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As filed with the Securities and Exchange Commission on February 28, 1996.
File No. 811-8454
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3 [x]
GLOBAL INVESTMENT 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
David J. Thelander, Esq.
Assistant General Counsel
LGT Asset Management, Inc.
50 California Street, 27th Floor
San Francisco, California 94111
(Name and Address of Agent for Service)
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EXPLANATORY NOTE
This Amendment to the Registration Statement of Global Investment
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 which 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.
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GLOBAL INVESTMENT PORTFOLIO
CROSS-REFERENCE SHEET
Item No. of Part A of
Form N-1A Captions in Document
---------------------- --------------------
1. Cover Page . . . . . . [Not Applicable]
2. Synopsis . . . . . . . [Not Applicable]
3. Condensed Financial [Not Applicable]
Information . . . . .
4. General Description of General Description of
Registrant . . . . . . Registrant
5. Management of the Fund Management of the Portfolio
6. Capital Stock and Capital Stock and Other
Other Securities . . . Securities
7. Purchase of Securities Purchase of Securities
Being Offered . . . .
8. Redemption or Redemption or Repurchase
Repurchase . . . . . .
9. Pending Legal Pending Legal Proceedings
Proceedings . . . . .
Item No. of Part B of
Form N-1A Captions in Document
---------------------- --------------------
10. Cover Page . . . . . . [Not Applicable]
11. Table of Contents . . Table of Contents
12. General Information and General Information and History
History . . . . . . .
13. Investment Objectives Investment Objectives and Policies
and Policies . . . . .
14. Management of the Management of the Portfolio
Registrant . . . . . .
15. Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities . . . . . .
16. Investment Advisory and Investment Advisory and Other
Other Services . . . . Services
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17. Brokerage Allocation . Brokerage Allocation and Other
Practices
18. Capital Stock and Other Capital Stock and Other Securities
Securities . . . . . .
19. Purchase, Redemption Purchase, Redemption and Pricing
and Pricing of of Securities
Securities Being
Offered . . . . . . .
20. Tax Status . . . . . . Tax Status
21. Underwriters . . . . . [Not Applicable]
22. Calculation of [Not Applicable]
Performance Data . . .
23. Financial Statements Financial Statements
A-2
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GLOBAL INVESTMENT PORTFOLIO
CONTENTS OF REGISTRATION STATEMENT
This registration statement of Global Investment Portfolio contains the
following documents:
Facing Sheet
Contents of Registration Statement
Cross-Reference Sheet
Part A
Part B
Part C
Signature Page
Exhibits
A-3
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PART A
Responses to Items 1 through 3 have been omitted pursuant to paragraph
4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant.
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Global Investment Portfolio ("Master Portfolio") is a diversified,
open-end management investment company which was organized as a New York
common law trust pursuant to a Declaration of Trust dated as of January
11, 1994.
Beneficial interests in the Master Portfolio are divided currently
into four separate subtrusts or "series"--Global Financial Services
Portfolio, Global Infrastructure Portfolio, Global Natural Resources
Portfolio and Global Consumer Products and Services Portfolio
(individually, "Portfolio"; collectively, "Portfolios")--each having a
distinct investment objective and distinct investment policies. The
Global Financial Services Portfolio, Global Infrastructure Portfolio and
Global Natural Resources Portfolio commenced operations on March 16, 1994.
The Global Consumer Products and Services Portfolio commenced operations
on December 30, 1994. Each Portfolio is described herein. Additional
subtrusts to the Master Portfolio may be organized at a later date. The
assets of each Portfolio belong only to that Portfolio, and the
liabilities of each Portfolio are borne solely by that Portfolio and no
other. See Item 6, "Capital Stock and Other Securities."
Beneficial interests in the Portfolios 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
Portfolios 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. 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.
Each Portfolio's investment manager and administrator is LGT Asset
Management, Inc. ("LGT Asset Management"), part of Liechtenstein Global
Trust, a provider of global asset management and private banking products
and services to individual and institutional investors, which is currently
entrusted with approximately $45 billion in total assets.
Investment Objectives
Global Financial Services Portfolio ("Financial Services Portfolio").
The Financial Services Portfolio primarily seeks long-term growth of
capital by investing primarily in equity securities of companies
throughout the world that operate in the financial services industry.
There is no assurance that the Financial Services Portfolio's investment
objective will be achieved.
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At least 65% of the Financial Services Portfolio's total assets
normally will be invested in common stocks and preferred stocks and
warrants to acquire such securities, issued by financial services
companies. A "financial services" company is an entity in which (i) at
least 50% of either the revenues or earnings was derived from financial
services activities, or (ii) at least 50% of the assets was devoted to
such activities, based on the company's most recent fiscal year. The
remainder of the Financial Services Portfolio's assets may be invested in
debt securities issued by financial services companies and/or equity and
debt securities of companies outside of the financial services industries,
which, in the opinion of LGT Asset Management, stand to benefit from
developments in the financial services industry.
Global Financial Services Industry Investment. Examples of financial
services companies include those providing financial services to consumers
and industry, including the following and their foreign equivalents:
commercial banks and savings institutions and loan associations and their
holding companies; consumer and industrial finance companies; diversified
financial services companies; investment banks; insurance brokerages;
securities brokerage and investment advisory companies; real estate-
related companies; leasing companies; and a variety of firms in all
segments of the insurance field such as multi-line, property and casualty,
and life insurance and insurance holding companies.
LGT Asset Management believes an accelerating rate of global economic
interdependence will lead to significant growth in the demand for
financial services. In addition, in LGT Asset Management's view, as the
industry evolves, opportunities will emerge for those companies positioned
for the future. Thus, LGT Asset Management expects that banking and
related financial institution consolidation in the developed countries,
increased demand for retail borrowing in developing countries, a growing
need for international trade-based financing, a rising demand for
sophisticated risk management, the proliferating number of liquid
securities markets around the world, and larger concentrations of
investable assets should lead to growth in financial service companies
that are positioned for the future.
The Financial Services Portfolio expects that, from time to time, a
significant portion of its total assets may be invested in the securities
of domestic issuers. Financial services is a global industry, however,
with significant, growing markets outside of the United States.
For these reasons, LGT Asset Management believes that a portfolio
comprised only of securities of U.S. issuers does not provide the greatest
potential for return from a financial services investment. LGT Asset
Management uses its financial expertise in markets located throughout the
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world and the substantial global resources of the Liechtenstein Global
Trust in attempting to identify those countries and financial services
companies then providing the greatest potential for growth of capital. In
this fashion, LGT Asset Management and the Portfolio seek to enable
interestholders to capitalize on the substantial investment opportunities
and the potential for long-term growth of capital presented by the global
financial services industry.
Global Infrastructure Portfolio ("Infrastructure Portfolio"). The
Infrastructure Portfolio primarily seeks long-term growth of capital by
investing primarily in equity securities of companies throughout the world
that design, develop or provide products and services significant to a
country's infrastructure. There is no assurance that the Infrastructure
Portfolio's investment objective will be achieved.
At least 65% of the Infrastructure Portfolio's total assets normally
will be invested in common stocks and preferred stocks and warrants to
acquire such securities, issued by infrastructure companies. An
"infrastructure" company is an entity in which (i) at least 50% of either
the revenues or earnings was derived from infrastructure activities, or
(ii) at least 50% of the assets was devoted to such activities, based on
the company's most recent fiscal year. The remainder of the
Infrastructure Portfolio's assets may be invested in debt securities
issued by infrastructure companies and/or equity and debt securities of
companies outside of the infrastructure industries, which, in the opinion
of LGT Asset Management, stand to benefit from developments in the
infrastructure industries.
Global Infrastructure Industries Investment. For purposes of the
Infrastructure Portfolio's policy of investing at least 65% of its total
assets in the securities of infrastructure companies, the companies in
which the Portfolio will principally invest will include those engaged in
designing, developing or providing the following products and services:
electricity production; oil, gas, and coal exploration, development,
production and distribution; water supply, including water treatment
facilities; nuclear power and other alternative energy sources;
transportation, including the construction or operation of transportation
systems; steel, concrete, or similar types of products; communications
equipment and services (including equipment and services for both data and
voice transmission); mobile communications and cellular radio/paging;
emerging technologies combining telephone, television and/or computer
systems; and other products and services which, in LGT Asset Management's
judgment, constitute services significant to the development of a
country's infrastructure.
In addition, long-term growth rates of certain foreign countries'
economies may be substantially higher than those of the U.S. economy. An
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integral aspect of the foreign countries' economies may be the development
or improvement of their infrastructure.
LGT Asset Management believes that a country's infrastructure is one
key to the long-term success of that country's economy. LGT Asset
Management believes that adequate energy, transportation, water, and
communications systems are essential elements for long-term economic
growth. LGT Asset Management believes that many developing nations,
especially in Asia and Latin America, plan to make significant
expenditures to the development of their infrastructure in the coming
years, which is expected to facilitate increased levels of services and
manufactured goods.
In the developed countries of North America, Europe, Japan and the
south Pacific, LGT Asset Management expects that the replacement and
upgrade of transportation and communications systems should stimulate
growth in the industries of those countries. In LGT Asset Management's
view, deregulation of telecommunications and electric and gas utilities in
many countries is promoting significant changes in these industries.
LGT Asset Management believes that strong economic growth in
developing countries and infrastructure replacement, upgrade, and
deregulation in more developed countries provide an environment for
favorable investment opportunities in infrastructure companies worldwide.
The Infrastructure Portfolio expects that, from time to time, a
significant portion of its assets may be invested in the securities of
domestic issuers. Infrastructure industries, however, are global
industries with significant, growing markets outside of the United States.
A sizeable proportion of the companies which comprise the infrastructure
industries are headquartered outside of the United States. In addition,
long-term growth rates of certain foreign countries' economies may be
substantially higher than those of the U.S. economy. An integral aspect
of the foreign countries' economies may be the development or improvement
of their infrastructure.
For these reasons, LGT Asset Management believes that a portfolio
comprised only of securities of U.S. issuers does not provide the greatest
potential for return from an infrastructure investment. LGT Asset
Management uses its financial expertise in markets located throughout the
world and the substantial global resources of the Liechtenstein Global
Trust in attempting to identify those countries and infrastructure
companies then providing the greatest potential for long-term capital
growth. In this fashion, LGT Asset Management and the Infrastructure
Portfolio seek to enable shareholders to capitalize on the substantial
investment opportunities and the potential for long-term growth of capital
presented by the global infrastructure industries.
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Global Natural Resources Portfolio ("Natural Resources Portfolio").
The Natural Resources Portfolio's investment objective is long-term
capital growth which it seeks by investing primarily in equity securities
of companies throughout the world which own, explore or develop natural
resources and other basic commodities, or supply goods and services to
such companies. There is no assurance that the Natural Resources
Portfolio's investment objective will be achieved.
At least 65% of the Natural Resources Portfolio's total assets
normally will be invested in common stocks and preferred stocks and
warrants to acquire such securities, issued by natural resource companies.
A "natural resource" company is an entity in which (i) at least 50% of
either the revenues or earnings was derived from natural resource
activities, or (ii) at least 50% of the assets was devoted to such
activities, based upon the company's most recent fiscal year. The
remainder of the Natural Resources Portfolio's assets may be invested in
debt securities issued by natural resource companies and/or equity and
debt securities of companies outside of the natural resource industries,
which, in the opinion of LGT Asset Management, stand to benefit from
developments in the natural resource industries.
Global Natural Resource Industries Investment. The natural resource
industries are comprised of a variety of companies. For purposes of the
Natural Resources Portfolio's policy of investing at least 65% of its
total assets in the securities of natural resource companies, the
companies in which the Natural Resources Portfolio will principally invest
are those which own, explore or develop: energy sources (such as oil, gas
and coal); ferrous and non-ferrous metals (such as iron, aluminum, copper,
nickel, zinc and lead), strategic metals (such as uranium and titanium)
and precious metals (such as gold, silver and platinum); chemicals; forest
products (such as timber, coated and uncoated tree sheet, pulp and
newsprint); other basic commodities (such as food stuffs); refined
products (such as chemicals and steel) and service companies that sell to
the producers and refiners; and other products and services, which, in LGT
Asset Management's opinion, are significant to the ownership and
development of natural resources and other basic commodities.
LGT Asset Management will allocate the Natural Resources Portfolio's
investments among those natural resource companies depending on its
assessment of their long-term growth potential. In assessing these
companies' long-term growth potential, LGT Asset Management will evaluate,
among other factors, their capabilities for expanded exploration and
production, superior exploration programs and production techniques and
facilities, current inventories, expected production and demand levels and
the potential to accumulate new resources. LGT Asset Management believes
that investments in natural resource industries and basic commodities
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offer an opportunity to achieve the long-term capital growth necessary to
protect wealth against the capital-eroding effects of inflation.
LGT Asset Management believes that the liberalization of formerly
socialist economies will bring about dramatic changes in both the supply
and demand for natural resources. In addition, rapid industrialization in
developing countries of Asia and Latin America are generating new demands
for industrial materials which are affecting world commodities markets.
LGT Asset Management believes these changes are likely to create
investment opportunities which benefit from new sources of supply and/or
from changes in commodities prices.
LGT Asset Management believes that investments in natural resource
industries offer an opportunity to protect wealth against the capital-
eroding effects of inflation. During periods of accelerating inflation or
currency uncertainty, worldwide investment demand for natural resources,
particularly precious metals, tends to increase, and during periods of
disinflation or currency stability, it tends to decrease. LGT Asset
Management believes that rising commodity prices and increasing worldwide
industrial production may favorably affect share prices of natural
resource companies, and investments in such companies can offer excellent
opportunities to offset the effects of inflation.
Global Consumer Products and Services Portfolio ("Consumer Products
and Services Portfolio"). The Consumer Products and Services Portfolio's
investment objective is long-term capital growth which it seeks by
investing primarily in equity securities of companies throughout the world
that manufacture, market, retail or distribute consumer products and
services. There is no assurance that the Consumer Products and Services
Portfolio's investment objective will be achieved.
At least 65% of the Consumer Products and Services Portfolio's total
assets normally will be invested in common stocks and preferred stocks and
warrants to acquire such securities issued by companies in the consumer
products and services industries. A "consumer products or services"
company is an entity in which (i) at least 50% of either the revenues or
earnings was derived from activities relating to consumer products or
services or (ii) at least 50% of the assets was devoted to such
activities, based on the company's most recent fiscal year. The remainder
of the Consumer Products and Services Portfolio's assets may be invested
in debt securities issued by consumer products or services companies
and/or equity and debt securities of companies outside the consumer
products or services industries, which, in the opinion of LGT Asset
Management, stand to benefit from developments in such industries.
Consumer Products and Services Industries Investment. The consumer
products and services industries are composed of a variety of companies.
For the purposes of the Consumer Products and Services Portfolio's policy
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of investing at least 65% of its total assets in the securities of
consumer products and services companies, the companies in which the
Consumer Products and Services Portfolio will principally invest will be
those that manufacture, market, retail, or distribute: (i) durable goods,
such as homes, household goods, automobiles, boats, furniture and
appliances, and computers; (ii) non-durable goods, such as food and
beverages and apparel; (iii) media, entertainment, broadcasting,
publishing and sports-related goods and services, such as television and
radio broadcast, motion pictures, wireless communications, gaming casinos,
theme parks, restaurants and lodging; and (iv) goods and services to
companies in the foregoing industries such as advertisers, textile
companies and distribution and shipping companies.
The Consumer Products and Services Portfolio expects that a
significant portion of its assets may be invested in the securities of
U.S. issuers from time to time, particularly those that market their
products globally. However, consumer products and services companies of a
particular nation or region of the world are often operated and owned in
their local markets, close to their customers. These companies, LGT Asset
Management believes, often offer superior opportunities for capital growth
as compared to their larger, multinational counterparts. Certain global
markets may be more attractive than others from time to time; companies
dependent on U.S. markets, for example, may be outperformed by companies
not dependent on U.S. markets.
LGT Asset Management also believes that the demand for consumer
products and services worldwide will increase along with rising disposable
income in both developed and developing nations. Emerging economies, such
as those in China, Southeast Asia, the former Eastern Europe and Latin
America, offer opportunities for the growth and expansion of consumer
markets. These regions currently comprise a growing source of inexpensive
manufacture of consumer products for export and a growing source of demand
for consumer products and services as the disposable incomes of their
populations increase. In LGT Asset Management's view, these changes are
likely to create investment opportunities in companies, both local and
multi-national, that are able to employ innovative manufacturing,
marketing, retailing and distribution methods to open new markets and/or
expand existing markets.
The Consumer Products and Services Portfolio expects that, from time
to time, a significant portion of its assets may be invested in the
securities of domestic issuers. The consumer products and services
industries represented in the Consumer Products and Services Portfolio,
however, are global industries with significant, growing markets outside
of the United States. A sizeable proportion of the companies which
comprise such industries are headquartered outside of the United States.
For these reasons, LGT Asset Management believes that a portfolio
comprised only of securities of U.S. issuers does not provide the greatest
potential for return from a Consumer Products and Services Portfolio
investment. LGT Asset Management uses its financial expertise in markets
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located throughout the world and the substantial global resources of the
Liechtenstein Global Trust in attempting to identify those countries and
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, LGT Asset Management seeks to enable
shareholders to capitalize on the substantial investment opportunities and
the potential for long-term growth of capital presented by the global
industries represented in the Consumer Products and Services Portfolio.
In analyzing companies for investment by each Portfolio, LGT Asset
Management ordinarily looks for several of the following characteristics:
above-average per share earnings growth, high return on invested capital,
a healthy balance sheet, sound financial and accounting policies and
overall financial strength, strong competitive advantages, effective
research and product development and marketing, efficient service, pricing
flexibility, strong management, and general operating characteristics
which will enable the companies to compete successfully in their
respective markets.
LGT Asset Management allocates each Portfolio's assets among
securities of countries and in currency denominations where opportunities
for meeting that Portfolio's investment objective are expected to be the
most attractive. Each Portfolio may invest substantially in securities
denominated in one or more currencies. Under normal conditions, each
Portfolio invests in the securities of issuers located in at least three
countries, including the United States; investments in securities of
issuers in any one country, other than the United States, will represent
no more than 40% of the Financial Services Portfolio's total assets; and
no more than 50% of the Infrastructure Portfolio's, Natural Resources
Portfolio's, and the Consumer Products and Services Portfolio's total
assets.
Privatizations. The governments of some foreign countries have been
engaged in programs of selling part or all of their stakes in government
owned or controlled enterprises ("privatizations"). LGT Asset Management
believes that privatizations may offer opportunities for significant
capital appreciation and intends to invest assets of the Portfolios in
privatizations in appropriate circumstances. In certain foreign
countries, the ability of foreign entities such as the Portfolios to
participate in privatizations may be limited by local law, or the terms on
which the Portfolios may be permitted to participate may be less
advantageous than those for local investors. There can be no assurance
that foreign governments will continue to sell companies currently owned
or controlled by them or that privatization programs will be successful.
Other Information Regarding the Portfolios. The approval of the
investors in a Portfolio is not required to change the investment
objective, policies or limitations of that Portfolio, unless otherwise
specified. Written notice shall be provided to investors in a Portfolio
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at least 30 days prior to any changes in that Portfolio's investment
objective.
General Policies
Temporary Defensive Strategies. Each Portfolio retains the
flexibility to respond promptly to changes in market and economic
conditions. Accordingly, in the interest of preserving interestholder's
capital and consistent with each Portfolio's investment objective, LGT
Asset Management may employ a temporary defensive investment strategy if
it determines such a strategy to be warranted due to market, economic or
political conditions. Under a defensive strategy, each Portfolio
temporarily may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and/or invest any portion or all of its
assets in debt securities or high quality money market instruments issued
by corporations or the U.S. or a foreign government. For temporary
defensive purposes, such as during times of international political or
economic uncertainty, most or all of each Portfolio's investments may be
made in the United States and denominated in U.S. dollars. To the extent
a Portfolio adopts a temporary defensive investment posture, it will not
be invested so as to directly achieve its investment objective.
In addition, pending investment of proceeds from sales of Portfolio
interests or to meet ordinary daily cash needs, each Portfolio temporarily
may hold cash (U.S. dollars, foreign currencies or multinational currency
units) and may invest Money Market Instruments in which each Portfolio may
invest including, but not limited to, U.S. or foreign government
Securities; high-grade commercial paper; bank certificates of deposit;
banker's acceptances; and repurchase agreements related to any of the
foregoing. High-grade commercial paper refers to commercial paper rated
A-1 by S&P or P-1 by Moody's or, if not rated, determined by LGT Asset
Management to be of comparable quality in high quality foreign or domestic
money market instruments.
Illiquid Securities. Each Portfolio may invest up to 15% of its net
assets in securities for which no readily available market exists, so-
called "Illiquid Securities." LGT Asset Management believes that
carefully selected investments in joint ventures, cooperatives,
partnerships, state enterprises and other similar vehicles (collectively,
"Special Situations") could enable the Portfolios to achieve capital
appreciation substantially exceeding the appreciation the Portfolios would
realize if they did not make such investments. However, in order to
attempt to limit investment risk, each Portfolio will invest no more than
5% of its total assets in Special Situations.
The Financial Services Portfolio currently will not invest more than
5%, and the Infrastructure Portfolio, the Natural Resources Portfolio and
the Consumer Products and Services Portfolio not more than 20%, of its
total assets in debt securities rated below investment grade, that is,
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rated below one of the four highest rating categories by Standard & Poor's
("S&P") or Moody's Investors Service, Inc. ("Moody's") or deemed to be of
equivalent quality in the judgment of LGT Asset Management. Securities
rated in the lowest category of investment grade, that is, securities
rated BBB by S&P or Baa by Moody's, are considered by S&P and Moody's to
have speculative characteristics. Debt securities rated below investment
grade are the equivalent of high yield, high risk bonds, commonly known as
"junk bonds". Such securities may include: (i) corporate debt securities
and; (ii) debt instruments issued by governments whose debt is unrated and
are subject to a greater risk of loss of principal and interest than those
of securities rated above BBB by S&P or Baa by Moody's in the four highest
rating categories described above. The Portfolios may also use
instruments (including forward currency contracts) often referred to as
"derivatives." See "Currency, Options and Futures Transactions." See
"Risk Factors -- Risks Associated with Debt Securities," below.
When-Issued Or Forward Commitment Securities. Each Portfolio may
purchase debt securities on a "when-issued" basis and may purchase or sell
such securities on a "forward commitment" basis in order to hedge against
anticipated changes in interest rates and prices. The price, which is
generally expressed in yield terms, is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later
date. When-issued securities and forward commitments may be sold prior to
the settlement date, but each Portfolio will purchase or sell when-issued
securities or enter into forward commitments only with the intention of
actually receiving or delivering the securities, as the case may be. No
income accrues on securities which have been purchased pursuant to a
forward commitment or on a when-issued basis prior to delivery of the
securities. If a Portfolio disposes of the right to acquire a when-issued
security prior to its acquisition or disposes of its right to deliver or
receive against a forward commitment, it may incur a gain or loss. At the
time a Portfolio enters into a transaction on a when-issued or forward
commitment basis, a segregated account consisting of cash or high grade
liquid debt securities equal to the value of the when-issued or forward
commitment securities will be established and maintained with its
custodian and will be marked to market daily. There is a risk that the
securities may not be delivered and that a Portfolio may incur a loss.
Investments in Other Investment Companies. Each Portfolio may invest
up to 10% of its total assets in other investment companies. As a
shareholder in such an investment company, a Portfolio would bear its
ratable share of that investment company's expenses, including its
advisory and administration fees. At the same time, that Portfolio would
continue to pay its own management fees and other expenses.
Borrowing, Reverse Repurchase Agreements and Roll Transactions. From
time to time, it may be advantageous for a Portfolio to borrow money
rather than sell existing portfolio positions to meet redemption requests.
Accordingly, a Portfolio may borrow from banks or through reverse
repurchase agreements and "roll" transactions in connection with meeting
requests for the redemptions of Portfolio interests. A reverse repurchase
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agreement is a borrowing transaction in which a Portfolio transfers
possession of a security to another party, such as a bank or
broker/dealer, in return for cash, and agrees to repurchase the security
in the future at an agreed upon price which includes an interest
component. A "roll" borrowing transaction involves a Portfolio's sale of
securities together with its commitment (for which that Portfolio may
receive a fee) to purchase similar, but not identical, securities at a
future date.
