. (37,570,399)
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 32,132,348
-----------
Net increase in net assets resulting from operations........................................ $69,568,993
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
------------ ------------
Increase (Decrease) in net assets
Operations:
Net investment income...................................................... $ 37,436,645 $ 42,149,830
Net realized gain on investments and foreign currency transactions......... 69,702,747 62,517,472
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies.............................. (1,099,793) 174,082
Net change in unrealized appreciation (depreciation) of investments........ (36,470,606) 31,730,913
------------ ------------
Net increase in net assets resulting from operations..................... 69,568,993 136,572,297
------------ ------------
Beneficial interest transactions:
Contributions.............................................................. 276,030,036 302,410,133
Withdrawals................................................................ (424,030,459) (350,591,916)
------------ ------------
Net decrease from beneficial interest transactions....................... (148,000,423) (48,181,783)
------------ ------------
Total increase (decrease) in net assets...................................... (78,431,430) 88,390,514
Net assets:
Beginning of year.......................................................... 447,071,280 358,680,766
------------ ------------
End of year................................................................ $368,639,850 $447,071,280
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Contained below are ratios and supplemental data that have been derived from
information provided in the financial statements.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 368,640 $ 447,071 $ 358,681 $ 400,911 $ 256,740
Ratio of net investment income to
average net assets..................... 8.23% 10.31% 12.8% 7.93% 8.0%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
4)................................... .69% 0.83% 0.78% 0.72% 0.9%
Without expense reductions............ .74% 0.83% 0.78% 0.72% 0.9%
Ratio of interest expense to average net
assets................................. N/A N/A N/A 0.22% N/A
Portfolio turnover rate................. 214% 290% 213% 178% 195%
<CAPTION>
OCTOBER 22, 1992
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1992
----------------------
<S> <C>
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 200
Ratio of net investment income to
average net assets..................... N/A(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
4)................................... N/A(a)
Without expense reductions............ N/A(a)
Ratio of interest expense to average net
assets................................. N/A
Portfolio turnover rate................. none
</TABLE>
- --------------
(a) Ratios are not meaningful due to short period of operation.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Global High Income Portfolio ("Portfolio") is organized as a New York Trust and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a non-diversified, open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the
Portfolio 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
The Portfolio calculates the net asset value of and completes orders to purchase
or repurchase Portfolio shares of beneficial interest on each business day, with
the exception of those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments 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
Portfolio'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 Portfolio's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATIONS
The accounting records of the Portfolio are maintained in U.S. dollars. The
market values of foreign securities, currency holdings, and other assets and
liabilities are recorded in the books and records of the Portfolio after
translation to U.S. dollars based on the exchange rates on that day. The cost of
each security is determined using historical exchange rates. Income and
withholding taxes are translated at prevailing exchange rates when earned or
incurred.
The Portfolio 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, sales of 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 Portfolio's books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains or
losses arise from changes in the value of assets and liabilities other than
investments in securities at year end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, it is the
Portfolio's policy to always receive, as collateral, United States government
securities or other high quality debt securities of which the value, including
accrued interest, is at least equal to the amount to be repaid to the Portfolio
under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward") 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 Portfolio as an unrealized gain or loss. When the
Forward Contract is closed, the Portfolio records a realized gain or loss equal
to the difference between the value at the time it was opened and the value at
the time it was closed. Forward Contracts involve market risk in excess of the
amounts shown in the Portfolio's "Statement of Assets and Liabilities." The
Portfolio could be exposed to risk if a counterparty is unable to meet the terms
of the contract or if the value of the currency changes unfavorably. The
Portfolio may enter into Forward Contracts in connection with planned purchases
or sales of securities, or to hedge against adverse fluctuations in exchange
rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Portfolio writes a call or put option, an amount equal to the premium
received is included in the Portfolio's "Statement of Assets and Liabilities" as
an asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the option.
The current market value of an option
F10
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
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. If an option expires on its stipulated expiration date or
if the Portfolio enters into a closing purchase transaction, a gain or loss is
realized without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a written
call option is exercised, a gain or loss is realized from the sale of the
underlying security and the proceeds of the sale are increased by the premium
originally received. If a written put option is exercised, the cost of the
underlying security purchased would be decreased by the premium originally
received. The Portfolio can write options only on a covered basis, which, for a
call, requires that the portfolio hold the underlying security and, for a put,
requires the Portfolio 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 Portfolio may use options to manage its exposure to the bond
market and to fluctuations in currency values or interest rates.
The premium paid by the Portfolio for the purchase of a call or put option is
included in the Portfolio's "Statement of Assets and Liabilities" as an
investment and subsequently "marked-to-market" to reflect the current market
value of the option. If an option which the Portfolio has purchased expires on
the stipulated expiration date, the Portfolio realizes a loss in the amount of
the cost of the option. If the Portfolio enters into a closing sale transaction,
the Portfolio realizes a gain or loss, depending on whether proceeds from the
closing sale transaction are greater or less than the cost of the option. If the
Portfolio exercises a call option, the cost of the securities acquired by
exercising the call is increased by the premium paid to buy the call. If the
Portfolio exercises a put option, it realizes a gain or loss from the sale of
the underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Portfolio may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Portfolio may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Portfolio may not be able to enter into a closing transaction because of an
illiquid secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Portfolio is required to pledge to the broker an amount of cash or securities
equal to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Portfolio agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as "variation margin"
and are recorded by the Portfolio as unrealized gains or losses. When the
contract is closed, the Portfolio records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. The potential risk to the Portfolio is that the
change in value of the underlying securities may not correlate to the change in
value of the contracts. The Portfolio may use futures contracts to manage its
exposure to the bond market and to fluctuations in currency values or interest
rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out-basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Portfolio may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Portfolio to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
For international securities, cash collateral is received by the Portfolio
against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by the Portfolio against loaned securities in the amount
at least equal to 102% of the market value of the loaned securities at the
inception of each loan, and is maintained at this level during the period of the
loan. At October 31, 1997, stocks with an aggregate value of $25,907,465 were on
loan to brokers. The loans were secured by cash collateral of $32,857,776, and
securities lending fees received by the Portfolio were $234,784.
(I) TAXES
It is the policy of the Portfolio to meet the requirements of the Internal
Revenue Code of 1986, as amended ("Code"). Therefore, no provision has been made
for Federal taxes on income, capital gains, or unrealized appreciation of
securities held.
(J) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Portfolio in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $25,000. These expenses
are being amortized on a straightline basis over a five-year period.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent with
investments of domestic origin. The Portfolio's investment in emerging market
countries may involve greater risks than investments in more developed markets
and the price of such investments may be volatile. These risks of investing in
foreign and
F11
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
emerging markets may include foreign currency exchange rate fluctuations,
perceived credit risk, adverse political and economic developments and possible
adverse foreign government intervention.
(L) INDEXED SECURITIES
The Portfolio may invest in indexed securities whose value is linked either
directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
(M) RESTRICTED SECURITIES
The Portfolio is permitted to invest in privately placed restricted securities.
These securities may be resold in transactions exempt from registration or to
the public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(N) LINE OF CREDIT
The Portfolio has a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allow the Portfolio to borrow an
aggregate maximum amount of $200,000,000. It is limited to borrowing up to
33 1/3% of the value of the Portfolio's total assets.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $11,820,513 with a weighted average interest rate of 6.47%. Interest expense
for the year ended October 31, 1997, was $165,711.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Portfolio's investment manager and
administrator. On October 31, 1996, Chancellor Capital Management, Inc. merged
with LGT Asset Management, Inc. and the surviving entity was renamed Chancellor
LGT Asset Management, Inc. The Portfolio pays investment management and
administration fees to the Manager at the annualized rate of 0.475% on the first
$500 million of average daily net assets of the Portfolio; 0.45% on the next $1
billion; 0.425% on the next $1 billion; and 0.40% on amounts thereafter, plus 2%
of the Portfolio's total investment income calculated in accordance with
generally accepted accounting principles, adjusted daily for currency
revaluations, on a mark to market basis, of the Portfolio's assets; provided,
however, that during any fiscal year this amount shall not exceed 2% of the
Portfolio's total investment income calculated in accordance with generally
accepted accounting principles. These fees are computed daily and paid monthly.
The Portfolio pays each of its Trustees who is not an employee, officer or
director of the Manager, G.T. Global Financial Services, Inc., or G.T. Global
Investor Services, Inc. $500 per year plus $150 for each meeting of the board or
any committee thereof attended by the Trustees.
At October 31, 1997, all of the shares of beneficial interest of the Portfolio
were owned either by GT Global High Income Fund or the Manager.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Portfolio, other than U.S. government obligations and
short-term investments, aggregated $829,268,070 and $933,111,597, respectively.
Purchases and sales of U.S. government obligations by the Portfolio aggregated
$27,699,458 and $11,689,150, respectively.
F12
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PART C
Item 24. Financial Statements And Exhibits.
- -------------------------------------------
(a) Financial Statements: Audited financial statements for the Portfolio
for the fiscal year ended October 31, 1997 and the report of Coopers & Lybrand
L.L.P., independent auditors, with respect to such audited financial statements
are included in Part B to this Registration Statement.
(b) Exhibits
1. Declaration of Trust of the Registrant. Incorporated by
Reference to Amendment No.6 to Registrant's Registration
Statement, File No. 811-7302.
2. By-Laws of the Registrant. Incorporated by Reference to
Amendment No.6 to Registrant's Registration Statement, File
No. 811-7302.
5. Investment Management and Administration Contract between
the Registrant and Chancellor LGT Asset Management, Inc.
Incorporated by Reference to Amendment No.6 to Registrant's
Registration Statement, File No. 811-7302.
8. Form of Custodian Agreement between the Registrant and
State Street Bank and Trust Company. Incorporated by
Reference to Amendment No.6 to Registrant's Registration
Statement, File No. 811-7302.
11. Consent of Coopers & Lybrand L.L.P., Independent
Accountants - Filed herewith.