Each Portfolio's borrowings will not exceed 33-1/3% of that
Portfolio's total assets, i.e., a Portfolio's total assets at all times
will equal at least 300% of the amount of outstanding borrowings. If
market fluctuations in the value of a Portfolio's securities holdings or
other factors cause the ratio of that Portfolio's total assets to
outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event that Portfolio may be required to sell
portfolio securities to restore the 300% asset coverage, even though from
an investment standpoint such sales might be disadvantageous. Each
Portfolio may also borrow up to 5% of its total assets for temporary or
emergency purposes other than to meet redemptions. Any borrowing by a
Portfolio may cause greater fluctuation in the value of its beneficial
interests than would be the case if such Portfolio did not borrow.
Repurchase Agreements. Repurchase agreements are transactions in
which a Portfolio purchases a security from a bank or recognized
securities dealer and simultaneously commits to resell that security to
the bank or dealer at an agreed-upon price, date, and market rate of
interest unrelated to the coupon rate or maturity of the purchased
security. Although repurchase agreements carry certain risks not
associated with direct investments in securities, each Portfolio intends
to enter into repurchase agreements only with banks and dealers believed
by LGT Asset Management to present minimum credit risks in accordance with
guidelines established by the Master Portfolio's Board of Trustees. LGT
Asset Management will review and monitor the creditworthiness of such
institutions under the Board's general supervision.
A Portfolio will invest only in repurchase agreements collateralized
at all times in an amount at least equal to the repurchase price plus
accrued interest. To the extent that the proceeds from any sale of such
collateral upon a default in the obligation to repurchase were less than
the repurchase price, a Portfolio would suffer a loss. If the financial
institution which is party to the repurchase agreement petitions for
bankruptcy or otherwise becomes subject to bankruptcy or other liquidation
proceedings, there may be restrictions on a Portfolio's ability to sell
the collateral and that Portfolio could suffer a loss. However, with
respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, each Portfolio
intends to comply with provisions under the U.S. Bankruptcy Code that
would allow it immediately to resell the collateral. A Portfolio will not
enter into a repurchase agreement with a maturity of more than seven days
if, as a result, more than 15% of the value of its total assets would be
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invested in such repurchase agreements, Special Situations and other
illiquid investments.
Securities Lending. Each Portfolio may make loans of its portfolio
securities to broker/dealers or to other institutional investors. The
borrower must maintain with the Portfolio's custodian collateral
consisting of cash, U.S. government securities or other liquid, high-grade
debt securities equal to at least 100% of the value of the borrowed
securities, plus any accrued interest. The Portfolio will receive any
interest paid on the loaned securities and a fee and/or a portion of the
interest earned on the collateral. Each Portfolio will limit its loans of
portfolio securities to an aggregate of 30% of the value of its total
assets, measured at the time any such loan is made. The risks in lending
portfolio securities, as with other extensions of secured credit, consist
of possible delay in receiving additional collateral or in recovery of the
securities or possible loss of rights in the collateral should the
borrower fail financially.
Risk Factors
General. As a result of the focus of each of the Portfolios on
specific industries, an investment in each may be more volatile than that
of other investment companies that do not concentrate their investments in
such a manner. Moreover, the value of each Portfolio's shares of
beneficial interest will be especially sensitive to factors affecting the
industry or industries on which it focuses. No Portfolio should be
considered as a complete investment program.
Financial Services Portfolio. The value of its beneficial interests
will be susceptible to factors affecting the financial services industry.
This industry may be subject to greater governmental regulation than many
other industries and changes in governmental policies and the need for
regulatory approvals may have a material effect on this industry. Banks,
savings and loan associations, and finance companies are subject to
extensive governmental regulation which may limit both the financial
commitments they can make, including the amounts and types of loans, and
the interest rates and fees they can charge. These companies are subject
to rapid business changes, significant competition, value fluctuations due
to the concentration of loans in particular industries significantly
affected by economic conditions (such as real estate or energy) and
volatile performance dependent upon the availability and cost of capital
and prevailing interest rates. In addition, general economic conditions
significantly affect these companies. Credit and other losses resulting
from the financial difficulty of borrowers or other third parties may have
an adverse effect on companies in this industry. Moreover, neither
federal insurance of deposits nor governmental regulation ensures the
solvency or profitability of commercial banks or thrifts or their holding
companies, or ensures against any risk of investment in the securities
issued by such institutions.
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Similar considerations affect the financial services sector in foreign
countries. In particular, government regulation in certain foreign
countries may include interest rate controls, credit controls and price
controls. Moreover, in some cases foreign governments have taken steps to
nationalize the operations of certain companies, such as banks, in the
financial services sector.
The laws generally separating commercial and investment banking, as
well as laws governing the capitalization and regulation of the industry,
currently are being studied by U.S. governmental authorities. The
services offered by banks may expand if legislation broadening bank powers
is enacted. While providing diversification, expanded powers could expose
banks to well-established competitors, particularly as the historical
distinctions between banks and other financial institutions erode.
Increased competition may result from the broadening of regional and
national interstate powers, which has led to a decline in the number of
publicly traded regional banks, and from the aggressive expansion of
larger, publicly held foreign banks. Foreign banks, particularly those of
Japan, have experienced financial difficulties attributed to increased
competition, regulatory changes, and general economic difficulties.
The financial services area in the United States currently is changing
as existing distinctions between various financial service segments become
less clear. For instance, recent business combinations have included
insurance, finance, and securities brokerage under single ownership. Some
primarily retail corporations have expanded into securities and insurance
fields. Investment banking, securities brokerage and investment advisory
companies in particular are subject to government regulation and risk due
to securities trading and underwriting activities.
Many of the investment considerations discussed in connection with
banks, savings and loans, and finance companies also apply to insurance
companies. The performance of insurance company investments will be
subject to risk from several factors. The earnings of insurance companies
will be affected by interest rates, pricing (including severe pricing
competition, from time to time), claims activity, marketing competition
and general economic conditions. Particular insurance lines will also be
influenced by specific matters. Property and casualty insurer profits may
be affected by certain weather catastrophes and other disasters. Life and
health insurer profits may be affected by mortality and morbidity rates.
Individual companies may be exposed to material risks, including reserve
inadequacy, problems in investment portfolios (due to real estate or
"junk" bond holdings, for example), and the inability to collect from
reinsurance carriers. Insurance companies are subject to extensive
governmental regulation, including the imposition of maximum rate levels,
which may not be adequate for some lines of business. Proposed or
potential antitrust or tax law changes may also adversely affect insurance
companies' policy sales, tax obligations and profitability. In addition,
significant insurance companies recently have reported liquidity or
solvency difficulties, or have experienced credit rating downgrades.
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Infrastructure Portfolio. The value of its beneficial interests will
be susceptible to factors affecting the infrastructure industries. In the
U.S. and foreign countries, infrastructure industries may be subject to
greater political, environmental and other governmental regulation than
many other industries. The nature of such regulation continues to evolve
in both the United States and foreign countries, and changes in
governmental policies and the need for regulatory approvals may have a
material effect on the products and services of this industry. Electric,
gas, water and most telecommunications companies in the United States, for
example, are subject to both federal and state regulation affecting
permitted rates of return and the kinds of services that may be offered.
Changes in prevailing interest rates may also affect the values because
prices of equity and debt securities of infrastructure companies often
tend to increase when interest rates decline and decrease when interest
rates rise.
In addition, many infrastructure companies, including coal, steel, and
other types of companies, have historically been subject to the risks
attendant to increases in fuel and other operating costs, high interest
costs on borrowed funds, costs associated with compliance with
environmental and other safety regulations and changes in the regulatory
climate. Such governmental regulation may also hamper the development of
new technologies, and it is impossible to predict the direction, type or
effect of any future regulation. Further, competition is intense for many
infrastructure companies. As a result, many of these companies may be
adversely affected in the future and such companies may be subject to
increased share price volatility. In addition, many companies have
diversified into oil and gas exploration and development, and therefore
returns may be more sensitive to energy prices. Other infrastructure
companies, such as water supply companies, are in a highly fragmented
industry due to local ownership. Generally these companies are mature and
are experiencing little or no growth.
While the Infrastructure Portfolio's investments normally will include
securities of established providers of traditional products and services,
the Infrastructure Portfolio may invest in smaller companies which can
benefit from the development of new products and services. These smaller
companies may present greater opportunities for capital appreciation, but
may also involve greater risks than large, established issuers. Such
smaller companies may have limited product lines, markets or financial
resources, and their securities may trade less frequently and in more
limited volume than the securities of larger, more established companies.
As a result, the prices of the securities of such smaller companies may
fluctuate to a greater degree than the prices of the securities of other
issuers.
Natural Resources Portfolio. The value of its beneficial interests
will be susceptible to factors affecting the natural resource industries.
In the U.S. and foreign countries, natural resource industries may be
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subject to greater political, environmental and other governmental
regulation than many other industries. The nature of such regulation
continues to evolve in both the U.S. and foreign countries, and changes in
governmental policies and the need for regulatory approvals may have a
material effect on the products and services of natural resource
companies. For example, the exploration, development and distribution of
coal, oil and gas in the U.S. are subject to significant federal and state
regulation, which may affect rates of return on such investments and the
kinds of services that may be offered.
In addition, many natural resource companies historically have been
subject to significant costs associated with compliance with environmental
and other safety regulations and changes in the regulatory climate. Such
governmental regulations may also hamper the development of new
technologies, and it is impossible to predict the direction, type or
effect of any future regulation.
Further, competition is intense for many natural resource companies.
As a result, many of these companies may be adversely affected in the
future and the value of the securities issued by such companies may be
subject to increased share price volatility.
The value of the Natural Resources Portfolio's securities will
fluctuate in response to stock market developments, as well as market
conditions for the particular natural resources with which the issuer is
involved. The values of natural resources may fluctuate directly with
respect to various stages of the inflationary cycle and are subject to
numerous factors, including national and international politics. The
Natural Resources Portfolio's investments in precious metals are subject
to many risks, including substantial price fluctuations over short periods
of time. Further, the Natural Resources Portfolio's investments in
companies which own or develop real estate may be subject to irregular
fluctuations in earnings, because these companies are affected by changes
in the availability of money, the level of interest rates, and other
factors.
Consumer Products and Services Portfolio. The value of its beneficial
interests will be susceptible to factors affecting the consumer products
and services industries. General economic conditions significantly affect
consumer products and services companies. The performance of consumer
products manufacturers, marketers, retailers and distributors relates
closely to the performance of the overall economy, interest rates and
consumer confidence. Such performance also depends substantially on
disposable household income and consumer spending, both of which are
closely tied to the actual or perceived performance of the overall
economy. In addition, changes in demographics and consumer tastes may
also affect the demand for, and success of, consumer products and services
in the global marketplace.
Further, competition is keen for many consumer products and services
companies. As a result, many consumer products and services companies may
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be adversely affected and the value of the securities issued by such
companies may be subject to increased share price volatility. In
addition, many consumer products and services companies have unpredictable
earnings, due in part to changes in consumer tastes and intense
competition. Also, the consumer products and services industries have
reacted strongly to technology development and to the threat of government
regulation. Consumer products and services industries may also be subject
to greater government regulation, including trade regulation, than many
other industries. Changes in governmental policy and the need for
regulatory approvals may have a material effect on the products and
services of the consumer products and services industries. Such
governmental regulations may also hamper the development of new business
opportunities, and it is impossible to predict the direction, type or
effect of any future government regulation.
Risks Relating to Foreign Investing. LGT Asset Management believes
that a global portfolio of investments may be less subject to market risk
(the risk attendant to investing in a particular market) and price
fluctuation than a portfolio invested solely in domestic securities.
Under each Portfolio's policies, LGT Asset Management may shift the
country allocations of each Portfolio's investments as market conditions
in individual countries change. Moreover, the number of different
investment opportunities from which each Portfolio may choose is
significantly broader than that of an investment company investing solely
in the securities of U.S. companies.
Nonetheless, foreign investing does entail certain risks. The
securities of non-U.S. issuers generally will not be registered with, nor
the issuers thereof be subject to, the reporting requirements of the
Securities and Exchange Commission ("SEC"). Accordingly, there may be
less publicly available information about foreign securities and issuers
than is available about domestic securities and issuers. Foreign
companies generally are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to
those applicable to domestic companies. Securities of some foreign
companies are less liquid and their prices may be more volatile than
securities of comparable domestic companies. Each Portfolio's net
investment income from foreign issuers may be subject to non-U.S.
withholding taxes, thereby reducing the Portfolios' net investment income.
With respect to some foreign countries, there is the increased
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Portfolios, political or social
instability, or diplomatic developments which could affect the Portfolios'
investments in those countries. Moreover, individual foreign economies
may differ favorably or unfavorably from the U.S. economy in such respects
as growth of gross national product, rate of inflation, rate of savings
and capital reinvestment, resource self-sufficiency and balance of
payments positions.
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Each Theme Portfolio may invest in issuers domiciled in "emerging
markets," i.e., those countries determined by LGT Asset Management to have
developing or emerging economies and markets. Emerging market investing
involves risks in addition to those risks involved in foreign investing.
For example, many emerging market countries have experienced
substantial, and in some periods extremely high, rates of inflation for
many years. In addition, economies in emerging markets generally are
dependent heavily upon international trade and, accordingly, have been and
continue to be affected adversely by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist
measures imposed or negotiated by the countries with which they trade.
The securities markets of emerging countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of the United States and other more developed countries. In
addition, brokerage commissions, custodial services and other costs
relating to investment in foreign markets generally are more expensive
than in the United States, particularly with respect to emerging markets.
Since a Portfolio may invest substantially in securities denominated
in currencies other than the U.S. dollar, and since a Portfolio may hold
foreign currencies, the Portfolios will be affected favorably or
unfavorably by exchange control regulations or changes in the exchange
rates between such currencies and the U.S. dollar. Changes in currency
exchange rates will influence the value of the beneficial interests of
each Portfolio, and also may affect the value of dividends and interest
earned by each Portfolio and gains and losses realized by each Portfolio.
Exchange rates are determined by the forces of supply and demand in the
foreign exchange markets. These forces are affected by the international
balance of payments and other economic and financial conditions,
government intervention, speculation and other factors.
Risks Associated with Debt Securities. As discussed above, the
Infrastructure Portfolio, Natural Resources Portfolio and Consumer
Products and Services Portfolio may invest up to 20% of their total assets
in debt securities rated below investment grade. Such investments involve
a high degree of risk. However, the Infrastructure Portfolio, Natural
Resources Portfolio and Consumer Products and Services Portfolio will not
invest in debt securities that are in default as to payment of principal
and interest.
The value of the debt securities held by a Portfolio generally will
vary conversely with market interest rates. If interest rates in a market
fall, the value of the debt securities held by a Portfolio ordinarily will
rise. If market interest rates increase, however, the debt securities
owned by the Portfolio in that market will be likely to decrease in value.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC and C by S&P and debt rated
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Ba, B, Caa, Ca, and C by Moody's is regarded by them, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligation. For S&P, BB indicates the lowest degree of speculation and C
the highest degree of speculation. For Moody's, Ba indicates the lowest
degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. Similarly, debt rated Ba or BB and below is regarded by the
relevant rating agency as speculative. Debt rated C by Moody's or S&P is
the lowest rated debt that is not in default as to principal or interest,
and such issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Lower quality
debt securities are also generally considered to be subject to greater
risk than securities with higher ratings with regard to a deterioration of
general economic conditions. These lower quality debt securities are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion
regarding their quality and are not a guarantee of quality. Rating
agencies attempt to evaluate the safety of principal and interest payments
and do not evaluate the risks of fluctuations in market value. Also,
rating agencies may fail to make timely changes in credit ratings in
response to subsequent events, so that an issuer's current financial
condition may be better or worse than a rating indicates.
The market values of lower quality debt securities tend to reflect
individual developments of the issuer to a greater extent than do higher
quality securities, which react primarily to fluctuations in the general
level of interest rates. In addition, lower quality debt securities tend
to be more sensitive to economic conditions and generally have more
volatile prices than higher quality securities. Issuers of lower quality
securities are often highly leveraged and may not have available to them
more traditional methods of financing. For example, during an economic
downturn or a sustained period of rising interest rates, highly leveraged
issuers of lower quality securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet
their interest payment obligations. The issuer's ability to service its
debt obligations may also be adversely affected by specific developments
affecting the issuer, such as the issuer's inability to meet specific
projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such
securities are generally unsecured and are often subordinated to other
creditors of the issuer.
Lower quality debt securities frequently have call or buy-back
features which would permit an issuer to call or repurchase the security
from either the Infrastructure Portfolio or the Natural Resources
Portfolio. In addition, either the Infrastructure Portfolio or the
Natural Resources Portfolio may have difficulty disposing of lower quality
securities because they may have a thin trading market. There may be no
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established retail secondary market for many of these securities, and the
Infrastructure Portfolio and the Natural Resources Portfolio anticipate
that such securities could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market may also
have an adverse impact on market prices of such instruments, and may make
it more difficult for the Infrastructure Portfolio and the Natural
Resources Portfolio to obtain accurate market quotations for purposes of
valuing the Infrastructure Portfolio's and the Natural Resources
Portfolio's portfolio investments. The Infrastructure Portfolio and the
Natural Resources Portfolio may also acquire lower quality debt securities
during an initial underwriting or securities which are sold without
registration under applicable securities laws. Such securities involve
special considerations and risks.
In addition to the foregoing, factors that could have an adverse
effect on the market value of lower quality debt securities in which the
Infrastructure Portfolio and the Natural Resources Portfolio may invest
include (i) potential adverse publicity; (ii) heightened sensitivity to
general economic or political conditions; and (iii) the likely adverse
impact of a major economic recession. The Infrastructure Portfolio and
the Natural Resources Portfolio may also incur additional expenses to the
extent each is required to seek recovery upon a default in the payment of
principal or interest on its portfolio holdings, and the Infrastructure
Portfolio and the Natural Resources Portfolio may have limited legal
recourse in the event of a default.
LGT Asset Management attempts to minimize the speculative risks
associated with investments in lower quality securities through credit
analysis and by carefully monitoring current trends in interest rates,
political developments and other factors. Nonetheless, investors should
carefully review the investment objective and policies of the
Infrastructure Portfolio and the Natural Resources Portfolio and consider
their ability to assume the investment risks involved before making an
investment.
Political, Social and Economic Risks. Investing in securities of non-
U.S. companies may entail additional risks due to the potential political,
social and economic instability of certain countries and the risks of
expropriation, nationalization, confiscation or the imposition of
restrictions on foreign investment and on repatriation of capital
invested. In the event of such expropriation, nationalization or other
confiscation by any country, a Portfolio could lose its entire investment
in any such country.
Illiquid Securities. Each Portfolio may invest up to 15% of its net
assets in illiquid securities. Securities may be considered illiquid if a
Portfolio cannot reasonably expect within seven days to sell the security
for approximately the amount at which that Portfolio values such
securities. The sale of illiquid securities, if they can be sold at all,
generally will require more time and result in higher brokerage charges or
dealer discounts and other selling expenses than will be the sale of
liquid securities such as securities eligible for trading on U.S.
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securities exchanges or in the over-the-counter markets. Moreover,
restricted securities, which may be illiquid for purposes of this
limitation, often sell, if at all, at a price lower than similar
securities that are not subject to restrictions or resale.
Illiquid securities include those that are subject to restrictions
contained in the securities laws of other countries. However, securities
that are freely marketable in the country where they are principally
traded, but would not be freely marketable in the United States, will not
be considered illiquid. Where registration is required, each Portfolio may
be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell
and the time each Portfolio may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse
market conditions were to develop, each Portfolio might obtain a less
favorable price than prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("1933 Act"),
including private placements, repurchase agreements, commercial paper,
foreign securities and corporate bonds and notes. These instruments are
often restricted securities because the securities are sold in
transactions not requiring registration. Institutional investors generally
will not seek to sell these instruments to the general public, but instead
will often depend either on an efficient institutional market in which
such unregistered securities can be readily resold or on an issuer's
ability to honor a demand for repayment. Therefore, the fact that there
are contractual or legal restrictions on resale to the general public or
certain institutions is not dispositive of the liquidity of such
investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain
securities to qualified institutional buyers. Institutional markets for
restricted securities have developed as a result of Rule 144A, providing
both readily ascertainable values for restricted securities and the
ability to liquidate an investment to satisfy share redemption orders.
Such markets include automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers,
such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities
held by each Portfolio, however, could affect adversely the marketability
of such portfolio securities and each Portfolio might be unable to dispose
of such securities promptly or at favorable prices.
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With respect to liquidity determinations generally, the Master
Portfolio's Board of Trustees has the ultimate responsibility for
determining whether specific securities, including restricted securities
eligible for resale to qualified institutional buyers pursuant to Rule
144A under the 1933 Act are liquid or illiquid. The Board has delegated
the function of making day to day determinations of liquidity to LGT Asset
Management, pursuant to guidelines reviewed by that Board. LGT Asset
Management takes into account a number of factors in reaching liquidity
decisions, including but not limited to: (1) the frequency of trading in
the security; (ii) the number of dealers who make quotes for the security;
(iii) the number of dealers who have undertaken to make a market in the
security; (iv) the number of other potential purchasers; and (v) the
nature of the security and how trading is affected (e.g., the time needed
to sell the security, how offers are solicited and the mechanics of
transfer). Moreover, certain securities, such as those subject to
repatriation restrictions of more than seven days, will generally be
treated as illiquid. LGT Asset Management monitors the liquidity of
securities held by each Portfolio and reports periodically on such
decisions to the Board of Trustees.
Religious, Political and Ethnic Instability. Certain countries in
which each Portfolio may invest may have groups that advocate radical
religious or revolutionary philosophies or support ethnic independence.
Any disturbance on the part of such individuals could carry the potential
for wide-spread destruction or confiscation of property owned by
individuals and entities foreign to such country and could cause the loss
of a Portfolio's investment in those countries. Instability may also
result from, among other things: (i) authoritarian governments or
military involvement in political and economic decision-making, including
changes in government through extra-constitutional means; (ii) popular
unrest associated with demands for improved political, economic and social
conditions; and (iii) hostile relations with neighboring or other
countries. Such political, social and economic instability could disrupt
the principal financial markets in which a Portfolio invests and adversely
affect the value of a Portfolio's assets.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets,
particularly their equity markets, by foreign entities such as the
Portfolios. These restrictions or controls may at times limit or preclude
investments in certain securities and may increase the cost and expenses
of a Portfolio. As illustrations, certain countries require governmental
approval prior to investments by foreign persons or limit the amount of
investment by foreign persons in a particular company or limit the
investment by foreign persons to only a specific class of securities of a
company that may have less advantageous terms than securities of the
company available for purchase by nationals. Moreover, the national
policies of certain countries may restrict investment opportunities in
issuers or industries deemed sensitive to national interests. In addition,
some countries require governmental approval for the repatriation of
investment income, capital or the proceeds of securities sales by foreign
investors. In addition, if there is a determination in a country's balance
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of payments or for other reasons, a country many impose restrictions or
foreign capital remittances abroad. The Portfolios could be adversely
affected by delays in, or a refusal to grant, any required governmental
approval for repatriation, as well as by the application to it of other
restrictions on investments.
Non-Uniform Corporate Disclosure Standards and Governmental
Regulation. Foreign companies are subject to accounting, auditing and
financial standards and requirements that differ, in some cases signifi-
cantly, from those applicable to U.S. companies. In particular, the
assets, liabilities and profits appearing on the financial statements of
such a company may not reflect its financial position or results of
operations in the way they would be reflected had such financial
statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the securities held by a Portfolio will
not be registered with the SEC or regulators of any foreign country, nor
will the issuers thereof be subject to the SEC's reporting requirements.
Thus, there will be less available information concerning most foreign
issuers of securities held by a Portfolio than is available concerning
U.S. issuers. In instances where the financial statements of an issuer
are not deemed to reflect accurately the financial situation of the
issuer, LGT Asset Management will take appropriate steps to evaluate the
proposed investment, which may include on-site inspection of the issuer,
interviews with its management and consultations with accountants, bankers
and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. Government. In addition, where
public information is available, it may be less reliable than such
information regarding U.S. issuers. Issuers of securities in foreign
jurisdictions are generally not subject to the same degree of regulation
as are U.S. issuers with respect to such matters, as restrictions on
market manipulation, insider trading rules, shareholder proxy requirements
and timely disclosure of information.
Currency Fluctuations. Because each Portfolio, under normal
circumstances, will invest a substantial portion of its total assets in
the securities of foreign issuers which are denominated in foreign
currencies, the strength or weakness of the U.S. dollar against such
foreign currencies will account for part of a Portfolio's investment
performance. A decline in the value of any particular currency against
the U.S. dollar will cause a decline in the U.S. dollar value of a
Portfolio's holdings of securities and cash denominated in such currency
and, therefore, will cause an overall decline in that Portfolio's net
asset value and any net investment income and capital gains derived from
such securities to be distributed in U.S. dollars to interestholders of
that Portfolio. Moreover, if the value of the foreign currencies in which
a Portfolio receives its income falls relative to the U.S. dollar between
receipt of the income and the making of portfolio distributions, the
Portfolio may be required to liquidate securities in order to make
distributions if the Portfolio has insufficient cash in U.S. dollars to
meet distribution requirements.
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The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for
particular currencies, central bank efforts to support particular
currencies, the relative movement of interest rates and pace of business
activity in the other countries, and the United States, and other economic
and financial conditions affecting the world economy.
Although each Portfolio values its assets daily in terms of U.S.
dollars, the Portfolios do not intend to convert their holdings of foreign
currencies into U.S. dollars on a daily basis. Each Portfolio will do so
from time to time, and investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference ("spread")
between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to a
Portfolio at one rate, while offering a lesser rate of exchange should
that Portfolio desire to sell that currency to the dealer.
Adverse Market Characteristics. Securities of many foreign issuers
may be less liquid and their prices more volatile than securities of
comparable U.S. issuers. In addition, foreign securities markets and
brokers generally are subject to less governmental supervision and
regulation than in the United States, and foreign securities transactions
usually are subject to fixed commissions, which generally are higher than
negotiated commissions on U.S. transactions. In addition, foreign
securities transactions may be subject to difficulties associated with the
settlement of such transactions. Delays in settlement could result in
temporary periods when assets of a Portfolio are uninvested and no return
is earned thereon. The inability of a Portfolio to make intended security
purchases due to settlement problems could cause that Portfolio to miss
attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to a
Portfolio due to subsequent declines in value of the portfolio security
or, if that Portfolio has entered into a contract to sell the security,
could result in possible liability to the purchaser. LGT Asset Management
will consider such difficulties when determining the allocation of that
Portfolio's assets, although LGT Asset Management does not believe that
such difficulties will have a material adverse effect on the Portfolio's
portfolio trading activities.
Each Portfolio may use foreign custodians, which may involve risks in
addition to those related to its use of U.S. custodians. Such risks
include uncertainties relating to determining and monitoring the foreign
custodian's financial strength, reputation and standing; maintaining
appropriate safeguards concerning the Portfolio's investments; and
possible difficulties in obtaining and enforcing judgements against such
custodians.
Special Considerations Affecting Europe. The countries that are
members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain and the United Kingdom) eliminated certain import tariffs
- 23 -
<PAGE>
and quotas, limitations on the employment of non-citizens and other trade
barriers with respect to one another over the past several years. LGT
Asset Management believes that this deregulation should improve the
prospect for economic growth in many European countries. Among other
things, the deregulation could enable companies domiciled in one country
to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled in one
country by opening additional markets for their goods and services in
other countries. Since, however, it is not clear at this time what the
exact form or effect of these Common Market reforms will be on business in
Western Europe or the emerging European markets, it is impossible to
predict the long-term impact of the implementation of this program on the
securities owned by the Portfolios.
Special Considerations Affecting Japan and Hong Kong. Investment in
securities of issuers domiciled in Japan and Hong Kong entails special
considerations. Overseas trade is important to Japan's economy. Japan
has few natural resources and must export to pay for its imports of these
basic requirements. Because of the concentration of Japanese exports in
highly visible products, Japan has had difficult relations with its
trading partners, particularly the United States, where the trade
imbalance is the greatest. It is possible that trade sanctions or other
protectionist measures could impact Japan adversely in both the short and
the long term. The Japanese securities markets are less regulated than
those in the United States. Evidence has emerged from time to time of
distortion of market prices to serve political or other purposes.
Shareholders' rights are not always equally enforced.
Hong Kong is a British colony which will transfer sovereignty to the
Peoples Republic of China in 1997. China has espoused policies
antagonistic to free enterprise capitalism and democracy. There can be no
guarantee that property rights will continue to be safeguarded in Hong
Kong after 1997, although recently, China has moved toward free
enterprise, and has established stock exchanges of its own.
Options, Futures and Forward Currency Transactions. Each Portfolio
may use forward currency contracts, futures contracts, options on
securities, options on indices, options on currencies and options on
futures contracts to implement strategies to attempt to hedge its
portfolio, i.e., reduce the overall level of investment risk normally
associated with the Portfolio. These instruments are often referred to as
"derivatives," which may be defined as financial instruments whose
performance is derived, at least in part, from the performance of another
asset (such as a security, currency or an index of securities). Each
Portfolio may enter into such instruments up to the full value of its
portfolio assets. There can be no assurance that these hedging efforts
will succeed.
To attempt to hedge against adverse movements in exchange rates
between currencies, each Portfolio may enter into forward currency
contracts for the purchase or sale of a specified currency at a specified
future date. Such contracts may involve the purchase or sale of a foreign
- 24 -
<PAGE>
currency against the U.S. dollar or may involve two foreign currencies.
The Portfolios may enter into forward currency contracts either with
respect to specific transactions or with respect to that Portfolio's
portfolio positions. For example, when a Portfolio anticipates making a
purchase or sale of a security, that Portfolio may enter into a forward
currency contract in order to set the rate (either relative to the U.S.
dollar or another currency) at which a currency exchange transaction
related to the purchase or sale will be made. Further, when LGT Asset
Management believes that a particular currency may decline compared to the
U.S. dollar or another currency, a Portfolio may enter into a forward
contract to sell the currency LGT Asset Management expects to decline in
an amount approximating the value of some or all of that Portfolio's
portfolio securities denominated in a foreign currency. Each Portfolio
also may purchase and sell put and call options on currencies, futures
contracts on currencies and options on futures contracts on currencies to
hedge against movements in exchange rates.
In addition, a Portfolio may purchase and sell put and call options on
equity and debt securities to hedge against the risk of fluctuations in
the prices of securities held by that Portfolio or that LGT Asset
Management intends to include in the Portfolio's portfolio. The Portfolio
also may purchase and sell put and call options on stock indexes. Such
stock index options serve to hedge against overall fluctuations in the
securities markets generally or in the natural resources market sector
specifically, rather than anticipated increases or decreases in the value
of a particular security.
Further, a Portfolio may sell stock index futures contracts and may
purchase put options or write call options on such futures contracts to
protect against a general stock market decline or a decline in the
financial services market sector that could affect adversely a Portfolio's
holdings. A Portfolio also may buy stock index futures contracts and
purchase call options or write put options on such contracts to hedge
against a general stock market or market sector advance and thereby
attempt to lessen the cost of future securities acquisitions. A Portfolio
may use interest rate futures contracts and options thereon to hedge the
debt portion of its portfolio against changes in the general level of
interest rates.
In addition, each Portfolio may purchase and sell put and call options
on securities, currencies and indices that are traded on recognized
securities exchanges and over-the-counter markets.
These practices may result in the loss of principal under certain
conditions. In addition, certain provisions of the Code limit the extent
to which a Portfolio may enter into forward contracts or futures
contracts, or engage in options transactions. See "Tax Status" in Part B.
Although a Portfolio might not employ any of the foregoing strategies,
its use of forward currency contracts, options and futures would involve
certain investment risks and transaction costs to which it might not
- 25 -
<PAGE>
otherwise be subject. These risks include: (1) dependence on LGT Asset
Management's ability to predict movement in the prices of individual
securities, fluctuations in the general securities markets or in the
financial services market sector and movements in interest rates and
currency markets; (2) imperfect correlation, or even no correlation,
between movements in the price of options, forward contracts, futures
contracts or options thereon and movements in the price of the currency or
security hedged or used for cover; (3) the fact that skills and techniques
needed to trade options, futures contracts and options thereon or to use
forward currency contracts are different from those needed to select the
securities in which a Portfolio invests; (4) lack of assurance that a
liquid secondary market will exist for any particular option, futures
contract or option thereon at any particular time; (5) the possible
inability of a Portfolio to purchase or sell a portfolio security at a
time when it would otherwise be favorable for it to do so, or the possible
need for a Portfolio to sell a security at a disadvantageous time, due to
the need for the Portfolio to maintain "cover" or to segregate securities
in connection with hedging transactions; and (6) the possible need to
defer closing out of certain options, futures contracts and options
thereon, and forward currency contracts in order to qualify or continue to
qualify for the beneficial tax treatment afforded regulated investment
companies under the Internal Revenue Code of 1986, as amended ("Code").
See "Dividends, Other Distributions and Taxes" in Part B. If LGT Asset
Management incorrectly forecasts securities market movements, currency
exchange rates or interest rates in utilizing a strategy for a Portfolio,
the Portfolio would be in a better position if it had not hedged at all.
A Portfolio may also conduct its foreign currency exchange transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market.
Portfolio Turnover. Each Portfolio anticipates that its portfolio
turnover rate should not exceed 100%. Higher portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs
that a Portfolio will bear directly. In addition, such turnover rates may
have certain tax consequences, including increasing taxable gains.
Investment Limitations
Each Portfolio is subject to certain investment limitations which
constitute fundamental policies. Fundamental policies of a Portfolio
cannot be changed without the approval of the holders of a majority of
that Portfolio's outstanding voting securities, as defined in the
1940 Act. See "Investment Limitations" in Item 13 of Part B.
Item 5. Management of the Portfolios.
--------------------------------------
The Master Portfolio's Board of Trustees has overall responsibility
for the operation of each Portfolio. See "Trustees and Executive
Officers" in Item 14 of Part B for a complete description of the Trustees
of the Master Portfolio.
- 26 -
<PAGE>
Investment Management and Administration. Services provided by LGT
Asset Management as each Portfolio's investment manager and administrator
include, but are not limited to, determining the composition of its
investment portfolio and placing orders to buy, sell or hold particular
securities. In addition, LGT Asset Management provides the following
administration services to each Portfolio: furnishing officers and
clerical staff; providing office space, services and equipment; and
supervising all matters relating to its operation. For these services,
each Portfolio pays investment management fees directly to LGT Asset
Management based on the average daily net assets of that Portfolio at the
annualized rate of 0.725% on the first $500 million, 0.70% on the next
$500 million, 0.675% on the next $500 million, and 0.65% on all amounts
thereafter.
LGT Asset Management also serves as each Portfolio's pricing and
accounting agent. The monthly fee for these services to LGT Asset
Management is a percentage, not to exceed 0.03% annually, of the average
daily net assets of the GT Global Financial Services Fund, GT Global
Infrastructure Fund, the GT Global Natural Resources Fund, and the GT
Global Consumer Products and Services Fund. The annual fee rate is
derived by applying 0.03% to the first $5 billion of assets of GT Global
Mutual Funds and 0.02% to the assets in excess of $5 billion and dividing
the result by the aggregate assets of such Funds.
LGT Asset Management provides investment management and/or
administration services to the GT Global Mutual Funds. LGT Asset
Management and its worldwide asset management affiliates have provided
investment management and/or administration services to institutional,
corporate and individual clients around the world since 1969. The U.S.
offices of LGT Asset Management are located at 50 California Street, 27th
Floor, San Francisco, California 94111.
LGT Asset Management and its worldwide affiliates, including LGT Bank
in Liechtenstein, formerly Bank in Liechtenstein, comprise Liechtenstein
Global Trust, formerly BIL GT Group Limited. On January 1, 1996, Bank in
Liechtenstein was renamed LGT Bank in Liechtenstein, and BIL GT Group
Limited was renamed Liechtenstein Global Trust. Liechtenstein Global Trust
is a provider of global asset management and private banking products and
services to individual and institutional investors. Liechtenstein Global
Trust is controlled by the Prince of Liechtenstein Foundation, which
serves as the parent organization for the various business enterprises of
the Princely Family of Liechtenstein. The principal business address of
the Prince of Liechtenstein Foundation is Herengasse 12, FL-9490, Vaduz,
Liechtenstein.
As of November 30, 1995, LGT Asset Management and its worldwide asset
management affiliates managed or administered approximately $22 billion,
of which approximately $20 billion consisted of GT Global retail funds
- 27 -
<PAGE>
worldwide. In the U.S., as of November 30, 1995, LGT Asset Management
managed or administered approximately $9.6 billion in GT Global Mutual
Funds. As of November 30, 1995, assets under advice by the LGT Bank in
Liechtenstein exceeded approximately $23 billion. As of November 30,
1995, assets entrusted to Liechtenstein Global Trust totaled approximately
$45 billion.
In addition to the resources of its San Francisco office, LGT Asset
Management uses the expertise, personnel, data and systems of other
offices of Liechtenstein Global Trust, including investment offices in
London, Hong Kong, Tokyo, Singapore, Sydney and Frankfurt.
In managing each Portfolio, LGT Asset Management employs a team
approach, taking advantage of the resources of its various investment
offices around the world in seeking to achieve each Portfolio's investment
objective. In addition, in managing each Portfolio these individuals
utilize the research and related work of other members of LGT Asset
Management's investment staff. The investment professionals primarily
responsible for the portfolio management of each of the Portfolios are as
follows:
<TABLE>
<CAPTION>
Financial Services Portfolio
----------------------------
Responsibilities Business Experience
Name/Office for the Portfolio Last Five Years
----------- ----------------- -------------------
<S> <C> <C>
A. James Ellman Portfolio Manager since 1995 Portfolio Manager since 1995. Analyst for LGT
San Francisco Asset Management from 1994 to 1995. From 1992
to 1994, Mr. Ellman was a student at the
Harvard Graduate School of Business
Administration, where he received a Master of
Business Administration. From 1990 to 1992,
Mr. Ellman was employed by the Federal Reserve
Bank of New York as an international bank
examiner.
- 28 -
<PAGE>
Infrastructure Portfolio
------------------------
Responsibilities Business Experience
Name/Office for the Portfolio Last Five Years
----------- ----------------- -------------------
David L. Sherry Portfolio manager since Portfolio Portfolio Manager for LGT Asset Management
San Francisco inception in 1994 since 1993. From 1992 to 1993, Mr. Sherry was
Senior Securities Analyst for Franklin
Resources, Inc. (San Mateo, CA). From 1990 to
1992, he was a student at University of
California at Los Angeles Graduate School of
Business (where he received a Master of
Business Administration). Prior thereto, he
was an Assistant Treasurer with Brown Brothers
Harriman (NY).
Michael Mahoney Portfolio manager since Portfolio Portfolio Manager for LGT Asset Management
San Francisco inception in 1994 since 1993. From 1991 to 1993, Mr. Mahoney was
an Investment Analyst of LGT Asset Management.
From 1989 to 1991, he was a student at Stanford
Graduate School of Business (where he received
a Master of Business Administration). Prior
thereto, he was a Management Consultant of Bain
& Co., management consulting (Boston).
Natural Resources Portfolio
---------------------------
Responsibilities Business Experience
Name/Office for the Portfolio Last Five Years
----------- ----------------- -------------------
Derek H. Webb Portfolio manager since 1995 Portfolio Manager since 1994. Analyst for LGT
San Francisco Asset Management from 1992 to 1994. From 1990
to 1992, Mr. Webb was a student of the
University of Pennsylvania, Wharton School of
Business. During 1989, he was Vice President,
Citicorp Investment Bank of Los Angeles. Prior
thereto, he was a Bond Trader, Trust Co. of the
West (Los Angeles).
- 29 -
<PAGE>
Consumer Products and Services Portfolio
-----------------------------------------
Responsibilities Business Experience
Name/Office for the Portfolio Last Five Years
----------- ------------------ -------------------
Derek H. Webb Portfolio manager since Portfolio Analyst for LGT Asset Management from 1992 to
San Francisco inception in 1994 1994. From 1990 to 1992, Mr. Webb was a
student of the University of Pennsylvania,
Wharton School of Business. During 1989, he
was Vice President, Citicorp Investment Bank
for Los Angeles. Prior thereto, he was a Bond
Trader, Trust Co. of the West Angeles).
</TABLE>
The Master Portfolio has not retained the services of a principal
underwriter or distributor, as beneficial interests in each Portfolio are
offered solely in private placement transactions.
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is each Portfolio's custodian.
Expenses. Each Portfolio pays all of its expenses not assumed by LGT
Asset Management and other agents. These expenses include in addition to
the investment management and administration and brokerage fees discussed
herein, legal and audit expenses, custodian fees, trustees' fees,
registration fees, organizational expenses, fidelity bond and other
insurance premiums, taxes, extraordinary expenses and the expenses of
reports sent to existing investors.
Item 6. Capital Stock and Other Securities.
--------------------------------------------
The Master Portfolio is organized as a New York state common law
trust. Under the Declaration of Trust, the Trustees are authorized to
issue beneficial interests in separate subtrusts or "series" of the Master
Trust. The Master Trust currently has four series (i.e., the Portfolios).
The Master Trust reserves the right to create and issue additional series.
Each investor in a Portfolio is entitled to participate equally in the
Portfolio's earnings and assets and to a vote in proportion to the amount
of its investment in the Portfolio. Investments in a Portfolio may not be
transferred, but an investor may withdraw all or any portion of its
investment at any time at net asset value. Each investor in a Portfolio
(e.g., investment companies and common and commingled trust funds) will be
liable for all obligations of that Portfolio, but not of the other
Portfolios. However, because a Portfolio will indemnify each investor
therein with respect to any liability to which the investor may become
subject by reason of being such an investor, the risk of an investor in a
Portfolio incurring financial loss on account of such liability would be
- 30 -
<PAGE>
limited to circumstances in which that Portfolio had inadequate insurance
and was unable to meet its obligations (including indemnification
obligations) out of its assets.
Investments in a Portfolio have no preemptive or conversion rights.
The Master Portfolio is not required to hold annual meetings of investors
but the Master 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 the
purpose of removing one or more Trustees, which removal requires a two-
thirds vote of the Master Portfolio's beneficial interests. Investors
also have under certain circumstances the right to remove one or more
Trustees without a meeting. Upon liquidation of a Portfolio, investors
would be entitled to share pro rata in that Portfolio's net assets
available for distribution to investors.
Under the anticipated method of operation of the Master Portfolio, no
Portfolio will be subject to any income tax. However, each investor in a
Portfolio will be taxable on its share (as determined in accordance with
the governing instruments of the Master Portfolio and the Code and the
regulations promulgated thereunder) of that Portfolio's income, gains,
losses, deductions, and credits in determining its income tax liability.
It is intended that each Portfolio's assets, income, and distributions
will be managed in such a way that an investor in a 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 LGT Asset Management.
Item 7. Purchase of Securities.
--------------------------------
Beneficial interests in each 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. Investments in a 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 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.
An investment in a Portfolio may be made without a sales load at the
net asset value next determined after an order is received in "good order"
by a Portfolio. There is no minimum initial or subsequent investment in a
Portfolio. However, investments must be made in federal funds (i.e.,
monies credited to the account of a Portfolio's custodian bank by a
Federal Reserve Bank).
- 31 -
<PAGE>
Each Portfolio reserves the right to cease accepting investments at
any time or to reject any investment order.
Item 8. Redemption or Repurchase.
----------------------------------
An investor in a 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 that Portfolio.
The proceeds of a reduction will be paid by a Portfolio in federal funds
normally on the next business day after the reduction is effected, but in
any event within seven days. Investments in a 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 New York Stock Exchange ("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 a 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.
----------------------------------
Not applicable.
- 32 -
<PAGE>
PART B
Item 10. Cover Page.
---------------------
Not applicable.
Item 11. Table of Contents.
----------------------------
Page
General Information and History . . . . . . . . . . . . . . . . . B-1
Investment Objectives and Policies . . . . . . . . . . . . . . . B-1
Management of the Portfolios . . . . . . . . . . . . . . . . . . B-19
Control Persons and Principal Holders of Interests . . . . . . . B-22
Investment Advisory and Other Services . . . . . . . . . . . . . B-23
Brokerage Allocation and Other Practices . . . . . . . . . . . . B-24
Capital Stock and Other Securities . . . . . . . . . . . . . . . B-26
Purchase, Redemption and Pricing of Securities . . . . . . . . . B-27
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
Calculation of Performance Data . . . . . . . . . . . . . . . . . B-31
Financial Statements . . . . . . . . . . . . . . . . . . . . . . B-31
Item 12. General Information and History.
------------------------------------------
Not applicable.
Item 13. Investment Objectives and Policies.
---------------------------------------------
Part A contains information about the investment objectives and
policies of Global Financial Services Portfolio ("Financial Services
Portfolio"), Global Infrastructure Portfolio ("Infrastructure Portfolio"),
Global Natural Resources Portfolio ("Natural Resources Portfolio") and
Global Consumer Products and Services Portfolio ("Consumer Products and
Services Portfolio") (individually, a "Portfolio," collectively, the
"Portfolios"), each a subtrust or "series" of Global Investment Portfolio
("Master Portfolio"). This Part B should only be read in conjunction with
Part A. This section contains supplemental information concerning the
investment policies and portfolio strategies that the Portfolios may
utilize, the types of securities and other instruments in which the
Portfolios may invest, and certain risks attendant to those investment
policies and strategies.
There may be times when, in the opinion of LGT Asset Management, Inc.
("LGT Asset Management"), the investment manager for each Portfolio,
prevailing market, economic or political conditions warrant reducing the
<PAGE>
proportion of a Portfolio's assets invested in equity securities and
increasing the proportion held in cash (U.S. dollars, foreign currencies
or multinational currency units) or invested in foreign or domestic high
quality money market instruments pending investment of proceeds from new
sales of shares. A portion of a Portfolio's assets normally will be held
in cash (U.S. dollars, foreign currencies or multinational currency units)
or invested in debt securities or high quality money market instruments
issued by corporations, or the U.S. or a foreign government to provide for
ongoing or expenses and redemptions.
Although each Portfolio values its assets daily in terms of U.S.
dollars, none of the Portfolios intend to convert their holdings of
foreign currencies into U.S. dollars on a daily basis. The Portfolios
will do so from time to time, and investors should be aware of the costs
of currency conversion. Although foreign exchange dealers do not charge a
fee for conversion, they do realize a profit based on the difference
("spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to a
Portfolio at one rate, while offering a lesser rate of exchange should
that Portfolio desire to sell that currency to the dealer.
Selection of Equity Investments
For each Portfolio's investment purposes, an issuer is typically
considered as located in a particular country if it is incorporated under
the laws of that country, at least 50% of the value of its assets are
located in that country and it normally derives at least 50% of its income
from operations or sales in that country. However, these are not absolute
requirements, and certain companies incorporated in a particular country
and considered by LGT Asset Management to be located in that country may
have substantial off-shore operations or subsidiaries and/or export sales
exceeding in size the assets or sales in that country.
In certain countries, governmental restrictions and other limitations
on investment may affect a Portfolio's ability to invest. For example, in
some instances only special classes of securities may be purchased by
foreigners and the market prices, liquidity and rights with respect to
those securities may vary from shares owned by nationals. LGT Asset
Management is not aware at this time of the existence of any investment or
exchange control regulations which might substantially impair the
operations of a Portfolio as described in Part A and this Part B.
Restrictions may in the future, however, make it undesirable to invest in
certain countries. It should be noted, however, that this situation
could change at any time. None of the Portfolios has a present intention
of making any significant investment in any country or stock market where
the political or economic situation might be considered by LGT Asset
Management to threaten a Portfolio with substantial or total loss in such
country or market.