13. Investment representation letters of initial investors.
Incorporated by Reference to Amendment No.6 to Registrant's
Registration Statement, File No.811-7302.
27. Financial Data Schedule - Filed herewith.
Item 25. Persons Controlled By Or Under Common Control With Registrant.
- -----------------------------------------------------------------------
Not applicable.
C-1
<PAGE>
Item 26. Number Of Holders Of Securities.
- -----------------------------------------
(1) (2)
Title of Class Number of Record Holders
(as of February 25, 1998)
Beneficial Interests 2
Item 27. Indemnification.
- -------------------------
Reference is hereby made to Article V of the Registrant's Declaration of
Trust, filed as Exhibit 1 to this Registration Statement.
The Trustees and officers of the Registrant are insured under an errors
and omissions liability insurance policy and the Registrant is insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Item 28. Business And Other Connections Of Investment Adviser.
- --------------------------------------------------------------
Information as to any other business, profession, vocation or employment
of a substantial nature in which each director or officer of Chancellor LGT
Asset Management is, or at any time during the past two years has been, engaged
for his or her own account or in the capacity of director, officer, employee,
partner or trustee is incorporated herein by reference from the section entitled
"Management" in the Feeder's Part A and the sections entitled "Directors,
Trustees and Executive Officers" and "Management" in the Feeder's Part B.
Information as to the directors and officers of Chancellor LGT Asset
Management, Inc., Registrant's investment manager, is included in such manager's
Form ADV (File No. 801-10254), filed with the Commission, which is incorporated
herein by reference thereto.
Item 29. Principal Underwriters.
- --------------------------------
Not applicable.
Item 30. Location Of Accounts And Records.
- ------------------------------------------
Accounts, books and other records required by Rules 31a-1 and 31a-2 under
the Investment Company Act of 1940, as amended, are maintained and held in the
offices of the Registrant and its investment manager, Chancellor LGT Asset
Management, Inc., 50 California Street, 27th Floor, San Francisco, California
94111.
C-2
<PAGE>
Records covering shareholder accounts and portfolio transactions are also
maintained and kept by the Registrant's Custodian, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110.
Item 31. Management Services.
- -----------------------------
Other than as set forth in Parts A and B of this Registration Statement,
the Registrant is not a party to any management-related service contract.
Item 32. Undertakings.
- ----------------------
None.
C-3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Global High Income Portfolio has duly caused this amendment to its Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of San Francisco, and the State of California, on
the 25th day of February, 1998.
GLOBAL HIGH INCOME PORTFOLIO
By: /s/ Michael A. Silver
-----------------------------
Michael A. Silver
Assistant Secretary
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description of Exhibit
1. Declaration of Trust of the Registrant - Incorporated by
Reference to Amendment No. 6 to Registrant's Registration
Statement, File No. 811- 7302.
2. By-Laws of the Registrant - Incorporated by Reference to
Amendment No. 6 to Registrant's Registration Statement, File No.
811-7302.
5. Investment Management and Administration Contract between the
Registrant and Chancellor LGT Asset Management, Inc. -
Incorporated by Reference to Amendment No. 6 to Registrant's
Registration Statement, File No. 811-7302.
8. Form of Custodian Agreement between the Registrant and State
Street Bank and Trust Company - Incorporated by Reference to
Amendment No. 6 to Registrant's Registration Statement, File No.
811- 7302.
11. Consent of Coopers & Lybrand L.L.P., Independent Accountants -
Filed herewith.
13. Investment representation letters of initial investors -
Incorporated by Reference to Amendment No. 6 to Registrant's
Registration Statement, File No. 811-7302.
27. Financial Data Schedule - Filed herewith.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FUND'S ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 343762
<INVESTMENTS-AT-VALUE> 348125
<RECEIVABLES> 28177
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3383
<TOTAL-ASSETS> 379685
<PAYABLE-FOR-SECURITIES> 9849
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1196
<TOTAL-LIABILITIES> 11045
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 127464
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 158169
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 79564
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3443
<NET-ASSETS> 368640
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 40562
<OTHER-INCOME> 0
<EXPENSES-NET> (3126)
<NET-INVESTMENT-INCOME> 37437
<REALIZED-GAINS-CURRENT> 69703
<APPREC-INCREASE-CURRENT> (37570)
<NET-CHANGE-FROM-OPS> 69569
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 276030
<NUMBER-OF-SHARES-REDEEMED> (424030)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (78431)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2971
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3360
<AVERAGE-NET-ASSETS> 434661
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Global High Income Portfolio:
We consent to the inclusion of Post Effective Amendment No. 7 to the
Registration Statement of Global High Income Portfolio, on Form N1-A (File No.
811-7302) of our report dated December 15, 1997 on our audit of the financial
statements and supplementary data of the above referenced Portfolios which
report is included in the Annual Report to Shareholders for the year ended
October 31, 1997 which is included in the Post Effective Amendment to the
Registration Statement.
We also consent to the reference to our Firm under the caption, "Financial
Statements."
/s/ Coopers & Lybrand L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