B-2
<PAGE>
Investment in Other Investment Companies
Each Portfolio may invest in the securities of investment companies
within the limits of the Investment Company Act of 1940, as amended ("1940
Act"). These limitations currently provide that, in general, a Portfolio
may purchase shares of an investment company unless (a) such a purchase
would cause that Portfolio to own in the aggregate more than 3% of the
total outstanding voting stock of the investment company or (b) such a
purchase would cause that Portfolio to have more than 5% of its assets
invested in the investment company or more than 10% of its assets invested
in an aggregate of all such investment companies. Investment in closed-
end investment companies may also involve the payment of substantial
premiums above the value of such companies' portfolio securities. Each
Portfolio does not intend to invest in such investment companies unless,
in the judgment of LGT Asset Management, the potential benefits of such
investment justify the payment of any applicable premiums. The yield of
such securities will be reduced by operating expenses of such companies
including payments to the investment managers of those investment
companies.
Depository Receipts
Each Portfolio may hold securities of foreign issuers in the form of
American Depository Receipts ("ADRs"), American Depository Shares ("ADSs")
and European Depository Receipts ("EDRs") or other securities convertible
into securities of eligible foreign issuers. These securities may not
necessarily be denominated in the same currency as the securities for
which they may be exchanged. ADRs and ADSs are typically issued by an
American bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes
referred to as Continental Depository Receipts ("CDRs"), are issued in
Europe typically by foreign banks and trust companies that evidence
ownership of either foreign or domestic securities. Generally, ADRs and
ADSs in registered form are designed for use in United States securities
markets and EDRs in bearer form are designed for use in European
securities markets. For purposes of each Portfolio's investment policies,
that Portfolio's investments in ADRs, ADSs and EDRs will be deemed to be
investments in the equity securities representing securities of foreign
issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or
"sponsored." While ADRs issued under these two types of facilities are in
some respects similar, there are distinctions between them relating to the
rights and obligations of ADR holders and the practices of market
participants. A depository may establish an unsponsored facility without
participation by (or even necessarily the acquiescence of) the issuer of
the deposited securities, although typically the depository requests a
letter of non-objection from such issuer prior to the establishment of the
facility. Holders of unsponsored ADRs generally bear all of the costs of
such facilities. The depository usually charges fees upon the deposit and
withdrawal of the deposited securities, the conversion of dividends into
U.S. dollars, the disposition of non-cash distributions, and the
B-3
<PAGE>
performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass- through
voting rights to ADR holders in respect of the deposited securities.
Sponsored ADR facilities are created in generally the same manner as
unsponsored facilities, except that the issuer of the deposited securities
enters into a deposit agreement with the depository. The deposit
agreement sets out the rights and responsibilities of the issuer, the
depository and the ADR holders. With sponsored facilities, the issuer of
the deposited securities generally will bear some of the costs relating to
the facility (such as dividend payment fees of the depository), although
ADR holders continue to bear certain other costs (such as deposit and
withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and
voting instructions, and to provide shareholder communications and other
information to the ADR holders at the request of the issuer of the
deposited securities. Each Portfolio may invest in both sponsored and
unsponsored ADRs.
Warrants or Rights
Warrants or rights may be acquired by each Portfolio in connection
with other securities or separately and provide that Portfolio with the
right to purchase at a later date other securities of the issuer. For
state law reasons, each Portfolio's investments in warrants or rights,
valued at the lower of cost or market, will not exceed 5% of the value of
its net assets and not more than 2% of such assets will be invested in
warrants and rights which are not listed on the American or New York Stock
Exchange. Warrants or rights acquired by each Portfolio in units or
attached to securities will be deemed to be without value for purpose of
this restriction.
Lending of Portfolio Securities
For the purpose of realizing additional income, each Portfolio may
make secured loans of its securities holdings amounting to not more than
30% of its total assets. Securities loans are made to broker dealers or
institutional investors pursuant to agreements requiring that the loans
continuously be secured by collateral at least equal at all times to 100%
of the value of the securities lent plus any accrued interest, "marked to
market" on a daily basis. The collateral received will consist of cash,
U.S. short-term government securities, bank letters of credit or such
other collateral as may be permitted under a Portfolio's investment
program and by regulatory agencies and approved by the Master Portfolio's
Board of Trustees. While the securities loan is outstanding, a Portfolio
will continue to receive the equivalent of the interest or dividends paid
by the issuer on the securities, as well as interest on the investment of
the collateral or a fee from the borrower. Each Portfolio has a right to
call each loan and obtain the securities on five business days' notice.
Each Portfolio will not have the right to vote equity securities while
they are being lent, but will call in a loan in anticipation of any
important vote. The risks in lending portfolio securities, as with other
B-4
<PAGE>
extensions of secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities or possible
loss of rights in the collateral should the borrower fail financially.
Loans only will be made to firms deemed by LGT Asset Management to be of
good standing and will not be made unless, in the judgment of LGT Asset
Management, the consideration to be earned from such loans would justify
the risk.
Commercial Bank Obligations
For the purposes of each Portfolio's investment policies with respect
to bank obligations, obligations of foreign branches of U.S. banks and of
foreign banks are obligations of the issuing bank and may be general
obligations of the parent bank. Such obligations, however, may be limited
by the terms of a specific obligation and by government regulation. As
with investment in non-U.S. securities in general, investments in the
obligations of foreign branches of U.S. banks and of foreign banks may
subject a Portfolio to investment risks that are different in some
respects from those of investments in obligations of U.S. issuers.
Although a Portfolio typically will acquire obligations issued and
supported by the credit of U.S. or foreign banks having total assets at
the time of purchase in excess of $1 billion, this $1 billion figure is
not an investment policy or restriction of any Portfolio. For the
purposes of calculation with respect to the $1 billion figure, the assets
of a bank will be deemed to include the assets of its U.S. and non-U.S.
branches.
Repurchase Agreements
Each Portfolio will invest only in repurchase agreements
collateralized at all times in an amount at least equal to the repurchase
price plus accrued interest. To the extent that the proceeds from any
sale of such collateral upon a default in the obligation to repurchase
were less than the repurchase price, the Portfolio would suffer a loss.
If the financial institution which is party to the repurchase agreement
petitions for bankruptcy or otherwise becomes subject to bankruptcy or
liquidation proceedings, there may be restrictions on a Portfolio's
ability to sell the collateral and that Portfolio could suffer a loss.
However, with respect to financial institutions whose bankruptcy or
liquidation proceedings are subject to the U.S. Bankruptcy Code, the
Portfolio intends to comply with provisions under the U.S. Bankruptcy Code
that would allow it immediately to resell the collateral. Each Portfolio
will not enter into a repurchase agreement with a maturity of more than
seven days if, as a result, more than 15% of the value of its net assets
would be invested in such repurchase agreements and other illiquid
investments.
Although repurchase agreements carry certain risks not associated with
direct investments in securities, the Portfolios intend to enter into
repurchase agreements only with banks and dealers believed by LGT Asset
Management to present minimum credit risks in accordance with guidelines
approved by the Master Portfolio's Board of Trustees. LGT Asset
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Management will review and monitor the creditworthiness of such
institutions, and will consider the capitalization of the institution, LGT
Asset Management's prior dealings with the institution, any rating of the
institution's senior long-term debt by independent rating agencies and
other relevant factors.
Borrowing, Reverse Repurchase Agreements and "Roll" Transactions
Each Portfolio's borrowings will not exceed 33-1/3% of the Portfolio's
total assets, i.e., a Portfolio's total assets at all times will equal at
least 300% of the amount of outstanding borrowings. If market
fluctuations in the value of a Portfolio's securities holdings or other
factors cause the ratio of a Portfolio's total assets to outstanding
borrowings to fall below 300%, within three days (excluding Sundays and
holidays) of such event that Portfolio may be required to sell portfolio
securities to restore the 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The
Infrastructure Portfolio and Natural Resources Portfolio also may borrow
up to an additional 5% of their total assets for temporary or emergency
purposes other than to meet redemptions. Any borrowing by a Portfolio may
cause greater fluctuation in the value of its shares than would be the
case if that Portfolio did not borrow.
Each Portfolio's fundamental investment limitations permit that
Portfolio to borrow money for leveraging purposes. The Infrastructure
Portfolio and Natural Resources Portfolio, however, are prohibited,
pursuant to a non-fundamental investment policy, from borrowing money in
order to purchase securities. Nevertheless, this policy may be changed in
the future by a Portfolio's Board of Trustees. In the event that a
Portfolio employs leverage in the future, it would be subject to certain
additional risks. Use of leverage creates an opportunity for greater
growth of capital but would exaggerate any increases or decreases in a
Portfolio's net asset value. When a Portfolio's income and gains on
securities purchased with the proceeds of borrowing exceed the cost of
such borrowing, that Portfolio's earnings will increase faster than
otherwise would be the case; conversely, if such income and gains fail to
exceed such costs, that Portfolio's earnings would decline faster than
would otherwise be the case.
Each Portfolio may enter into reverse repurchase agreements, which
involve the sale of a security by a Portfolio and its agreement to
repurchase the security at a specified time and price. Each Portfolio
also may engage in "roll" transactions, which involve the sale of
Government National Mortgage Association ("GNMA") certificates or other
securities together with a commitment (for which that Portfolio may
receive a fee) to purchase similar, but not identical, securities at a
future date. Each Portfolio will maintain in a segregated account with a
custodian cash, U.S. government securities or other liquid, high-grade
debt securities in an amount sufficient to cover its obligations under
"roll" transactions and reverse repurchase agreements with broker-dealers
(but no segregation is required for reverse repurchase agreements with
banks).
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Short Sales
Each Portfolio is authorized to make short sales of securities,
although it has no current intention of doing so. A short sale is a
transaction in which a Portfolio sells a security in anticipation that the
market price of that security will decline. Each Portfolio may make short
sales (i) as a form of hedging to offset potential declines in long
positions in securities it owns, or anticipates acquiring, or in similar
securities, and (ii) in order to maintain portfolio flexibility in its
securities holdings.
When a Portfolio makes a short sale of a security it does not own,
that Portfolio must borrow the security sold short and deliver it to the
broker-dealer or other intermediary through which it made the short sale.
That Portfolio may have to pay a fee to borrow particular securities and
will often be obligated to pay over any payments received on such borrowed
securities.
A Portfolio's obligation to replace the borrowed security when the
borrowing is called or expires will be secured by collateral (usually
cash, government securities or other highly liquid securities similar to
those borrowed) deposited with the intermediary. That Portfolio also will
be required to deposit similar collateral with its custodian to the
extent, if any, necessary so that the value of both collateral deposits in
the aggregate is at all times equal to at least 100% of the current market
value of the security sold short. Depending on arrangements made with the
intermediary from which a Portfolio borrowed the security regarding
payment of any amounts received by that Portfolio on such security, that
Portfolio may not receive any payments (including interest) on its
collateral deposited with such intermediary.
If the price of the security sold short increases between the time of
the short sale and the time a Portfolio replaces the borrowed security,
that Portfolio will incur a loss; conversely, if the price declines, that
Portfolio will realize a gain. Any gain will be decreased, and any loss
increased, by the transaction costs associated with the transaction.
Although a Portfolio's gain is limited by the price at which it sold the
security short, its potential loss theoretically is unlimited.
None of the Portfolios will make a short sale if, after giving effect
to such sale, the market value of the securities sold short exceeds 25% of
the value of its total assets or that Portfolio's aggregate short sales of
the securities of any one issuer exceed the lesser of 2.0% of that
Portfolio's net assets or 2.0% of the securities of any class of the
issuer. Moreover, each Portfolio may engage in short sales only with
respect to securities listed on a national securities exchange. Each
Portfolio may make short sales "against the box" without respect to such
limitations. In this type of short sale, at the time of the sale a
Portfolio owns the security it has sold short or has the immediate and
unconditional right to acquire at no additional cost the identical
security.
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Options, Futures and Currency Strategies
Special Risks of Options, Futures and Currency Strategies
The use of options, futures contracts and forward currency contracts
("Forward Contracts") involves special considerations and risks, as
described below. Risks pertaining to particular instruments are described
in the sections that follow.
(1) Successful use of most of these instruments depends upon LGT
Asset Management's ability to predict movements of the overall securities
and currency markets, which requires different skills than predicting
changes in the prices of individual securities. While LGT Asset
Management is experienced in the use of these instruments, there can be no
assurance that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used
in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in
the investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies
can also reduce opportunity for gain by offsetting the positive effect of
favorable price movements in the hedged investments. For example, if a
Portfolio entered into a short hedge because LGT Asset Management
projected a decline in the price of a security in the Portfolio's
portfolio, and the price of that security increased instead, the gain from
that increase might be wholly or partially offset by a decline in the
price of the hedging instrument. Moreover, if the price of the hedging
instrument declined by more than the increase in the price of the
security, the Portfolio could suffer a loss. In either such case, the
Portfolio would have been in a better position had it not hedged at all.
(4) As described below, the Portfolio might be required to
maintain assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in instruments involving obligations to
third parties (i.e., instruments other than purchased options). If the
Portfolio were unable to close out its positions in such instruments, it
might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. The requirements
might impair the Portfolio's ability to sell a portfolio security or make
an investment at a time when it would otherwise be favorable to do so, or
require that the Portfolio sell a portfolio security at a disadvantageous
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time. The Portfolio's ability to close out a position in an instrument
prior to expiration or maturity depends on the existence of a liquid
secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to
enter into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Portfolio.
Writing Call Options
Each Portfolio may write (sell) call options on securities, indices
and currencies. Call options generally will be written on securities and
currencies that, in the opinion of LGT Asset Management, are not expected
to make any major price moves in the near future but that, over the long
term, are deemed to be attractive investments for a Portfolio.
A call option gives the holder (buyer) the right to purchase a
security or currency at a specified price (the exercise price) at any time
until (American style) or on (European style) a certain date (the
expiration date). So long as the obligation of the writer of a call
option continues, he or she may be assigned an exercise notice, requiring
him or her to deliver the underlying security or currency against payment
of the exercise price. This obligation terminates upon the expiration of
the call option, or such earlier time at which the writer effects a
closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be
written will be purchased solely on the basis of investment considerations
consistent with each Portfolio's investment objective. When writing a
call option, a Portfolio, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security or
currency above the exercise price, and retains the risk of loss should the
price of the security or currency decline. Unlike one who owns securities
or currencies not subject to an option, a Portfolio has no control over
when it may be required to sell the underlying securities or currencies,
since most options may be exercised at any time prior to the option's
expiration. If a call option that a Portfolio has written expires, the
Portfolio will realize a gain in the amount of the premium; however, such
gain may be offset by a decline in the market value of the underlying
security or currency during the option period. If the call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security or currency, which will be increased or offset by the
premium received. Each Portfolio does not consider a security or currency
covered by a call option to be "pledged" as that term is used in each
Portfolio's policy that limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because
declines in the value of the hedged instrument would be offset to the
extent of the premium received for writing the option. However, if the
security or currency appreciates to a price higher than the exercise price
of the call option, it can be expected that the option will be exercised
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<PAGE>
and a Portfolio will be obligated to sell the security or currency at less
than its market value.
The premium that a Portfolio receives for writing a call option is
deemed to constitute the market value of an option. The premium each
Portfolio will receive when it writes a call option will reflect, among
other things, the current market price of the underlying investment, the
relationship of the exercise price to such market price, the historical
price volatility of the underlying investment, and the length of the
option period. In determining whether a particular call option should be
written, LGT Asset Management will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will
exist for those options.
Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security or currency
from being called, or to permit the sale of the underlying security or
currency. Furthermore, effecting a closing transaction will permit a
Portfolio to write another call option on the underlying security or
currency with either a different exercise price, expiration date or both.
Each Portfolio will pay transaction costs in connection with the
writing of options and in entering into closing purchase contracts.
Transaction costs relating to options activity normally are higher than
those applicable to purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the
current market values of the underlying securities or currencies at the
time the options are written. From time to time, a Portfolio may purchase
an underlying security or currency for delivery in accordance with the
exercise of an option, rather than delivering such security or currency
from its portfolio. In such cases, additional costs will be incurred.
A Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more, respectively,
than the premium received from writing the option. Because increases in
the market price of a call option generally will reflect increases in the
market price of the underlying security or currency, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in
part by appreciation of the underlying security or currency owned by a
Portfolio.
Writing Put Options
Each Portfolio may write put options on securities, indices and
currencies. A put option gives the purchaser of the option the right to
sell, and the writer (seller) the obligation to buy, the underlying
security or currency at the exercise price at any time until (American
style) or on (European style) the expiration date. The operation of put
options in other respects, including their related risks and rewards, is
substantially identical to that of call options.
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<PAGE>
A Portfolio generally would write put options in circumstances where
LGT Asset Management wishes to purchase the underlying security or
currency for that Portfolio's holdings at a price lower than the current
market price of the security or currency. In such event, that Portfolio
would write a put option at an exercise price that, reduced by the premium
received on the option, reflects the lower price it is willing to pay.
Since that Portfolio would also receive interest on debt securities or
currencies maintained to cover the exercise price of the option, this
technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market
price of the underlying security or currency would decline below the
exercise price less the premium received.
Writing put options can serve as a limited long hedge because
increases in the value of the hedged investment would be offset to the
extent of the premium received for writing the option. However, if the
security or currency depreciates to a price lower than the exercise price
of the put option, it can be expected that the put option will be
exercised and a Portfolio will be obligated to sell the security or
currency at greater than its market value.
Purchasing Put Options
Each Portfolio may purchase put options on securities, indices and
currencies. As the holder of a put option, a Portfolio would have the
right to sell the underlying security or currency at the exercise price at
any time until (American style) or on (European style) the expiration
date. That Portfolio may enter into closing sale transactions with
respect to such options, exercise them or permit them to expire.
Each Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by that Portfolio in order to protect
against an anticipated decline in the value of the security or currency.
Such hedge protection is provided only during the life of the put option
when the Portfolio, as the holder of the put option, is able to sell the
underlying security or currency at the put exercise price regardless of
any decline in the underlying security's market price or currency's
exchange value. For example, a put option may be purchased in order to
protect unrealized appreciation of a security or currency when LGT Asset
Management deems it desirable to continue to hold the security or currency
because of tax considerations. The premium paid for the put option and
any transaction costs would reduce any profit otherwise available for
distribution when the security or currency is eventually sold.
A Portfolio also may purchase put options at a time when that
Portfolio does not own the underlying security or currency. By purchasing
put options on a security or currency it does not own, that Portfolio
seeks to benefit from a decline in the market price of the underlying
security or currency. If the put option is not sold when it has remaining
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value, and if the market price of the underlying security or currency
remains equal to or greater than the exercise price during the life of the
put option, that Portfolio will lose its entire investment in the put
option. In order for the purchase of a put option to be profitable, the
market price of the underlying security or currency must decline
sufficiently below the exercise price to cover the premium and transaction
costs, unless the put option is sold in a closing sale transaction.
Purchasing Call Options
A Portfolio may purchase call options on securities indices and
currencies. As the holder of a call option, such Portfolio would have the
right to purchase the underlying security or currency at the exercise
price at any time until (American style) or on (European style) the
expiration date. Such Portfolio may enter into closing sale transactions
with respect to such options, exercise them or permit them to expire.
Call options may be purchased by a Portfolio for the purpose of
acquiring the underlying security or currency for its portfolio. Utilized
in this fashion, the purchase of call options would enable a Portfolio to
acquire the security or currency at the exercise price of the call option
plus the premium paid. At times, the net cost of acquiring the security
or currency in this manner may be less than the cost of acquiring the
security or currency directly. This technique may also be useful to a
Portfolio in a purchasing a large block of securities that would be more
difficult to acquire by direct market purchases. So long as it holds such
a call option, rather than the underlying security or currency itself, the
Portfolio is partially protected from any unexpected decline in the market
price of the underlying security or currency and, in such event, could
allow the call option to expire, incurring a loss only to the extent of
the premium paid for the option.
A Portfolio also may purchase call options on underlying securities or
currencies it owns in order to protect unrealized gains on call options
previously written by it. A call option could be purchased for this
purpose where tax considerations make it inadvisable to realize such gains
through a closing purchase transaction. Call options also may be
purchased at times to avoid realizing losses that would result in a
reduction of a Portfolio's current return. For example, where a Portfolio
has written a call option on an underlying security or currency having a
current market value below the price at which such security or currency
was purchased by that Portfolio, an increase in the market price could
result in the exercise of the call option written by that Portfolio and
the realization of a loss on the underlying security or currency.
Accordingly, a Portfolio could purchase a call option on the same
underlying security or currency, which could be exercised to fulfill the
Portfolio's delivery obligations under its written call (if it is
exercised). This strategy could allow the Portfolio to avoid selling the
portfolio security or currency at a time when it has an unrealized loss;
however, the Portfolio would have to pay a premium to purchase the call
option plus transaction costs.
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Aggregate premiums paid for put and call options will not exceed 5% of
each Portfolio's total assets, at the time of each purchase.
A Portfolio may attempt to accomplish objectives similar to those
involved in using Forward Contracts, by purchasing put or call options on
currencies. A put option gives a Portfolio as purchaser the right (but
not the obligation) to sell a specified amount of currency at the exercise
price at any time until (American style) or on (European style) the
expiration date of the option. A call option gives a Portfolio as
purchaser the right (but not the obligation) to purchase a specified
amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date of the option. A
Portfolio might purchase a currency put option, for example, to protect
itself against a decline in the dollar value of a currency in which it
holds or anticipates holding securities. If the currency's value should
decline against the dollar, the loss in currency value should be offset,
in whole or in part, by an increase in the value of the put. If the value
of the currency instead should rise against the dollar, any gain to a
Portfolio would be reduced by the premium it had paid for the put option.
A currency call option might be purchased, for example, in anticipation
of, or to protect against, a rise in the value against the dollar of a
currency in which a Portfolio anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter
("OTC options"). Listed options are third-party contracts (i.e.,
performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation) and have standardized strike
prices and expiration dates. A Portfolio will not purchase an OTC option
unless it believes that daily valuations for such options are readily
obtainable. OTC options differ from exchange-traded options in that OTC
options are transacted with dealers directly and not through a clearing
corporation (which guarantees performance). Consequently, there is a risk
of non-performance by the dealer. Since no exchange is involved, OTC
options are valued on the basis of an average of the last bid prices
obtained from dealers, unless a quotation from only one dealer is
available, in which case only that dealer's price will be used.
The staff of the Securities and Exchange Commission (the "SEC")
considers purchased OTC options to be illiquid securities. A Portfolio
may also sell OTC options and, in connection therewith, segregate assets
or cover its obligations with respect to OTC options written by the
Portfolio. The assets used as cover for OTC options written by a
Portfolio will be considered illiquid unless the OTC options are sold to
qualified dealers who agree that the Portfolio may repurchase any OTC
option it writes at a maximum price to be calculated by a formula set
forth in the option agreement. The cover for an OTC option written
subject to this procedure would be considered illiquid only to the extent
that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
A Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. A
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<PAGE>
Portfolio intends to purchase or write only those exchange-traded options
for which there appears to be a liquid secondary market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating
directly with the contra party, or by a transaction in the secondary
market if any such market exists. Although a Portfolio will enter into
OTC options only with contra parties that are expected to be capable of
entering into closing transactions with the Portfolio, there is no
assurance that the Portfolio will in fact be able to close out an OTC
option position at a favorable price prior to expiration. In the event of
insolvency of the contra party, the Portfolio might be unable to close out
an OTC option position at any time prior to its expiration.
Index Options
Puts and calls on indices are similar to puts and calls on securities
or futures contracts except that all settlements are in cash and gain or
loss depends on changes in the index in question (and thus on price
movements in the securities market or a particular market sector
generally) rather than on price movements in individual securities or
futures contracts. When a Portfolio writes a call on an index, it
receives a premium and agrees that, prior to the expiration date, the
purchaser of the call, upon exercise of the call, will receive from the
Portfolio an amount of cash if the closing level of the index upon which
the call is based is greater than the exercise price of the call. The
amount of cash is equal to the difference between the closing price of the
index and the exercise price of the call times a specified multiple (the
"multiplier"), which determines the total dollar value for each point of
such difference. When a Portfolio buys a call on an index, it pays a
premium and has the same rights as to such call as are indicated above.
When a Portfolio buys a put on an index, it pays a premium and has the
right, prior to the expiration date, to require the seller of the put,
upon the Portfolio's exercise of the put, to deliver to the Portfolio an
amount of cash if the closing level of the index upon which the put is
based is less than the exercise price of the put, which amount of cash is
determined by the multiplier, as described above for calls. When the
Portfolio writes a put on an index, it receives a premium and the
purchaser has the right, prior to the expiration date, to require the
Portfolio to deliver to it an amount of cash equal to the difference
between the closing level of the index and the exercise price times the
multiplier, if the closing level is less than the exercise price.
The risks of investment in index options may be greater than options
on securities. Because index options are settled in cash, when a
Portfolio writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. A Portfolio can offset some of the risk of writing a call
index option position by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, a
Portfolio cannot, as a practical matter, acquire and hold a portfolio
containing exactly the same securities as underlie the index and, as a
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result, bears a risk that the value of the securities held will vary from
the value of the index.
Even if a Portfolio could assemble a securities portfolio that exactly
reproduced the composition of the underlying index, it still would not be
fully covered from a risk standpoint because of the "timing risk" inherent
in writing index options. When an index option is exercised, the amount
of cash that the holder is entitled to receive is determined by the
difference between the exercise price and the closing index level on the
date when the option is exercised. As with other kinds of options, the
Portfolio, as the call writer, will not know that it has been assigned
until the next business day at the earliest. The time lag between
exercise and notice of assignment poses no risk for the writer of a
covered call on a specific underlying security, such as common stock,
because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as
the writer already owns the underlying security, it can satisfy its
settlement obligations by simply delivering it, and the risk that its
value may have declined since the exercise date is borne by the exercising
holder. In contrast, even if the writer of an index call holds securities
that exactly match the composition of the underlying index, it will not be
able to satisfy its assignment obligations by delivering those securities
against payment of the exercise price. Instead, it will be required to
pay cash in an among based on the closing index value on the exercise
date; and by the time it learns that it has been assigned, the index may
have declined, with a corresponding decline in the value of its securities
portfolio. This "timing risk" is an inherent limitation on the ability of
index call writers to cover their risks exposure by holding securities
positions.
If a Portfolio has purchased an index option and exercises it before
the closing index value for that day is available, it runs the risk that
the level of the underlying index may subsequently change. If such a
change causes the exercised option to fall out-of-the money, the Portfolio
will be required to pay the difference between the closing index value and
the exercise price of the option (times the applicable multiplier) to the
assigned writer.
Interest Rate, Currency and Stock Index Futures Contracts
Each Portfolio may enter into interest rate or currency futures
contracts, and may enter into stock index futures contracts (collectively,
"Futures" or "Futures Contracts"), as a hedge against changes in
prevailing levels of interest rates, currency exchange rates or stock
price levels in order to establish more definitely the effective return on
securities or currencies held or intended to be acquired by that
Portfolio. A Portfolio's hedging may include sales of Futures as an
offset against the effect of expected increases in interest rates, and
decreases in currency exchange rates and stock prices, and purchases of
Futures as an offset against the effect of expected declines in interest
rates, and increases in currency exchange rates or stock prices.
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Each Portfolio only will enter into Futures Contracts that are traded
on futures exchanges and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading thereon in
the United States are regulated under the Commodity Exchange Act by the
Commodity Futures Trading Commission ("CFTC"). Futures are exchanged in
London at the London International Financial Futures Exchange.
Although techniques other than sales and purchases of Futures
Contracts could be used to reduce a Portfolio's exposure to interest rate,
currency exchange rate and stock market fluctuations, that Portfolio may
be able to hedge exposure more effectively and at a lower cost through
using Futures Contracts.
A Futures Contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial
instrument (security or currency) for a specified price at a designated
date, time and place. A stock index Futures Contract provides for the
delivery, at a designated date, time and place, of an amount of cash equal
to a specified dollar amount times the difference between the stock index
value at the close of trading on the contract and the price at which the
Futures Contract is originally struck; no physical delivery of stocks
comprising the index is made. Brokerage fees are incurred when a Futures
Contract is bought or sold, and margin deposits must be maintained at all
times the Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and
payment for financial instruments or currencies, Futures Contracts usually
are closed out before the delivery date. Closing out an open Futures
Contract sale or purchase is effected by entering into an offsetting
Futures Contract purchase or sale, respectively, for the same aggregate
amount of the identical financial instrument or currency and the same
delivery date. If the offsetting purchase price is less than the original
sale price, a Portfolio would realize a gain; if it is more, a Portfolio
realizes a loss. Conversely, if the offsetting sale price is more than
the original purchase price, a Portfolio realizes a gain; if it is less, a
Portfolio realizes a loss. The transaction costs also must be included in
these calculations. There can be no assurance, however, that a Portfolio
will be able to enter into an offsetting transaction with respect to a
particular Futures Contract at a particular time. If a Portfolio is not
able to enter into an offsetting transaction, that Portfolio will continue
to be required to maintain the margin deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual
obligations arising from the sale of one Futures Contract of September
Deutschemarks on an exchange may be fulfilled at any time before delivery
under the Futures Contract is required (i.e., on a specified date in
September, the "delivery month") by the purchase of another Futures
Contract of September Deutschemarks on the same exchange. In such
instance, the difference between the price at which the Futures Contract
was sold and the price paid for the offsetting purchase, after allowance
for transaction costs, represents the profit or loss to a Portfolio.
B-16
<PAGE>
Each Portfolio's Futures transactions will be entered into for hedging
purposes; that is, Futures Contracts will be sold to protect against a
decline in the price of securities or currencies that a Portfolio owns, or
Futures Contracts will be purchased to protect a Portfolio against an
increase in the price of securities or currencies it has committed to
purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that
must be deposited by a Portfolio in order to initiate Futures trading and
to maintain that Portfolio's open positions in Futures Contracts. A
margin deposit made when the Futures Contract is entered into ("initial
margin") is intended to assure a Portfolio's performance under the Futures
Contract. The margin required for a particular Futures Contract is set by
the exchange on which the Futures Contract is traded and may be modified
significantly from time to time by the exchange during the term of the
Futures Contract.
Subsequent payments, called "variation margin," to and from the
futures commission merchant through which the Portfolio entered into the
Futures Contract will be made on a daily basis as the price of the
underlying security, currency or index fluctuates making the Futures
Contract more or less valuable, a process known as marking-to-market.
Risks of Using Futures Contracts. The prices of Futures Contracts are
volatile and are influenced, among other things, by actual and anticipated
changes in interest rates, and currency exchange rates, and in stock
market movements, which in turn are affected by fiscal and monetary
policies and national and international political and economic events.
There is a risk of imperfect correlation between changes in prices of
Futures Contracts and prices of the securities or currencies in a
Portfolio's portfolio being hedged. The degree of imperfection of
correlation depends upon circumstances such as: variations in speculative
market demand for Futures and for securities or currencies, including
technical influences in Futures trading; and differences between the
financial instruments being hedged and the instruments underlying the
standard Futures Contracts available for trading. A decision of whether,
when, and how to hedge involves skill and judgment, and even a well-
conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves
an extremely high degree of leverage. As a result, a relatively small
price movement in a Futures Contract may result in immediate and
substantial loss, as well as gain, to the investor. For example, if at
the time of purchase, 10% of the value of the Futures Contract is
deposited as margin, a subsequent 10% decrease in the value of the Futures
Contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out.
A 15% decrease would result in a loss equal to 150% of the original margin
deposit, if the Futures Contract were closed out. Thus, a purchase or
B-17
<PAGE>
sale of a Futures Contract may result in losses in excess of the amount
invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted
in Futures Contract and options on Futures Contracts prices during a
single trading day. The daily limit establishes the maximum amount that
the price of a Futures Contract or option may vary either up or down from
the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of Futures Contract
or option, no trades may be made on that day at a price beyond that limit.
The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures Contract and
option prices occasionally have moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing
prompt liquidation of positions and subjecting some traders to substantial
losses.
If a Portfolio were unable to liquidate a Futures or option on Futures
position due to the absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses. The Portfolio would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Portfolio would
continue to be required to make daily variation margin payments and might
be required to maintain the position being hedged by the Future or option
or to maintain cash or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk
the movements in the prices of Futures Contracts or options on Futures
might not correlate perfectly with movements in the prices of the
investments being hedged. For example, all participants in the Futures
and options on Futures markets are subject to daily variation margin calls
and might be compelled to liquidate Futures or options on Futures
positions whose prices are moving unfavorably to avoid being subject to
further calls. These liquidations could increase price volatility of the
instruments and distort the normal price relationship between the Futures
or options and the investments being hedged. Also, because initial margin
deposit requirements in the Futures market are less onerous than margin
requirements in the securities markets, there might be increased
participation by speculators in the Futures markets. This participation
also might cause temporary price distortions. In addition, activities of
large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result
in temporary price distortions.
Options on Futures Contracts
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if
the option is a put) at a specified exercise price at any time during the
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<PAGE>
period of the option. Upon exercise of the option, the delivery of the
Futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
Futures margin account, which represents the amount by which the market
price of the Futures Contract, at exercise, exceeds (in the case of a
call) or is less than (in the case of a put) the exercise price of the
option on the Futures Contract. If an option is exercised on the last
trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise
price of the option and the closing level of the securities, currencies or
index upon which the Futures Contract is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and
the purchase of put options on Futures can serve as a short hedge.
Writing call option on Futures can serve as a limited short hedge, and
writing put options on Futures can serve as a limited long hedge, using a
strategy similar to that used for writing options on securities, foreign
currencies or indices.
If a Portfolio writes an option on a Futures Contract, it will be
required to deposit initial and variation margin pursuant to requirements
similar to those applicable to Futures Contracts. Premiums received from
the writing of an option on a Futures Contract are included in the initial
margin deposit.
A Portfolio may seek to close out an option position by selling an
option covering the same Futures Contract and having the same exercise
price and expiration date. The ability to establish and close out
positions on such options is subject to the maintenance of a liquid
secondary market.
Limitations on Use of Futures, Options on Futures and Certain Options on
Currencies
To the extent that a Portfolio enters into Futures Contracts, options
on Futures Contracts, and options on foreign currencies traded on a CFTC-
regulated exchange, in each case other than for bona fide hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums
required to establish those positions (excluding the amount by which
options are "in-the-money") will not exceed 5% of the liquidation value of
the Portfolio, after taking into account unrealized profits and unrealized
losses on any contracts the Portfolio has entered into. In general, a
call option on a Futures Contract is "in-the-money" if the value of the
underlying Futures Contract exceeds the strike, i.e., exercise price of
the call; a put option on a Futures Contract is in-the-money if the value
of the underlying Futures Contract is exceeded by the strike price of the
put. This guideline may be modified by the Master Portfolio's Board of
Trustees without a shareholder vote. This limitation does not limit the
percentage of a Portfolio's assets at risk to 5%.
B-19
<PAGE>
Forward Currency Contracts
A Forward Contract is an obligation, usually arranged with a
commercial bank or other currency dealer, to purchase or sell a currency
against another currency at a future date and price as agreed upon by the
parties. A Portfolio either may accept or make delivery of the currency
at the maturity of the Forward Contract. A Portfolio also may, if its
contra party agrees, prior to maturity, enter into a closing transaction
involving the purchase or sale of an offsetting contract.
A Portfolio engages in forward currency transactions in anticipation
of, or to protect itself against, fluctuations in exchange rates. A
Portfolio might sell a particular foreign currency forward, for example,
when it holds bonds denominated in a foreign currency but anticipates, and
seeks to be protected against, a decline in the currency against the U.S.
dollar. Similarly, a Portfolio might sell the U.S. dollar forward when it
holds bonds denominated in U.S. dollars but anticipates, and seeks to be
protected against, a decline in the U.S. dollar relative to other
currencies. Further, a Portfolio might purchase a currency forward to
"lock in" the price of securities denominated in that currency that it
anticipates purchasing.
Forward Contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and
their customers. A Forward Contract generally has no deposit requirement,
and no commissions are charged at any stage for trades. Each Portfolio
will enter into such Forward Contracts with major U.S. or foreign banks
and securities or currency dealers in accordance with guidelines approved
by the Master Portfolio's Board of Trustees.
A Portfolio may enter into Forward Contracts either with respect to
specific transactions or with respect to overall investments of that
Portfolio. The precise matching of the Forward Contract amounts and the
value of specific securities generally will not be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between
the date the Forward Contract is entered into and the date it matures.
Accordingly, it may be necessary for a Portfolio to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase) if the market value of the security is less than the amount
of foreign currency that Portfolio is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency that a Portfolio is obligated to deliver. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be predicted accurately, causing a Portfolio to sustain
losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Portfolio
to sell a currency, that Portfolio either may sell a portfolio security
B-20
<PAGE>
and use the sale proceeds to make delivery of the currency or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which that Portfolio will obtain,
on the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, that Portfolio may close out a Forward
Contract requiring it to purchase a specified currency by, if its contra
party agrees, entering into a second contract entitling it to sell the
same amount of the same currency on the maturity date of the first
contract. That Portfolio would realize a gain or loss as a result of
entering into such an offsetting Forward Contract under either
circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first
contract and the offsetting contract.
The cost to a Portfolio of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts
usually are entered into on a principal basis, no fees or commissions are
involved. The use of Forward Contracts does not eliminate fluctuations in
the prices of the underlying securities a Portfolio owns or intends to
acquire, but it does establish a rate of exchange in advance. In
addition, while Forward Contract sales limit the risk of loss due to a
decline in the value of the hedged currencies, they also limit any
potential gain that might result should the value of the currencies
increase.
Foreign Currency Strategies - Special Considerations. A Portfolio may
use options on foreign currencies, Futures on foreign currencies, options
on Futures on foreign currencies and Forward Contracts to hedge against
movements in the values of the foreign currencies in which the Portfolio's
securities are denominated. Such currency hedges can protect against
price movements in a security that the Portfolio owns or intends to
acquire that are attributable to changes in the value of the currency in
which it is denominated. Such hedges do not, however, protect against
price movements in the securities that are attainable to other causes.
A Portfolio might seek to hedge against changes in the value of a
particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more
expensive than certain other contracts. In such cases, the Portfolio may
hedge against price movements in that currency by entering into a contract
on another currency or basket of currencies, the values of which LGT Asset
Management believes will have a positive correlation to the value of the
currency being hedged. The risk that movements in the price of the
contract will not correlate perfectly with movements in the price of the
currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward
Contracts and options on foreign currencies, depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of Futures Contracts,
B-21
<PAGE>
Forward Contracts or options, the Portfolio could be disadvantaged by
dealing in the odd lot market (generally consisting of transactions of
less than $1 million) for the underlying foreign currencies at prices that
are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Quotation information generally is representative of very large
transactions in the interbank market and thus might not reflect odd-lot
transactions where rates might be less favorable. The interbank market in
foreign currencies is a global, round-the-clock market. To the extent the
U.S. options or Futures markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements
might take place in the underlying markets that cannot be reflected in the
markets for the Futures contracts or options until they reopen.
Settlement of Futures Contracts, Forward Contracts and options
involving foreign currencies might be required to take place within the
country issuing the underlying currency. Thus, the Portfolio might be
required to accept or make delivery of the underlying foreign currency in
accordance with any U.S. or foreign regulations regarding the maintenance
of foreign banking arrangements by U.S. residents and might be required to
pay any fees, taxes and charges associated with such delivery assessed in
the issuing country.
Cover. Transactions using Forward Contracts, Futures Contracts and
options (other than options that a Portfolio has purchased) expose the
Portfolio to an obligation to another party. A Portfolio will not enter
into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, currencies, or other options, Forward
Contracts or Futures Contracts, or (2) cash, receivables and short-term
debt securities with a value sufficient at all times to cover its
potential obligations not covered as provided in (1) above. Each
Portfolio will comply with SEC guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash, U.S.
government securities or other liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Forward Contract, Futures Contract
or option is open, unless they are replaced with other appropriate assets.
If a large portion of a Portfolio's assets are used for cover or
segregated accounts, it could affect portfolio management or the
Portfolio's ability to meet redemption requests or other current
obligations.
Portfolio Trading and Turnover
Although each Portfolio generally does not intend to trade for short-
term profits, the securities held by a Portfolio will be sold whenever LGT
Asset Management believes it is appropriate to do so, without regard to
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<PAGE>
the length of time a particular security may have been held. Higher
portfolio turnover involves correspondingly greater brokerage commissions
and other transaction costs that a Portfolio will bear directly.
For the fiscal period May 31, 1994 (commencement of operations) to
October 31, 1994, and for the fiscal year ended October 31, 1995, the
portfolio turnover rates for the Financial Services Portfolio,
Infrastructure Portfolio and Natural Resources Portfolio were 53% and 17%,
18% and 45%, and 137% and 87%, respectively. For the fiscal period
December 30, 1994 (commencement of operations) to October 31, 1995, the
portfolio turnover rate for the Consumer Products and Services Portfolio
was 200%.
Investment Limitations
Each Portfolio has adopted the following fundamental investment
limitations which (unless otherwise noted) may not be changed without
approval by the holders of the lesser of (i) 67% of the total beneficial
interests of that Portfolio represented at a meeting at which more than
50% of the total beneficial interests of that Portfolio are represented,
or (ii) more than 50% of the total beneficial interests of that Portfolio.
Each Portfolio may not:
(1) Buy or sell real estate (including real estate limited
partnerships); however, each Portfolio may invest in debt securities
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein, including real estate
investment trusts;
(2) Buy or sell commodities or commodity contracts, except that each
Portfolio may purchase and sell financial and currency futures contracts
and options thereon, and may purchase and sell currency forward contracts,
options on foreign currencies and may otherwise engage in other
transactions in foreign currencies;
(3) Underwrite securities of other issuers, except to the extent that
the disposal of an investment position may technically cause it to be
considered an underwriter as that term is defined under the Securities Act
of 1933;
(4) Make loans; except that each Portfolio may purchase debt
securities and enter into repurchase agreements and may make loans of
portfolio securities;
(5) Purchase securities on margin, provided that each Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities; except that it may make margin deposits
in connection with futures contracts;
B-23
<PAGE>
(6) Borrow money except from banks in excess of 33-1/3% of the value
of that Portfolio's total assets, including the amount borrowed, less all
liabilities and indebtedness (other than borrowing). This restriction
shall not prevent any Portfolio from entering into reverse repurchase
agreements, provided that reverse repurchase agreements, and any other
transactions constituting borrowing by that Portfolio may not exceed one-
third of that Portfolio's total assets. Transactions involving options,
futures contracts, options on futures contracts and forward currency
contracts and collateral arrangements relating thereto will not be deemed
to be borrowings;
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements in
connection with permissible activities; or
(8) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, each Portfolio may invest in
the securities of companies that engage in these activities.
Each Portfolio is classified as a "diversified" portfolio under the
1940 Act. This means that, with respect to 75% of those Portfolio's total
assets, no more than 5% will be invested in the securities of any one
issuer, and each Portfolio will purchase no more than 10% of the
outstanding voting securities of any one issuer.
Further investment or operating policies of each Portfolio, which may
be changed by action of the Master Portfolio's Board of Trustees without
investor approval, are that each Portfolio will not:
(1) Invest in securities of an issuer if the investment
would cause that Portfolio to own more than 10% of any class of
securities of any one issuer;
(2) Invest in companies for the purpose of exercising
control or management;
(3) Invest more than 15% of its total assets in
illiquid securities, including securities that are illiquid by
virtue of the absence of a readily available market;
(4) Invest more than 5% of its total assets in
securities of companies having, together with their predecessors, a
record of less than three years of continuous operation;
(5) Purchase or retain the securities of any issuer, if
the individual officers and Trustees of the Master Portfolio, or
of the Portfolio's investment adviser, or distributor, each owning
beneficially more than 1/2 of 1% of the securities of such issuer,
together own more than 5% of the securities of such issuer.
B-24
<PAGE>
(6) Enter into a futures contract, an options on a
futures contract, or an option on foreign currency traded on a
CFTC-regulated exchange, in each cash other than for bona fide
hedging purposes (as defined by the CFTC), if the aggregate initial
margin and premiums required to establish all of those positions
(excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Portfolio's portfolio, after
taking into account unrealized profits and unrealized losses on any
contracts the Portfolio has entered into;
(7) Borrow money except for temporary or emergency
purposes (not for leveraging) in excess of 33 1/3% of the value of
that Portfolio's total assets (while borrowings exceed 5% of the
Infrastructure Portfolio's and Natural Resources Portfolio's total
assets, such Portfolios will not make any additional investments);
or
(8) Invest more than 10% of its total assets in shares of
other investment companies and may not invest more than 5% of its
total assets in any one investment company or acquire more than 3%
of the outstanding voting securities of any one investment company.
Item 14. Management of the Portfolios.
--------------------------------------
Trustees and Executive Officers. The Portfolio's By-Laws authorize a
Board of Trustees of a minimum two persons, as fixed by the Board of
Trustees. Trustees normally are elected by the interestholders; however,
a majority of remaining Trustees may fill Trustee vacancies caused by
resignation, death or expansion of the Board.
The Master Portfolio's Trustees and executive officers are listed
below.
B-25
<PAGE>
<TABLE>
<CAPTION
Names, Position(s) with Principal Occupations and Business
the Portfolios and Address Experience for the Past 5 Years
-------------------------- ----------------------------------
<S> <C>
David A. Minella*, 43 Director of Liechtenstein Global Trust (holding company of
Trustee, Chairman of the Board and the various international LGT companies) since 1990;
President President of the Asset Management Division, Liechtenstein
50 California Street Global Trust since 1995; Director and President of LGT Asset
San Francisco, CA 94111 Management Holdings, Inc. ("LGT Asset Management Holdings")
since 1988; Director and President of LGT Asset Management
since 1989; Director of GT Global since 1987 and President
of GT Global from 1987 to 1995; Director of GT Services
since 1990; President of GT Services from 1990 to 1995;
Director of G.T. Global Insurance Agency, Inc. ("G.T.
Insurance") since 1992, and President of G.T. Insurance from
1992 to 1995. Mr. Minella also is a director or trustee of
each of the other investment companies registered under the
1940 Act that is managed or administered by LGT Asset
Management.
C. Derek Anderson, 54 Chief Executive Officer of Anderson Capital Management,
Trustee Inc.; Chairman and Chief Executive Officer of Plantagenet
220 Sansome Street Holdings, Ltd. from 1991 to present; Director, Munsingwear,
Suite 400 Inc.; Director, American Heritage Group Inc. and various
San Francisco, CA 94104 other companies. Mr. Anderson also is a director or trustee
of each of the other investment companies registered under
the 1940 Act that is managed or administered by LGT Asset
Management.
Frank S. Bayley, 55 A Partner with Baker & McKenzie (a law firm); Director and
Trustee Chairman of C.D. Stimson Company (a private investment
Two Embarcadero Center company); and Trustee, Seattle Art Museum. Mr. Bayley also
San Francisco, CA 94111 is a director or trustee of each of the other investment
companies registered under the 1940 Act that is managed or
administered by LGT Asset Management.
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<PAGE>
Names, Position(s) with Principal Occupations and Business
the Portfolios and Address Experience for the Past 5 Years
-------------------------- ----------------------------------
Arthur C. Patterson, 51 Managing Partner of Accel Partners (a venture capital firm).
Trustee He also serves as a director of various computing and
One Embarcadero Center software companies. Mr. Patterson also is a director or
Suite 3820 trustee of each of the other investment companies registered
San Francisco, CA 94111 under the 1940 Act that is managed or administered by LGT
Asset Management.
Ruth H. Quigley, 60 Private investor. From 1984 to 1986, Miss Quigley was
Trustee President of Quigley Friedlander & Co., Inc. (a financial
1055 California Street advisory services firm). Ms. Quigley also is a director or
San Francisco, CA 94108 trustee of each of the other investment companies registered
under the 1940 Act that is managed or administered by LGT
Asset Management.
F. Christian Wignall, 39 Director of LGT Asset Management Holdings since 1989, Senior
Vice President and Chief Investment Vice President, Chief Investment Officer - Global Equities
Officer - Global Equities and a Director of LGT Asset Management since 1987, and
50 California Street Chairman of the Investment Policy Committee of the
San Francisco, CA 94111 affiliated international LGT companies since 1990.
James R. Tufts, 37 President of GT Services since 1995; from 1994 to 1995
Vice President and Senior Vice President - Finance and Administration of GT
Chief Financial Officer Global, GT Services and G.T. Insurance. Senior Vice
50 California Street President - Finance and Administration of LGT Asset
San Francisco, CA 94111 Management Holdings and LGT Asset Management since 1994.
From 1990 to 1994, Mr. Tufts was Vice President - Finance of
LGT Asset Management Holdings, LGT Asset Management, GT
Global and GT Services. He was Vice President - Finance of
G.T. Insurance from 1992 to 1994; and a Director of LGT
Asset Management, GT Global and GT Services since 1991.
Kenneth W. Chancey, 50 Vice President - Mutual Fund Accounting of LGT Asset
Vice President and Principal Management since 1992. Mr. Chancey was Vice President of
Accounting Officer Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
B-27
<PAGE>
Names, Position(s) with Principal Occupations and Business
the Portfolios and Address Experience for the Past 5 Years
-------------------------- ----------------------------------
Helge K. Lee, 49 Senior Vice President and General Counsel of LGT Asset
Vice President and Secretary Management Holdings, Inc., LGT Asset Management, GT Global,
50 California Street GT Services, and G.T. Insurance since February 1996. Senior
San Francisco, CA 94111 Vice President, Secretary and General Counsel of LGT Asset
Management Holdings, LGT Asset Management, GT Global, GT
Services and G.T. Insurance from May 1994 to February 1996.
Mr. Lee was the Senior Vice President, General Counsel and
Secretary of Strong/Corneliuson Management, Inc. and
Secretary of each of the Strong Funds from October 1991
through May 1994. For more than five years prior to October
1991, he was a shareholder in the law firm of Godfrey &
Kahn, S.C., Milwaukee, Wisconsin.
Peter R. Guarino, 36 Secretary of LGT Asset Management Holdings, LGT Asset
Assistant Secretary Management, GT Global, GT Services and G.T. Insurance since
50 California Street February 1996. Assistant General Counsel of G.T. Insurance
San Francisco, CA 94111 since 1992 and Assistant General Counsel of LGT Asset
Management Holdings, Inc., LGT Asset Management, GT Global
and GT Services since 1991. From 1989 to 1991, Mr. Guarino
was an attorney at The Dreyfus Corporation.
David J. Thelander, 40 Vice President of LGT Asset Management Holdings, LGT Asset
Assistant Secretary Management, GT Global, GT Services and G.T. Insurance since
50 California Street February 1996. Mr. Thelander has been an Assistant General
San Francisco, CA 94111 Counsel of LGT Asset Management since January 1995. Mr.
Thelander was an associate at the law firm of Kirkpatrick &
Lockhart LLP from 1993 to 1994. Prior thereto, he was an
attorney with the U.S. Securities and Exchange Commission.
</TABLE>
* Mr. Minella is an "interested person" of the Company as defined by the
1940 Act due to his affiliation with the LGT companies.
The Board of Trustees has a Nominating and Audit Committee, composed of
Miss Quigley and Messrs. Anderson, Bayley and Patterson, which is
responsible for nominating persons to serve as Trustees, reviewing audits
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<PAGE>
of the Company and its funds and recommending firms to serve as
independent auditors of the Company. Each of the Trustees and officers of
the Company is also a Director and officer of G.T. Global Developing
Markets Fund, Inc., and a Trustee and officer of G.T. Global Growth
Series, G.T. Greater Europe Fund, G.T. Global Variable Investment Trust,
G.T. Global Variable Investment Series, Global Investment Portfolio (of
which the Portfolios are subtrusts), Growth Portfolio and Global High
Income Portfolio, which also are registered investment companies managed
by LGT Asset Management. Each Trustee and Officer serves in total as a
Director and/or Trustee and officer, respectively, of 10 registered
investment companies with 40 series managed or administered by LGT Asset
Management.
Each Trustee who is not a director, officer or employee of LGT Asset
Management or any affiliated company is paid an annual fee of $5,000 a
year, plus $300 for each meeting of the Board attended, and is reimbursed
travel and other expenses incurred in connection with attending Board
meetings. Other Trustees and officers receive no compensation or expense
reimbursement from the Master Portfolio. For the fiscal year ended
October 31, 1995, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley
were each paid Trustees' fees and expense reimbursements of $1,366.71 by
the Financial Services Portfolio, $1,366.64 by the Infrastructure
Portfolio and $1,366.65 by the Natural Resources Portfolio. For the
fiscal year ended October 31, 1995, Mr. Anderson, Mr. Bayley, Mr.
Patterson and Ms. Quigley, who are not directors, officers or employees of
LGT Asset Management or any affiliated company, each received total
compensation of $92,176.78, $87,868.64, $92,260.90 and $86,957.55,
respectively, from the 40 investment companies managed and/or administered
by LGT Asset Management 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 date of this
filing, the officers and Trustees and their families as a group owned in
the aggregate beneficially or of record less than 1% of the outstanding
interests of each Portfolio.
The Declaration of Trust provides that each Portfolio will indemnify
its Trustees and officers as described below under Item 18.
Item 15. Control Persons and Principal Holders of Beneficial Interests.
-----------------------------------------------------------------------
As of the date of this filing, GT Global Financial Services Fund, GT
Global Natural Resources Fund, GT Global Infrastructure Fund and GT Global
Consumer Products and Services Fund (each a "Fund," collectively, "Funds")
owned 99.9%, 99.9%, 99.9% and 99.9% of the value of the outstanding
beneficial interests in Global Financial Services Portfolio, Global
Natural Resources Portfolio, Global Infrastructure Portfolio and Global
Consumer Products and Services Portfolio, respectively. Because currently
each Fund controls its corresponding Portfolio, each Fund may take actions
affecting its corresponding Portfolio without the approval of any other
investor.
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Each Fund has informed its corresponding Portfolio that whenever a
Fund is requested to vote on any proposal of its corresponding 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
each Portfolio will follow the same or a similar practice.
Item 16. Investment Advisory and Other Services.
-------------------------------------------------
Investment Management and Administration. LGT Asset Management serves
as the Portfolios' investment manager under an Investment Management and
Administration Contract ("Management Contract"). As investment manager,
LGT Asset Management makes all investment decisions for the Portfolios and
administers each Portfolio's affairs. LGT Asset Management provides a
continuous investment program for each Portfolio, including investment
research and management with respect to all securities and cash
equivalents of each Portfolio. LGT Asset Management will determine from
time to time what securities and other investments will be purchased,
retained or sold by each Portfolio, and the brokers and dealers through
whom trades will be executed. Among other things, LGT Asset Management
furnishes the services and pays the compensation and travel expenses of
persons who perform the executive, administrative, clerical and
bookkeeping functions of each Portfolio and provides suitable office
space, necessary small office equipment and utilities. For these
services, each Portfolio pays LGT Asset Management investment management
and administration fees, based on the average daily net assets, at the
annualized rate of 0.725% on the first $500 million, 0.70% on the next
$500 million, 0.675% on the next $500 million, and 0.65% on all amounts
thereafter.
The Management Contract may be renewed for one-year terms, provided
that any such renewal has been specifically approved at least annually by:
(i) the Master Portfolio's Board of Trustees, or by the vote of a majority
of the Portfolios' outstanding voting interests (as defined in the
1940 Act), and (ii) a majority of Trustees who are not parties to the
Management Contract or "interested persons" of any such party (as defined
in the 1940 Act), cast in person at a meeting called for the specific
purpose of voting on such approval. The Management Contract provides that
with respect to a Portfolio either that Portfolio or LGT Asset Management
may terminate the Management Contract without penalty upon sixty days'
written notice to the other party. The Management Contract terminates
automatically in the event of its assignment (as defined in the 1940 Act).
For the period May 31, 1994 (commencement of operations) to October 31,
1994, Financial Services Portfolio, Infrastructure Portfolio and Natural
Resources Portfolio paid net investment management and administration fees
of $0, $3,021 and $0, respectively to LGT Asset Management, reflecting
reimbursement by LGT Asset Management of investment management and
administration fees payable by the Financial Services Portfolio,
Infrastructure Portfolios and Natural Resources Portfolio in the amounts
of $8,249, $48,901, and $28,500, respectively. For the fiscal year ended
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October 31, 1995, the Financial Services Portfolio, Infrastructure
Portfolio and Natural Resources Portfolio paid LGT Asset Management
investment management and administration fees of $51,353, $601,421 and
$213,856, respectively. For the period December 30, 1994 (commencement of
operations) through October 31, 1995, the Consumer Products and Services
Portfolio paid LGT Asset Management investment management and
administration fees of $16,284.
Custodian. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, is custodian of each Portfolio's assets.
Independent Accountants. The Master Portfolio's independent
accountants are Coopers & Lybrand, One Post Office Square, Boston,
Massachusetts 02109.
Item 17. Brokerage Allocation and Other Practices.
---------------------------------------------------
Subject to policies established by the Master Portfolio's Board of
Trustees, LGT Asset Management is responsible for the execution of each
Portfolio's securities transactions and the selection of broker/dealers
who execute such transactions on behalf of each Portfolio. In executing
portfolio transactions, LGT Asset Management seeks the best net results
for each Portfolio, taking into account such factors as the price
(including the applicable brokerage commission or dealer spread), size of
the order, difficulty of execution and operational facilities of the firm
involved. While LGT Asset Management generally seeks reasonably
competitive commission rates and spreads, payment of the lowest commission
or spread is not necessarily consistent with the best net results. While
the Portfolios may engage in soft dollar arrangements for research
services, as described below, the Portfolios have no obligation to deal
with any broker/dealers in the execution of portfolio transactions.
Consistent with the interests of the Portfolios, LGT Asset Management
may select brokers to execute the Portfolios' portfolio transactions on
the basis of the research and brokerage services they provide to LGT Asset
Management for its use in managing the Portfolios and its other advisory
accounts. Such services may include furnishing analyses, reports and
information concerning issuers, industries, securities, geographic
regions, economic factors and trends, portfolio strategy, and performance
of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement). Research
and brokerage services received from such brokers are in addition to, and
not in lieu of, the services required to be performed by LGT Asset
Management under the Management Contract (defined below). A commission
paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided
that LGT Asset Management determines in good faith that such commission is
reasonable in terms either of that particular transaction or the overall
responsibility of LGT Asset Management to the Portfolios and its other
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<PAGE>
clients and that the total commissions paid by the Portfolios will be
reasonable in relation to the benefits received by the Portfolios over the
long term. Research services may also be received from dealers who
execute portfolio transactions.
LGT Asset Management may allocate brokerage transactions to
broker/dealers who have entered into arrangements under which the
broker/dealer allocates a portion of the commissions paid by the
Portfolios toward payment of the Portfolios' expenses, such as transfer
agent and custodian fees.
Investment decisions for each Portfolio and for other investment
accounts managed by LGT Asset Management are made independently of each
other in light of differing conditions. However, the same investment
decision occasionally may be made for two or more of such accounts,
including a Portfolio. In such cases simultaneous transactions may occur.
Purchases or sales are then allocated as to price or amount in a manner
deemed fair and equitable to all accounts involved. While in some cases
this practice could have a detrimental effect upon the price or value of
the security as far as a Portfolio is concerned, in other cases LGT Asset
Management believes that coordination and the ability to participate in
volume transactions will be beneficial to that Portfolio.
Under a policy adopted by the Master Portfolio's Board of Trustees,
and subject to the policy of obtaining the best net results, LGT Asset
Management may consider a broker/dealer's sale of the shares of the mutual
funds for which LGT Asset Management serves as investment manager in
selecting brokers and dealers for the execution of the Portfolios'
portfolio transactions. This policy does not imply a commitment to
execute portfolio transactions through all broker/dealers that sell shares
of such other funds.
Each Portfolio contemplates purchasing most foreign equity securities
in over-the-counter markets or stock exchanges located in the countries in
which the respective principal offices of the issuers of the various
securities are located, if that is the best available market. The fixed
commissions paid in connection with most such foreign stock transactions
generally are higher than negotiated commissions on United States
transactions. There generally is less government supervision and
regulation of foreign stock exchanges and brokers than in the United
States. Foreign security settlements may in some instances be subject to
delays and related administrative uncertainties.
Foreign equity securities may be held by each Portfolio in the form of
ADRs, ADSs, CDRs or EDRs or securities convertible into foreign equity
securities. ADRs, ADSs, CDRs and EDRs may be listed on stock exchanges,
or traded in the over-the-counter markets in the United States or Europe,
as the case may be. ADRs, like other securities traded in the United
States, will be subject to negotiated commission rates. The foreign and
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<PAGE>
domestic debt securities and money market instruments in which a Portfolio
may invest generally are traded in the over-the-counter markets.
Each Portfolio contemplates that, consistent with the policy of
obtaining the best net results, brokerage transactions may be conducted
through certain companies that are members of the BIL GT Group. The
Master Portfolio's Board of Trustees has adopted procedures in conformity
with Rule 17e-1 under the 1940 Act to ensure that all brokerage
commissions paid to such affiliates are reasonable and fair in the context
of the market in which they are operating. Any such transactions will be
effected and related compensation paid only in accordance with applicable
SEC regulations. For the fiscal period May 31, 1994 (commencement of
operations) to October 31, 1994, the Financial Services Portfolio,
Infrastructure Portfolio and Natural Resources Portfolio paid aggregate
brokerage commissions of $18,145, $111,512 and $132,572, respectively.
For the fiscal year ended October 31, 1995, the Financial Services
Portfolio, Infrastructure Portfolio and Natural Resources Portfolio paid
aggregate brokerage commissions of $38,814, $122,399, and $90,630,
respectively. For the period December 30, 1994 (commencement of
operations) to October 31, 1995, the Consumer Products and Services
Portfolio paid aggregate brokerage commissions of $17,605.
Although each Portfolio does not intend generally to trade for short-
term profits, the securities held by that Portfolio will be sold whenever
management believes it is appropriate to do so, without regard to the
length of time a particular security may have been held (except to the
extent necessary to avoid non-compliance with the "Short-Short Limitation"
described in "Tax Status").
A Portfolio engages in such trading when LGT Asset Management has
concluded that the sale of a security owned by that Portfolio and/or the
purchase of another security of better value can enhance principal and/or
increase income. A security may be sold to avoid any prospective decline
in market value, or a security may be purchased in anticipation of a
market rise. Consistent with each Portfolio's investment objective, a
security may also be sold and a comparable security purchased
coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two
securities.
Each Portfolio anticipates that its annual portfolio turnover rated
should not exceed 100%. However, the portfolio turnover rate will not be
a limiting factor when management deems portfolio changes appropriate. A
100% portfolio turnover rate would occur if the lesser of the value of
purchases or sales of portfolio securities for a Portfolio (excluding
purchases of U.S. Treasury and other securities with a maturity at the
date of purchase of one year or less) were equal to 100% of the average
monthly value of the securities, excluding short-term investments, held by
that Portfolio during such year. Higher portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs
that the Portfolio will bear directly. For the fiscal period May 31, 1994
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<PAGE>
(commencement of operations) to October 31, 1994 and for the fiscal year
ended October 31, 1995, the portfolio turnover rates for the Financial
Services Portfolio, Infrastructure Portfolio and Natural Resources
Portfolio were 53% and 17%, 18% and 45% and 137% and 87%, respectively.
For the period December 30, 1994 (commencement of operations) to October
31, 1995, the portfolio turnover rate for the Consumer Products and
Services Portfolio was 200%.
Item 18. Capital Stock and Other Securities.
---------------------------------------------
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in each Portfolio. An investor in a Portfolio is
entitled to participate pro rata in distributions of the Portfolio's
income and gains and to be allocated a pro rata share of the Portfolio's
income, gains, losses, deductions, and credits. Upon liquidation or
dissolution of a Portfolio, investors are entitled to share pro rata in
that Portfolio's net assets available for distribution to its investors.
Investments in a Portfolio have no preference, preemptive, conversion or
similar rights. Investments in each Portfolio may not be transferred.
Each investor in a Portfolio is entitled to a vote in proportion to
the amount of its investment in that Portfolio. Investors in the
Portfolios will all vote together in certain circumstances (e.g., election
of the Trustees and auditors, and as required by the 1940 Act and the
rules thereunder). Investors in a Portfolio do not have cumulative voting
rights, and investors holding more than 50% of the aggregate beneficial
interest in the Master Portfolio or in a Portfolio, as the case may be,
may control the outcome of these votes. The Master Portfolio is not
required to hold annual meetings of investors but the Master Portfolio
will hold special meetings of investors when (1) a majority of the
Trustees determines to do so; or (2) investors holding at least 10% of the
interests in the Master Portfolio (or a Portfolio) request in writing a
meeting of investors in the Master Portfolio (or Portfolio). No material
amendment may be made to the Master Portfolio's Declaration of Trust
without the affirmative majority vote of investors (with the vote of each
being in proportion to the amount of its investment).
The Master Portfolio may enter into a merger or consolidation, or sell
all or substantially all of its (or a Portfolio's) assets, if approved by
the vote of two-thirds of the beneficial interests in the Master Portfolio
(or in the Portfolio affected by such action, as the case may be) with the
vote of each interestholder being in proportion to the amount of its
investment, except that if the Trustees recommend such sale of assets, the
approval by vote of a majority of the beneficial interests in the Master
Portfolio (or in the Portfolio affected by such action, as the case may
be) with the vote of each interestholder being in proportion to the amount
of their investment, will be sufficient. A Portfolio may also be
terminated (i) upon liquidation and distribution of its assets, if
approved by the vote of two-thirds of the beneficial interests in such
Portfolio (with the vote of each being in proportion to the amount of
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<PAGE>
their investment), or (ii) by the Trustees by written notice to its
investors.
The Master Portfolio is organized as a New York common law trust.
Investors in each Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by that
Portfolio in the event that there is imposed upon an investor a greater
portion of the liabilities and obligations of that Portfolio than its
proportionate beneficial interest in such Portfolio. The Declaration of
Trust also provides that each Portfolio shall maintain appropriate
insurance (for example, fidelity bonding and errors and omissions
insurance) covering certain kinds of potential 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 investor's Portfolio itself was unable to meet its
obligations.
The Declaration of Trust further provides that obligations of each
Portfolio are not binding upon the Trustees individually but only upon the
property of that 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 or her
office. The Declaration of Trust provides that the trustees and officers
will be indemnified by the Master Portfolio against liabilities and
expenses incurred in connection with litigation in which they may be
involved because of their offices with the Master Portfolio, unless, as to
liability to the Master 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 Master 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 each 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
("1933 Act"). See Items 4 and 7 in Part A.
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<PAGE>
Each Portfolio determines its net asset value as of the close of
regular trading on the NYSE (currently 4:00 p.m. Eastern Time, unless
weather, equipment failure or other factors contribute to an earlier
closing time). Currently the NYSE is closed on weekends and on certain
days relating to the following holidays: New Year's Day, President's Day,
Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving Day and
Christmas Day. Additions or reductions will be effected at the time of
determination of net asset value next following the receipt of an order.
Each Portfolio's portfolio securities and other assets are valued as
follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on
stock exchanges are valued at the last sale price on the exchange 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 to be the primary market. Securities traded in the over-
the-counter market are valued at the last available bid price prior to the
time of valuation. Securities and assets for which market quotations are
not readily available (including restricted securities which are subject
to limitations as to their sale) are valued at fair value as determined in
good faith by or under the direction of the Board of Trustees.
Long-term debt obligations are valued at the mean of representative
quoted bid or asked prices for such securities or, if such prices are not
available, at prices for securities of comparable maturity, quality and
type; however, when LGT Asset Management deems it appropriate, prices
obtained for the day of valuation from a bond pricing service will be
used. Short-term debt investments are amortized to maturity based on
their cost, adjusted for foreign exchange translation, provided such
relations represent fair value.
Options on currencies purchased by a Portfolio are valued at their
last bid price in the case of listed options or at the average of the last
bid prices obtained from dealers, unless a quotation from only one dealer
is available, in which case only that dealer's price will be used, in the
case of OTC options. The value of each security denominated in a currency
other than U.S. dollars will be translated into U.S. dollars at the
prevailing market rate as determined by LGT Asset Management on that day.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees. The valuation procedures
applied in any specific instance are likely to vary from case to case.
However, consideration is generally given to the financial position of the
issuer and other fundamental analytical data relating to the investment
and to the nature of the restrictions on disposition of the securities
(including any registration expenses that might be borne by a Portfolio in
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connection with such disposition). In addition, specific factors also are
generally considered, such as the cost of the investment, the market value
of any unrestricted securities of the same class (both at the time of
purchase and at the time of valuation), the size of the holding, the
prices of any recent transactions or offers with respect to such
securities and any available analysts' reports regarding the issuer.
Any assets or liabilities initially denominated in terms of foreign
currencies are translated into U.S. dollars at the official exchange rate
or, alternatively, at the mean of the current bid and asked prices of such
currencies against the U.S. dollar last quoted by a major bank that is a
regular participant in the foreign exchange market or on the basis of a
pricing service that takes into account the quotes provided by a number of
such major banks. If none of these alternatives is available or none are
deemed to provide a suitable methodology for converting a foreign currency
into U.S. dollars, the Board of Trustees, in good faith, will establish a
conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not
take place on all days on which the NYSE is open. Further, trading takes
place in various foreign markets on days on which the NYSE is not open and
therefore the Portfolios' net asset value is not calculated. The
calculation of the Portfolios' net asset value therefore may not take
place contemporaneously with the determination of the prices of securities
held by the Portfolios. Events affecting the values of securities held by
the Portfolios that occur between the time their prices are determined and
the close of normal trading on the NYSE will not be reflected in the
Portfolios' net asset value unless LGT Asset Management, under the
supervision of the Board of Trustees, determines that the particular event
would materially affect net asset value. As a result, the Portfolios' net
asset value may be significantly affected by such trading on days when an
interestholder has no access to a Portfolio.
Each 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 that 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. Each Portfolio has elected,
however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which each 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 that Portfolio at
the beginning of the period.
Each investor in a Portfolio may add to or reduce its investment in
that 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 a Portfolio will be determined by multiplying the net asset value of
such Portfolio by the percentage representing that investor's share of the
aggregate beneficial interests in that Portfolio. Any additions or
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<PAGE>
reductions which are to be effected on that day will then be effected.
The investor's percentage of the aggregate beneficial interests in a
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 that 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 that Portfolio by all investors in that Portfolio. The percentage so
determined will then be applied to determine the value of the investor's
interest in that Portfolio as of the close of trading on the following day
the NYSE is open for trading.
Item 20. Tax Status.
---------------------
Taxation of the Portfolios
The Portfolios and their Relationship of the Feeder Funds. Each
Portfolio is treated as a separate partnership for federal income tax
purposes and is not a "publicly traded partnership." As a result, each
Portfolio is not subject to federal income tax; instead, each Feeder Fund,
as an investor in its corresponding Portfolio, is required to take into
account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions and credits, without regard
to whether it has received any cash distributions from the Portfolio. Each
Portfolio also is not subject to New York income or franchise tax.
Because, as noted above, each Feeder Fund is deemed to own a
proportionate share of its corresponding Portfolio's assets, and to earn a
proportionate share of its corresponding Portfolio's income, for purposes
of determining whether the Fund satisfies the requirements to qualify as a
RIC, each Portfolio intends to conduct its operations so that its
corresponding Fund will be able to satisfy all those requirements.
Distributions to each Feeder Fund from its corresponding Portfolio
(whether pursuant to a partial or complete withdrawal or otherwise) will
not result in the Fund's recognition of any gain or loss for federal
income tax purposes, except that (1) gain will be recognized to the extent
any cash that is distributed exceeds the Fund's basis for its interest in
the Portfolio before the distribution, (2) income or gain will be
recognized if the distribution is in liquidation of the Fund's entire
interest in its Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. Each Feeder Fund's basis for its interest in its
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corresponding Portfolio generally will equal the amount of cash and the
basis of any property the Fund invests in the Portfolio, increased by the
Fund's share of the Portfolio's net income and gains and decreased by (a)
the amount of cash and the basis of any property the Portfolio distributes
to the Fund and (b) the Fund's share of the Portfolio's losses.
Foreign Taxes. Dividends and interest received by a Portfolio may be
subject to income, withholding or other taxes imposed by foreign countries
and U.S. possessions that would reduce the yield on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not
impose taxes on capital gains in respect of investments by foreign
investors. If more than 50% of the value of a Fund's total assets (taking
into account, in the case of a Feeder Fund, its proportionate share of its
corresponding Portfolio's assets) at the close of its taxable year
consists of securities of foreign corporations, the Fund will be eligible
to, and may, file an election with the Internal Revenue Service that will
enable its shareholders, in effect, to receive the benefit of the foreign
tax credit with respect to any foreign income taxes paid by it (taking
into account, in the case of a Feeder Fund, its proportionate share of
those taxes paid by its corresponding Portfolio). Pursuant to the
election, a Fund will treat those taxes as dividends paid to its
shareholders and each shareholder will be required to (1) include in gross
income, and treat as paid by him, his proportionate share of those taxes,
(2) treat his share of those taxes and of any dividend paid by the Fund
that represents income from foreign sources as his own income from those
sources, and (3) either deduct the taxes deemed paid by him in computing
his taxable income or, alternatively, use the foregoing information in
calculating the foreign tax credit against his federal income tax. Each
Fund will report to its shareholders shortly after each taxable year their
respective shares of the Fund's income (taking into account, in the case
of a Feeder Fund, its proportionate share of its corresponding Portfolio's
income) from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
Passive Foreign Investment Companies. Each Portfolio may invest in the
stock of PFICs. A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is
passive or (2) an average of at least 50% of its assets produce, or are
held for the production of, passive income. Under certain circumstances, a
Fund will be subject to federal income tax on a part (or, in the case of a
Feeder Fund, its proportionate share of a part) of any "excess
distribution" received by it (or, in the case of a Feeder Fund, by its
corresponding Portfolio) on the stock of a PFIC or of any gain on the
Fund's (or, in the case of a Feeder Fund, its corresponding Portfolio's)
disposition of that stock (collectively, "PFIC income"), plus interest
thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly,
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will not be taxable to it to the extent that income is distributed to its
shareholders.
If a Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Portfolio (or, in the case of a Portfolio, its
corresponding Feeder Fund) will be required to include in income each year
its pro rata share of the QEF's annual ordinary earnings and net capital
gain (the excess of net long-term capital gain over net short-term capital
loss)--which most likely would have to be distributed by that Portfolio
(or, in the case of a Portfolio, its corresponding Feeder Fund) to satisfy
the Distribution Requirement and to avoid imposition of the Excise Tax--
even if those earnings and gain were not received thereby. In most
instances it will be very difficult, if not impossible, to make this
election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Funds,
would be entitled to elect to "mark-to-market" their stock in certain
PFICs. "Marking-to-market," in this context, means recognizing as gain for
each taxable year the excess, as of the end of that year, of the fair
market value of each such PFIC's stock over the adjusted basis in that
stock (including mark-to-market gain for each prior year for which an
election was in effect).
Options, Futures and Foreign Currency Transactions. The Portfolios'
use of hedging transactions such as selling (writing) and purchasing
options and Futures and entering into Forward Contracts, involves complex
rules that will determine, for federal income tax purposes, the character
and timing of recognition of the gains and losses a Portfolio realizes in
connection therewith. Income from foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and income from
transactions in options, Futures and Forward Contracts derived by a
Portfolio with respect to its business of investing in securities or
foreign currencies, will qualify as permissible income under the Income
Requirement for that Portfolio (or, in the case of a Portfolio, its
corresponding Feeder Fund). However, income from the disposition by a
Portfolio of options and Futures (other than those on foreign currencies)
will be subject to the Short-Short Limitation for that Portfolio (or, in
the case of a Portfolio, its corresponding Feeder Fund) if they are held
for less than three months. Income from the disposition by a Portfolio of
foreign currencies, and options, Futures and Forward Contracts on foreign
currencies, that are not directly related to its principal business of
investing in securities (or options and Futures with respect thereto) also
will be subject to the Short-Short Limitation for that Portfolio (or, in
the case of a Portfolio, its corresponding Feeder Fund) if they are held
for less than three months.
B-40
<PAGE>
If a Portfolio satisfies certain requirements, any increase in value
of a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedge for
purposes of determining whether that Portfolio (or, in the case of a
Portfolio, its corresponding Feeder Fund) satisfies the Short-Short
Limitation. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of that limitation. Each
Portfolio intends that, when it engages in hedging transactions, it will
qualify for this treatment, but at the present time it is not clear
whether this treatment will be available for all of those transactions. To
the extent this treatment is not available, a Portfolio may be forced to
defer the closing out of certain options, Futures, Forward Contracts on
foreign currency positions beyond the time when it otherwise would be
advantageous to do so, in order for that Portfolio (or, in the case of a
Portfolio, its corresponding Feeder Fund) to continue to qualify as a RIC.
Futures and Forward Contracts that are subject to Section 1256 of the
Code (other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by a Portfolio at the end of its taxable
year generally will be deemed to have been sold at market value for
federal income tax purposes. Sixty percent of any net gain or loss
recognized on these deemed sales, and 60% of any net gain or loss realized
from any actual sales of Section 1256 Contracts, will be treated as long-
term capital gain or loss, and the balance will be treated as short-term
capital gain or loss. Section 988 of the Code may apply to gains or losses
from transactions in foreign currencies, foreign-currency-denominated debt
securities and options, Futures and Forward Contracts on foreign
currencies ("Section 988" gains or losses). Each Section 988 gain or loss
generally is computed separately and treated as ordinary income or loss.
In the case of overlap between Sections 1256 and 988, special provisions
determine the character and timing of any income, gain or loss. Each
Portfolio attempts to monitor Section 988 transactions to minimize any
adverse tax impact.
The foregoing is a general and abbreviated summary of certain federal
income tax considerations affecting the Funds, their shareholders and the
Portfolios. Investors are urged to consult their own tax advisers for more
detailed information and for information regarding any foreign, state and
local taxes applicable to distributions received from a Fund.
Item 21. Underwriters.
-----------------------
Not applicable.
Item 22. Calculation of Performance Data.
------------------------------------------
Not applicable.
B-41
<PAGE>
Item 23. Financial Statements.
-------------------------------
The audited financial statements of the Financial Services Portfolio,
the Infrastructure Portfolio and the Natural Resources Portfolio for the
fiscal year ended October 31, 1995, and the audited financial statements
of the Consumer Products and Services Portfolio for the period December
30, 1994 (commencement of operations) to October 31, 1995 included herein,
have been so included in reliance on the report of Coopers & Lybrand,
independent auditors, given on the authority of said firm as experts in
auditing and accounting.
B-42
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Trustees of
Global Financial Services Portfolio:
We have audited the accompanying statement of assets and liabilities of Global
Financial Services Portfolio, including the portfolio of investments, as of
October 31, 1995, the related statement of operations for the year then ended,
the statements of changes in net assets and supplementary data for the year then
ended and for the period from May 31, 1994 (commencement of operations) to
October 31, 1994. 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, 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 supplementary data referred to
above present fairly, in all material respects, the financial position of Global
Financial Services Portfolio as of October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets and
supplementary data for the year then ended and for the period from May 31, 1994
(commencement of operations) to October 31, 1994, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1995
F-9
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Banks-Regional (24.5%)
Banco Commercial S.A. - 144A ADR{.} -/- {\/} .............. URGY 11,300 $ 189,274 1.9
Unidanmark AS "A" ......................................... DEN 4,000 183,788 1.9
Thai Farmers Bank, Ltd. - Foreign-/- ...................... THAI 21,100 174,435 1.8
Sparbanken Sverige AB "A" ................................. SWDN 15,000 158,287 1.6
Den Danske Bank ........................................... DEN 2,280 151,087 1.5
Bancorp Hawaii, Inc. ...................................... US 4,000 134,000 1.4
First Tennessee National Corp. ............................ US 2,400 128,400 1.3
Cullen/Frost Bankers, Inc. ................................ US 2,500 127,500 1.3
BayBanks, Inc. ............................................ US 1,500 121,500 1.2
Fokus Banken AS-/- ........................................ NOR 23,600 119,975 1.2
Anglo-Irish Bank Corp. PLC ................................ IRE 109,000 110,258 1.1
Bank of Melbourne Ltd. ................................... AUSL 19,800 100,417 1.0
Mellon Bank Corp. ......................................... US 2,000 100,250 1.0
Union Bank Corp. ......................................... US 2,000 100,250 1.0
Espirito Santo Financial Holding S.A. - ADR{\/} .......... LUX 9,000 99,000 1.0
Advance Bank of Australia Ltd. ............................ AUSL 13,000 96,025 1.0
Allied Irish Bank PLC ..................................... IRE 17,500 88,475 0.9
Westpac Banking Corp., Ltd. ............................... AUSL 20,000 82,090 0.8
PT Bank Internasional Indonesia - Foreign ................. INDO 23,000 80,551 0.8
Commerce Bancorp, Inc. .................................... US 3,000 69,375 0.7
Glacier Bancorp, Inc. ..................................... US 550 11,275 0.1
------------
2,426,212
------------
Banks-Money Center (17.2%)
Bank of Ireland ........................................... IRE 36,000 239,378 2.4
Bank Hapoalim Ltd.-/- ..................................... ISRL 133,000 211,494 2.2
HSBC Holdings PLC ......................................... HK 12,000 174,617 1.8
Bangkok Bank Co., Ltd. - Foreign .......................... THAI 14,300 147,774 1.5
National Westminster Bank PLC ............................. UK 14,800 147,602 1.5
Commercial Bank of Korea-/- ............................... KOR 9,900 110,348 1.1
Krung Thai Bank Ltd. - Foreign ............................ THAI 24,750 98,370 1.0
Bank Leumi Le - Israel-/- ................................. ISRL 67,500 92,833 1.0
Sumitomo Bank ............................................. JPN 5,000 88,543 0.9
Mitsubishi Bank ........................................... JPN 4,000 78,270 0.8
Banco O'Higgins - ADR{\/} ................................ CHLE 3,600 76,950 0.8
Fuji Bank Ltd. ............................................ JPN 4,000 74,357 0.8
Dai-Ichi Kangyo Bank Ltd. ................................. JPN 4,000 67,704 0.7
Citicorp .................................................. US 1,000 64,875 0.7
------------
1,673,115
------------
<PAGE>
Securities Brokers (12.4%)
Daiwa Securities Co., Ltd. ................................ JPN 14,000 164,368 1.7
Edwards (A.G.), Inc. ...................................... US 5,600 142,800 1.5
Nikko Securities Co., Ltd. ................................ JPN 14,000 130,672 1.3
Nomura Securities Co., Ltd. ............................... JPN 7,000 128,070 1.3
Peregrine Investment Holdings Ltd. ........................ HK 100,000 127,406 1.3
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Securities Brokers (Continued)
Dean Witter, Discover & Co. ............................... US 2,500 $ 124,375 1.3
Yamaichi Securities ....................................... JPN 22,000 115,370 1.2
Charles Schwab Corp. ...................................... US 4,600 105,225 1.1
Kankaku Securities Co.-/- ................................. JPN 27,000 87,173 0.9
Hanshin Securities Co. .................................... KOR 3,500 78,225 0.8
------------
1,203,684
------------
Other Financial (10.7%)
U.S. Order, Inc. .......................................... US 13,100 196,500 2.0
Aboitiz Equity Ventures, Inc.-/- .......................... PHIL 730,000 139,088 1.4
Transaction Network Service-/- ............................ US 6,000 138,000 1.4
Acom Co., Ltd. ............................................ JPN 4,000 130,320 1.3
DST Systems, Inc. ......................................... US 5,000 105,000 1.1
Shohkoh Fund .............................................. JPN 600 104,491 1.1
Compagnie Financiere de Paribas S.A. ...................... FR 1,800 99,049 1.0
JACCS Co., Ltd. ........................................... JPN 10,000 91,185 0.9
State Street Boston Corp. ................................. US 1,250 48,594 0.5
------------
1,052,227
------------
Investment Management (8.1%)
Alliance Capital Management L.P. .......................... US 12,200 256,199 2.6
Invesco PLC - ADR{\/} ..................................... UK 6,000 229,499 2.3
Franklin Resources, Inc. .................................. US 2,000 101,500 1.0
Invesco PLC-/- ............................................ UK 23,300 89,488 0.9
M & G Group PLC ........................................... UK 3,500 72,191 0.7
Eaton Vance Corp. ........................................ US 1,600 58,400 0.6
------------
807,277
------------
Consumer Finance (5.2%)
First Financial Caribbean Corp. ........................... US 10,000 178,124 1.8
Nichiei Co., Ltd. ........................................ JPN 2,000 124,254 1.3
Promise Co., Ltd. ......................................... JPN 3,000 118,286 1.2
Green Tree Financial Corp. ................................ US 3,400 90,525 0.9
------------
511,189
------------
Insurance - Multi-Line (4.6%)
Corporacion Mapfre ........................................ SPN 4,000 205,068 2.1
Allmerica Financial Corp. ................................. US 5,000 125,625 1.3
Axa Group ................................................. FR 2,036 113,118 1.2
------------
443,811
------------
Insurance - Property-Casualty (3.6%)
RenaissanceRe Holdings Ltd. ............................... US 4,000 108,500 1.1
Mid Ocean Ltd. ............................................ US 2,700 95,513 1.0
MBIA, Inc. ................................................ US 1,200 83,550 0.9
AMBAC, Inc. .............................................. US 1,300 54,763 0.6
------------
342,326
------------
<PAGE>
Real Estate Investment Trust (2.8%)
Alexander Haagen Properties, Inc. ......................... US 8,900 97,900 1.0
Beacon Properties Corp. ................................... US 4,300 93,525 1.0
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Real Estate Investment Trust (Continued)
Evans Withycombe Residential, Inc. ........................ US 4,000 $ 75,500 0.8
------------
266,925
------------
Savings & Loans (2.0%)
Leader Financial Corp. .................................... US 3,000 106,875 1.1
Long Island Bancorp, Inc. ................................. US 3,800 86,925 0.9
------------
193,800
------------
Banks-Super Regional (1.6%)
NationsBank Corp. ......................................... US 1,500 98,625 1.0
BankAmerica Corp. ......................................... US 1,000 57,500 0.6
------------
156,125
------------
Insurance-Life (0.9%)
Mapfre Vida Seguros ....................................... SPN 1,700 89,943 0.9
------------ -----
TOTAL EQUITY INVESTMENTS (cost $8,390,205) ................. 9,166,634 93.6
------------ -----
<CAPTION>
Market % of Net
Repurchase Agreement Value Assets {d}
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1995 with State Street Bank & Trust
Company, due November 1, 1995, for an effective yield of
5.80% collateralized by $860,000 U.S. Treasury Strips due
2/15/02 (market value of collateral is $595,179, including
accrued interest). (cost $575,093) ...................... 575,093 5.9
------------ -----
TOTAL INVESTMENTS (cost $8,965,298) ......................... 9,741,727 99.5
Other Assets and Liabilities ................................ 51,617 0.5
------------ -----
NET ASSETS .................................................. $ 9,793,344 100.0
------------ -----
------------ -----
<PAGE>
<FN>
- ----------------
{d} Percentages indicated are based on net assets of $9,793,344.
{\/} 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.
* For Federal income tax purposes, cost is $8,976,777 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 969,371
Unrealized depreciation: (204,421)
-------------
Net unrealized appreciation: $ 764,950
-------------
-------------
</TABLE>
Abbreviation:
ADR -- American Depository Receipt
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
The Fund's Portfolio of Investments at October 31, 1995, was concentrated in the
following countries:
<TABLE>
<CAPTION>
Percentage of Net Assets
{d}
---------------------------
Short-Term
Country(Country Code/Currency Code) Equity & Other Total
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Australia (AUSL/AUD) ................. 2.8 2.8
Chile (CHLE/CLP) ..................... 0.8 0.8
Denmark (DEN/DKK) .................... 3.4 3.4
France (FR/FRF) ...................... 2.2 2.2
Hong Kong (HK/HKD) ................... 3.1 3.1
Indonesia (INDO/IDR) ................. 0.8 0.8
Ireland (IRE/IEP) .................... 4.4 4.4
Israel (ISRL/ILS) .................... 3.2 3.2
Japan (JPN/JPY) ...................... 15.4 15.4
Korea (KOR/KRW) ...................... 1.9 1.9
Luxembourg (LUX/ECU) ................. 1.0 1.0
Norway (NOR/NOK) ..................... 1.2 1.2
Philippines (PHIL/PHP) ............... 1.4 1.4
Spain (SPN/ESP) ...................... 3.0 3.0
Sweden (SWDN/SEK) .................... 1.6 1.6
Thailand (THAI/THB) .................. 4.3 4.3
United Kingdom (UK/GBP) .............. 5.4 5.4
United States (US/USD) ............... 35.8 6.4 42.2
Uruguay (URGY/UYP) ................... 1.9 1.9
------ --- -----
Total ............................... 93.6 6.4 100.0
------ --- -----
------ --- -----
<FN>
- ----------------
{d} Percentages indicated are based on net assets of $9,793,344.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Market Value
(U.S. Contract Delivery Unrealized
Contracts to Sell Dollars) Price Date Appreciation
- ------------------------------------------------------------------------------- ------------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Japanese Yen................................................................... 466,686 99.83000 11/14/95 $ 11,126
------------- ------------
Total Contracts to Sell (Receivable amount $477,812)........................... 466,686 $ 11,126
------------- ------------
</TABLE>
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF NET ASSETS IS 4.77%
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost
$8,965,298) (Note 1)............................. $ 9,741,727
Foreign currencies (cost $524).................... 524
Receivable for securities sold.................... 767,833
Dividends and dividend withholding tax reclaims
receivable....................................... 13,818
Receivable for open forward foreign currency
contracts, net (Note 1).......................... 11,126
Interest receivable............................... 20
Cash held as collateral for securities loaned
(Note 1)......................................... 223,830
-----------
Total assets.................................... 10,758,878
-----------
Liabilities:
Payable for securities purchased.................. 667,221
Payable for investment management and
administration fees (Note 2)..................... 51,353
Payable for professional fees..................... 7,214
Payable for printing and postage expenses......... 4,007
Payable for custodian fees (Note 1)............... 2,943
Payable for Trustees' fees and expenses (Note
2)............................................... 2,849
Other accrued expenses............................ 6,117
Collateral for securities loaned (Note 1)......... 223,830
-----------
Total liabilities............................... 965,534
-----------
Net assets.......................................... $ 9,793,344
-----------
-----------
Net assets consist of:
Paid in capital................................... $ 9,303,972
Accumulated net investment income................. 170,139
Accumulated net realized loss on investments and
foreign currency transactions.................... (471,178)
Net unrealized appreciation on translation of
assets and liabilities in foreign currencies..... 13,982
Net unrealized appreciation of investments........ 776,429
-----------
Total -- representing net assets applicable to
shares of beneficial interest outstanding.......... $ 9,793,344
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of
$10,038)................................................. $ 224,978
Interest income........................................... 60,482
----------
Total investment income................................. 285,460
----------
Expenses:
Investment management and administration fees (Note 2).... 51,353
Custodian fees (Note 1)................................... 25,175
Legal fees................................................ 12,300
Trustees' fees and expenses (Note 2)...................... 7,119
Audit fees................................................ 5,550
Other expenses............................................ 1,900
----------
Total expenses before reductions........................ 103,397
----------
Expense reductions (Note 1 & 4)....................... (1,771)
----------
Total net expenses...................................... 101,626
----------
Net investment income....................................... 183,834
----------
Net realized and unrealized gain (loss) on
investments and foreign currencies: (Note 1)
Net realized loss on investments........... $ (405,844)
Net realized loss on foreign currency
transactions.............................. (32,894)
----------
Net realized loss during the year....................... (438,738)
Net change in unrealized appreciation on
translation of assets and liabilities in
foreign currencies........................ 13,973
Net change in unrealized appreciation of
investments............................... 743,739
----------
Net unrealized appreciation during the year............. 757,712
----------
Net realized and unrealized gain on investments and foreign
currencies................................................. 318,974
----------
Net increase in net assets resulting from operations........ $ 502,808
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAY 31, 1994
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
Increase in net assets
<S> <C> <C>
Operations:
Net investment income (loss)............... $ 183,834 $ (13,695)
Net realized loss on investments and
foreign currency transactions............. (438,738) (32,440)
Net change in unrealized appreciation on
translation of assets and liabilities in
foreign currencies........................ 13,973 9
Net change in unrealized appreciation of
investments............................... 743,739 32,690
----------------- -----------------
Net increase (decrease) in net assets
resulting from operations............... 502,808 (13,436)
Beneficial interest transactions:
Contributions.............................. 9,881,645 5,089,171
Withdrawals................................ (5,766,944) --
----------------- -----------------
Net increase from beneficial interest
transactions............................ 4,114,701 5,089,171
----------------- -----------------
Total increase in net assets................. 4,617,509 5,075,735
Net assets:
Beginning of period........................ 5,175,835 100,100
----------------- -----------------
End of period.............................. $ 9,793,344 $5,175,835
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES 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 MAY 31, 1994
OCTOBER 31, (COMMENCEMENT OF OPERATIONS)
1995 TO OCTOBER 31, 1994
------------ ------------------------------
<S> <C> <C>
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 9,793 $ 5,176
Ratio of net investment income to
average net assets..................... 2.60 % 1.19 %(a)
Ratio of operating expenses to average
net assets:
With expense reductions............... 1.43 % 4.43 %(a)
Without expense reductions............ 1.46 % -- %*
Portfolio turnover rate................. 170 % 53 %
</TABLE>
- ----------------
(a) Annualized
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Global Financial Services 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 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.
(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 G.T. Capital Management,
Inc. ("G.T. Capital") 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 G.T.
Capital 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 TRANSLATION
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 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 Contract") is an agreement between
two parties to buy
F-18
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
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 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 holds
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 stock 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 stock market and to fluctuations in currency values or interest
rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-
F-19
<PAGE>
<PAGE>
GLOBAL FINANCIAL SERVICES PORTFOLIO
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
At October 31, 1995, stocks with an aggregate value of approximately $204,255
were on loan to brokers. The loans were secured by cash collateral of $223,830.
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. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of the loan. For
the year ended October 31, 1995, the Portfolio received $201 of income from
securities lending which was used to offset the Portfolio's custody expenses.
(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) 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 Portfolio'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.
In addition, the Portfolio may focus its investments in certain related
financial services industries, subjecting the Portfolio to greater risk than a
fund that is more diversified.
(K) 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.
(L) 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.
2. RELATED PARTIES
G.T. Capital is the Portfolio's investment manager and administrator. The
Portfolio pays investment management and administration fees to G.T. Capital at
the annualized rate of 0.725% on the first $500 million of average daily net
assets of the Portfolio; 0.70% on the next $500 million; 0.675% on the next $500
million; and 0.65% on amounts thereafter. These fees are computed daily and paid
monthly.
The Portfolio pays each of its Trustees who is not an employee, officer or
director of G.T. Capital, 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, 1995, all of the shares of beneficial interest of the Portfolio
were owned either by G.T. Global Financial Services Fund or G.T. Capital.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities by the Portfolio, other than short-term investments, aggregated
$14,536,797 and $10,774,813, respectively. There were no purchases or sales of
U.S. government obligations by the Portfolio for the year ended October 31,
1995.
4. EXPENSE REDUCTIONS
G.T. Capital has directed certain portfolio trades to brokers who paid a portion
of the Portfolio's expenses. For the year ended October 31, 1995, the
Portfolio's expenses were reduced by $1,570 under these arrangements.
F-20
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Trustees of
Global Infrastructure Portfolio:
We have audited the accompanying statement of assets and liabilities of Global
Infrastructure Portfolio, including the portfolio of investments, as of October
31, 1995, the related statement of operations for the year then ended, the
statements of changes in net assets and the supplementary data for the year then
ended and for the period from May 31, 1994 (commencement of operations) to
October 31, 1994. 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, 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 supplementary data referred to
above present fairly, in all material respects, the financial position of Global
Infrastructure Portfolio as of October 31, 1995, the results of its operations
for the year then ended, the changes in its net assets and the supplementary
data for the year then ended and for the period from May 31, 1994 (commencement
of operations) to October 31, 1994, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1995
F-9
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (27.3%)
Consolidated Electric Power Asia .......................... HK 1,400,000 $ 2,833,971 3.3
ELECTRICAL & GAS UTILITIES
Korea Electric Power Corp.: ............................... KOR -- -- 2.8
ELECTRICAL & GAS UTILITIES
ADR-/- {\/} ............................................. -- 58,000 1,435,500 --
Common-/- ............................................... -- 21,000 938,083 --
ASEA AB "B" Free ......................................... SWDN 22,000 2,172,307 2.5
ELECTRICAL PLANT/EQUIPMENT
Enron Global Power & Pipelines L.L.C. ..................... US 90,000 2,171,250 2.5
ENERGY EQUIPMENT & SERVICES
Empresa Nacional de Electridad S.A. - ADR{\/} ............. SPN 40,000 2,010,000 2.3
ELECTRICAL & GAS UTILITIES
Compania Boliviana de Energia Electrica{\/} ............... BOL 62,300 1,814,488 2.1
ELECTRICAL & GAS UTILITIES
Edison S.p.A. ............................................. ITLY 450,000 1,811,527 2.1
ELECTRICAL & GAS UTILITIES
Chilgener S.A. - ADR{\/} .................................. CHLE 75,000 1,800,000 2.1
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (Cemig) - ADR-/-
{\/} .................................................... BRZL 81,175 1,735,116 2.0
ELECTRICAL & GAS UTILITIES
EVN Energie-Versorgung Niederoesterreich AG ............... ASTRI 14,000 1,711,284 2.0
ELECTRICAL & GAS UTILITIES
Capex S.A. ................................................ ARG 260,000 1,677,000 2.0
ELECTRICAL & GAS UTILITIES
MetroGas S.A. - ADR{\/} ................................... ARG 100,000 850,000 1.0
ENERGY EQUIPMENT & SERVICES
AES China Generating Co., Ltd. "A"-/- ..................... US 54,100 541,000 0.6
ELECTRICAL & GAS UTILITIES
------------
23,501,526
------------
<PAGE>
Services (20.7%)
ABC Rail Products Corp.-/- ................................ US 115,100 2,560,975 3.0
TRANSPORTATION - ROAD & RAIL
DDI Corp. ................................................. JPN 295 2,392,672 2.8
WIRELESS COMMUNICATIONS
Telefonica de Espana - ADR{\/} ............................ SPN 55,000 2,069,375 2.4
TELEPHONE NETWORKS
SPT Telecom-/- ........................................... CZCH 19,000 1,871,295 2.2
TELEPHONE NETWORKS
WorldCom, Inc.-/- ......................................... US 55,832 1,821,519 2.1
TELEPHONE - LONG DISTANCE
Stet Di Risp .............................................. ITLY 810,000 1,768,188 2.1
TELEPHONE NETWORKS
PT Indonesia Satellite (Indosat) - ADR{\/} ................ INDO 50,000 1,656,250 1.9
TELEPHONE - LONG DISTANCE
Philippine Long Distance Telephone Co. - ADR{\/} .......... PHIL 20,000 1,122,500 1.3
TELEPHONE NETWORKS
Centennial Cellular Corp. "A"-/- .......................... US 60,000 1,095,000 1.3
WIRELESS COMMUNICATIONS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
Pakistan Telecommunications Co., Ltd.: .................... PAK -- -- 0.8
TELEPHONE NETWORKS
144A GDR{.} -/- {\/} ................................... -- 4,892 $ 457,402 --
New Voucher-/- {\/} ..................................... -- 2,800 273,324 --
RailTex, Inc.-/- .......................................... US 22,200 460,650 0.5
TRANSPORTATION - ROAD & RAIL
PST Vans, Inc.-/- ......................................... US 47,500 267,188 0.3
TRANSPORTATION - ROAD & RAIL
Telecomunicacoes Brasileiras S.A. (Telebras) - 144A ADR{.}
{\/} ..................................................... BRZL 113 4,506 --
TELEPHONE NETWORKS
------------
17,820,844
------------
Capital Goods (20.7%)
Nokia AB Preferred - ADR{\/} .............................. FIN 51,000 2,843,250 3.3
TELECOM EQUIPMENT
Mannesmann AG ............................................. GER 7,500 2,469,090 2.9
MACHINERY & ENGINEERING
Caterpillar, Inc. ......................................... US 40,000 2,245,000 2.6
MACHINERY & ENGINEERING
Fluor Corp. ............................................... US 35,000 1,977,500 2.3
CONSTRUCTION
United Engineers Ltd. .................................... MAL 270,000 1,679,197 2.0
CONSTRUCTION
Allgon AB "B" Free ........................................ SWDN 100,000 1,515,037 1.8
TELECOM EQUIPMENT
Acme-Cleveland Corp. ..................................... US 63,300 1,384,688 1.6
MACHINE TOOLS
E.R.G. Ltd. .............................................. AUSL 1,100,000 1,331,861 1.5
MULTI-INDUSTRY
BroadBand Technologies, Inc.-/- ........................... US 70,100 1,226,750 1.4
TELECOM EQUIPMENT
C & P Homes, Inc.-/- ...................................... PHIL 998,200 643,566 0.7
CONSTRUCTION
Champion Technology Holdings .............................. HK 3,878,622 496,668 0.6
TELECOM EQUIPMENT
------------
17,812,607
------------
<PAGE>
Materials/Basic Industry (15.0%)
La Cementos Nacional, C.A. - 144A GDR{.} -/- {\/} ......... ECDR 12,060 2,412,000 2.8
CEMENT
PT Bakrie and Brothers .................................... INDO 1,170,000 2,061,674 2.4
BUILDING MATERIALS & COMPONENTS
Lone Star Industries, Inc. ................................ US 75,000 1,715,625 2.0
CEMENT
Giant Cement Holding, Inc.-/- ............................. US 179,800 1,685,625 2.0
CEMENT
Siam Cement Co., Ltd. - Foreign ........................... THAI 28,000 1,526,868 1.8
CEMENT
Hylsamex, S.A. de C.V. - 144A ADR{.} -/- {\/} ............. MEX 75,000 1,265,625 1.5
METALS - STEEL
Cementos Paz del Rio S.A. - 144A ADR{.} -/- {\/} .......... COL 65,000 926,250 1.1
CEMENT
PT Semen Cibinong - Foreign ............................... INDO 316,000 828,282 1.0
CEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Grupo Simec, S.A. de C.V. - ADR-/- {\/} ................... MEX 54,200 $ 352,300 0.4
METALS - STEEL
------------
12,774,249
------------
Technology (9.3%)
DSP Communications, Inc. .................................. US 110,000 3,987,500 4.6
TELECOM TECHNOLOGY
LG Information & Communication-/- ......................... KOR 30,400 2,423,735 2.8
TELECOM TECHNOLOGY
Three-Five Systems, Inc.-/- .............................. US 90,000 1,631,249 1.9
TELECOM TECHNOLOGY
------------
8,042,484
------------
Miscellaneous (2.2%)
General Electric Co. ...................................... US 30,000 1,897,500 2.2
CONGLOMERATE
------------ -----
TOTAL EQUITY INVESTMENTS (cost $81,114,777) ................. 81,849,210 95.2
------------ -----
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (0.9%)
Philippines (0.9%)
International Container Terminal Services, Convertible
Bond,5% due 9/15/01 - 144A (cost $1,000,000){.} ....... USD 1,000,000 810,000 0.9
------------ -----
<CAPTION>
Market % of Net
Repurchase Agreement Value Assets {d}
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1995, with State Street Bank & Trust
Company, due November 1, 1995, for an effective yield of
5.80% collateralized by $3,235,000 U.S. Treasury Bill, due
2/8/96 (market value of collateral is $3,187,283,
including accrued interest) (cost $3,116,502). .......... 3,116,502 3.6
------------ -----
TOTAL INVESTMENTS (cost $85,231,279) ........................ 85,775,712 99.7
Other Assets and Liabilities ................................ 234,216 0.3
------------ -----
NET ASSETS .................................................. $ 86,009,928 100.0
------------ -----
------------ -----
<PAGE>
<FN>
- ----------------
{d} Percentages indicated are based on net assets of $86,009,928.
-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} 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.
* For Federal income tax purposes, cost is $85,381,279 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 8,629,590
Unrealized depreciation: (8,235,157)
-------------
Net unrealized appreciation: $ 394,433
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
The Fund's Portfolio of Investments at October 31, 1995, was concentrated in the
following countries:
<TABLE>
<CAPTION>
Percentage of Net Assets {d}
-------------------------------------------
Short-Term
Country(Country Code/Currency Code) Equity Fixed Income & Other Total
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) ................. 3.0 3.0
Australia (AUSL/AUD) ................. 1.5 1.5
Austria (ASTRI/ATS) .................. 2.0 2.0
Bolivia (BOL/BOL) .................... 2.1 2.1
Brazil (BRZL/BRL) .................... 2.0 2.0
Chile (CHLE/CLP) ..................... 2.1 2.1
Colombia (COL/COP) ................... 1.1 1.1
Czech Republic (CZCH/CSK) ........... 2.2 2.2
Ecuador (ECDR/ECS) .................. 2.8 2.8
Finland (FIN/FIM) .................... 3.3 3.3
Germany (GER/DEM) .................... 2.9 2.9
Hong Kong (HK/HKD) ................... 3.9 3.9
Indonesia (INDO/IDR) ................. 5.3 5.3
Italy (ITLY/ITL) ..................... 4.2 4.2
Japan (JPN/JPY) ...................... 2.8 2.8
Korea (KOR/KRW) ...................... 5.6 5.6
Malaysia (MAL/MYR) ................... 2.0 2.0
Mexico (MEX/MXN) ..................... 1.9 1.9
Pakistan (PAK/PKR) .................. 0.8 0.8
Philippines (PHIL/PHP) ............... 2.0 0.9 2.9
Spain (SPN/ESP) ...................... 4.7 4.7
Sweden (SWDN/SEK) .................... 4.3 4.3
Thailand (THAI/THB) .................. 1.8 1.8
United States (US/USD) ............... 30.9 3.9 34.8
------ --- --- -----
Total ............................... 95.2 0.9 3.9 100.0
------ --- --- -----
------ --- --- -----
<FN>
- ----------------
{d} Percentages indicated are based on net assets of $86,009,928.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Market Value Unrealized
(U.S. Delivery Appreciation
Contracts to Buy Dollars) Contract Price Date (Depreciation)
- ------------------------------------------------------------------------- ------------- -------------- --------- -------------
<S> <C> <C> <C> <C>
Deutsche Marks........................................................... 852,697 1.42567 11/03/95 $ 10,987
Japanese Yen............................................................. 215,243 100.01800 11/14/95 (4,717)
Japanese Yen............................................................. 25,438 97.97301 11/14/95 (1,100)
------------- -------------
Total Contracts to Buy (Payable amount $1,088,208)....................... 1,093,378 5,170
------------- -------------
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF NET ASSETS IS 1.27%
Contracts to Sell
- -------------------------------------------------------------------------
Deutsche Marks........................................................... 1,811,980 1.37700 11/03/95 39,872
Deutsche Marks........................................................... 177,898 1.45648 11/30/95 (6,251)
Italian Lira............................................................. 1,341,741 1,605.60000 11/16/95 (10,500)
Japanese Yen............................................................. 978,378 91.70000 11/14/95 112,135
Japanese Yen............................................................. 303,297 96.50400 11/14/95 17,933
------------- -------------
Total Contracts to Sell (Receivable amount $4,766,483)................... 4,613,294 153,189
------------- -------------
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF NET ASSETS IS 5.36%
Total Open Forward Foreign currency Contracts, Net....................... $ 158,359
-------------
-------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $85,231,279)
(Note 1)............................................... $85,775,712
U.S. currency.............................. $ 499
Foreign currencies (cost $472,653)......... 472,692 473,191
--------
Receivable for open forward foreign currency contracts,
net (Note 1)........................................... 158,359
Dividends and dividend withholding tax reclaims
receivable............................................. 119,634
Receivable for forward foreign currency contracts --
closed (Note 1)........................................ 15,177
Interest receivable..................................... 6,389
Prepaid expenses........................................ 234
Cash held as collateral for securities loaned (Note
1)..................................................... 7,441,675
-----------
Total assets.......................................... 93,990,371
-----------
Liabilities:
Payable for investment management and administration
fees (Note 2).......................................... 505,838
Payable for professional fees........................... 14,114
Payable for custodian fees (Note 1)..................... 6,534
Payable for printing and postage expenses............... 4,250
Payable for Trustees' fees and expenses (Note 2)........ 3,992
Other accrued expenses.................................. 4,040
Collateral for securities loaned (Note 1)............... 7,441,675
-----------
Total liabilities..................................... 7,980,443
-----------
Net assets................................................ $86,009,928
-----------
-----------
Net assets consist of:
Paid in capital......................................... $84,277,905
Accumulated net investment income....................... 1,136,794
Accumulated net realized loss on investments and foreign
currency transactions.................................. (107,584)
Net unrealized appreciation on translation of assets and
liabilities in foreign currencies...................... 158,380
Net unrealized appreciation of investments.............. 544,433
-----------
Total -- representing net assets applicable to shares of
beneficial interest outstanding.......................... $86,009,928
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of
$90,378).................................................. $1,008,999
Interest income............................................ 692,904
----------
Total investment income.................................. 1,701,903
----------
Expenses:
Investment management and administration fees (Note 2)..... 601,421
Custodian fees (Note 1).................................... 80,701
Legal fees................................................. 18,300
Audit fees................................................. 11,550
Trustees' fees and expenses (Note 2)....................... 7,300
Printing and postage expenses.............................. 4,250
Other expenses............................................. 3,650
----------
Total expenses before reductions......................... 727,172
----------
Expense reductions (Notes 1 & 4)....................... (37,549)
----------
Total net expenses....................................... 689,623
----------
Net investment income........................................ 1,012,280
----------
Net realized and unrealized loss on
investments and foreign currencies: (Note 1)
Net realized gain on investments........... 1,032,988
Net realized loss on foreign currency
transactions.............................. (1,091,351)
-----------
Net realized loss during the year........................ (58,363)
Net change in unrealized appreciation on
translation of assets and liabilities
in foreign currencies..................... 157,236
Net change in unrealized appreciation of
investments............................... (565,235)
-----------
Net unrealized depreciation during the year.............. (407,999)
----------
Net realized and unrealized loss on investments and foreign
currencies.................................................. (466,362)
----------
Net increase in net assets resulting from operations......... $ 545,918
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAY 31, 1994
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
Increase in net assets
<S> <C> <C>
Operations:
Net investment income...................... $ 1,012,280 $ 124,514
Net realized loss on investments and
foreign currency transactions............. (58,363) (49,221)
Net change in unrealized appreciation on
translation of assets and
liabilities in foreign currencies......... 157,236 1,144
Net change in unrealized appreciation of
investments............................... (565,235) 1,109,668
----------------- -----------------
Net increase in net assets resulting from
operations.............................. 545,918 1,186,105
Beneficial interest transactions:
Contributions.............................. 62,352,320 52,494,964
Withdrawals................................ (27,995,100) (2,674,379)
----------------- -----------------
Net increase from beneficial interest
transactions............................ 34,357,220 49,820,585
----------------- -----------------
Total increase in net assets................. 34,903,138 51,006,690
Net assets:
Beginning of period........................ 51,106,790 100,100
----------------- -----------------
End of period.............................. $ 86,009,928 $51,106,790
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Contained below are ratios and supplemental data that have been derived
from information provided in the financial statements.
<TABLE>
<CAPTION>
MAY 31, 1994
YEAR ENDED (COMMENCEMENT OF
OCTOBER 31, OPERATIONS) TO
1995 OCTOBER 31, 1994
----------- ------------------
<S> <C> <C>
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 86,010 $ 51,107
Ratio of net investment income to
average net assets..................... 1.22% 1.44 %(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
4)................................... 0.83% 1.17 %(a)
Without expense reductions............ 0.88% -- % *
Portfolio turnover rate................. 45% 18 %
</TABLE>
- ----------------
(a) Annualized.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Global Infrastructure 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 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.
(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, 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 G.T. Capital Management,
Inc. ("G.T. Capital") 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 G.T.
Capital 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 TRANSLATION
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 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.
F-18
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
(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 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 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 stock market and 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 stock market and to fluctuations in currency values or interest
rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The
F-19
<PAGE>
<PAGE>
GLOBAL INFRASTRUCTURE PORTFOLIO
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
At October 31, 1995, stocks with an aggregate value of approximately $7,127,333
were on loan to brokers. The loans were secured by cash collateral of
$7,441,675. 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 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 the loan. For
the year ended October 31, 1995, the Portfolio received $29,528 of income from
securities lending which were used to reduce the Portfolio's custodian fees.
(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) 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 Portfolio's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the price of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
In addition, the Portfolio may focus its investments in certain related
infrastructure industries, subjecting the Portfolio to greater risk than a fund
that is more diversified.
(K) 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.
(L) 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.
2. RELATED PARTIES
G.T. Capital is the Portfolio's investment manager and administrator. The
Portfolio pays investment management and administration fees to G.T. Capital at
the annualized rate of 0.725% on the first $500 million of average daily net
assets of the Portfolio; 0.70% on the next $500 million; 0.675% on the next $500
million; and 0.65% on amounts thereafter. These fees are computed daily and paid
monthly.
The Portfolio pays each of its Trustees who is not an employee, officer or
director of G.T. Capital, 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, 1995, all of the shares of beneficial interest of the Portfolio
were owned either by G.T. Global Infrastructure Fund or G.T. Capital.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities by the Portfolio, other than short-term investments, aggregated
$66,417,748 and $32,256,613, respectively. There were no purchases or sales of
U.S. government obligations by the Portfolio for the year ended October 31,
1995.
4. EXPENSE REDUCTIONS
G.T. Capital has directed certain portfolio trades to brokers who paid a portion
of the Portfolio's expenses. For the year ended October 31, 1995, the
Portfolio's expenses were reduced by $8,021 under these arrangements.
F-20
<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES PORTFOLIO
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Trustees of Global Natural Resources Portfolio:
We have audited the accompanying statement of assets and liabilities of Global
Natural Resources Portfolio, including the schedule of Portfolio Investments, as
of October 31, 1995, the related statement of operations for the year then
ended, the statements of changes in net assets and the supplementary data for
the year then ended and for the period from May 31, 1994 (commencement of
operations) to October 31, 1994. 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, 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 supplementary data referred to
above present fairly, in all material respects, the financial position of Global
Natural Resources Portfolio as of October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets and the
supplementary data for the year then ended and for the period from May 31, 1994
(commencement of operations) to October 31, 1994, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1995
F-9
<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Oil (31.3%)
Mobil Corp. ............................................... US 11,000 $ 1,108,250 4.1
British Petroleum Co., PLC ................................ UK 150,100 1,103,153 4.1
Saga Petroleum AS "A" ..................................... NOR 85,000 1,064,923 4.0
Reading & Bates Corp.-/- .................................. US 90,000 1,035,000 3.9
Repsol S.A. - ADR{\/} ..................................... SPN 34,900 1,033,913 3.9
Shell Transport & Trading Co., PLC ........................ UK 80,500 940,248 3.5
Anadarko Petroleum Corp. .................................. US 20,000 867,500 3.2
Total Compagnie Francaise des Petroles S.A. - ADR{\/} ..... FR 20,100 620,588 2.3
Norsk Hydro AS ............................................ NOR 15,175 604,485 2.3
------------
8,378,060
------------
Chemicals (12.8%)
Cytec Industries-/- ....................................... US 19,300 1,056,675 3.9
Cabot Corp. ............................................... US 21,000 997,500 3.7
Occidental Petroleum Corp. ................................ US 33,000 709,500 2.6
Potash Corporation of Saskatchewan, Inc.{\/} .............. CAN 10,000 696,250 2.6
------------
3,459,925
------------
Machinery & Engineering (9.5%)
Rauma Oy - ADR-/- {\/} ................................... FIN 45,700 993,975 3.7
Valmet Corp. "A" .......................................... FIN 32,500 903,799 3.4
Harnischfeger Industries, Inc. ........................... US 20,000 630,000 2.4
------------
2,527,774
------------
Metals - Non-Ferrous (8.2%)
Lonrho PLC ................................................ UK 400,000 986,249 3.7
Diamond Fields Resources, Inc.-/- ......................... CAN 42,800 770,962 2.9
PT Tambang Timah - 144A GDR{.} -/- {\/} ................... INDO 37,500 426,375 1.6
------------
2,183,586
------------
Forest Products (7.7%)
James River Corporation of Virginia ....................... US 30,000 963,750 3.6
Asia Pulp & Paper Co., Ltd. - ADR{\/}-/- ................. INDO 59,000 604,750 2.3
St Laurent Paperboard, Inc.-/- ........................... CAN 33,900 490,415 1.8
------------
2,058,915
------------
Metals - Steel (7.1%)
UCAR International, Inc.-/- ............................... US 41,400 1,179,900 4.4
SGL Carbon AG-/- .......................................... GER 10,900 714,894 2.7
------------
1,894,794
------------
<PAGE>
Misc. Materials & Components (6.5%)
Broken Hill Proprietary Co., Ltd. ......................... AUSL 56,167 760,470 2.8
Anglovaal Ltd. "N" ........................................ SAFR 17,350 658,981 2.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES PORTFOLIO
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Misc. Materials & Components (Continued)
De Beers Centenary AG - Linked Unit ....................... SAFR 11,400 $ 314,973 1.2
------------
1,734,424
------------
Gold (4.8%)
Ashanti Goldfields Co., Ltd. - GDR{\/} ................... SAFR 41,000 722,625 2.7
Acacia Resources Ltd.-/- .................................. AUSL 352,000 576,302 2.1
------------
1,298,927
------------
Food (3.2%)
IBP, Inc. ................................................. US 14,100 844,238 3.2
------------ -----
TOTAL EQUITY INVESTMENTS (cost $23,524,522) ................. 24,380,643 91.1
------------ -----
<CAPTION>
Market
Repurchase Agreement Value
- ------------------------------------------------------------- ------------
<S> <C> <C> <C> <C>
Dated October 31, 1995 with State Street Bank & Trust
Company, due November 1, 1995, for an effective yield of
5.80% collateralized by $2,820,000 U.S. Treasury Bill, due
10/17/96 (market value of collateral is $2,675,240,
including collateralized accrued interest) (cost
$2,620,422) ............................................ 2,620,422 9.8
------------ -----
TOTAL INVESTMENTS (cost $26,144,944) ........................ 27,001,065 100.9
Other Assets and Liabilities ................................ (241,081) (0.9)
------------ -----
NET ASSETS .................................................. $ 26,759,984 100.0
------------ -----
------------ -----
<FN>
- ----------------
{d} Percentages indicated are based on net assets of $26,759,984.
-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} 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.
* For Federal income tax purposes, cost is $26,144,944 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 1,790,765
Unrealized depreciation: (934,644)
-------------
Net unrealized appreciation: $ 856,121
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES PORTFOLIO
The Fund's Portfolio of Investments at October 31, 1995, was concentrated in the
following countries:
<TABLE>
<CAPTION>
Percentage of Net Assets
{d}
---------------------------
Short-Term
Country (Country Code/Currency Code) Equity & Other Total
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Australia (AUSL/AUD) ................. 4.9 4.9
Canada (CAN/CAD) ..................... 7.3 7.3
Finland (FIN/FIM) .................... 7.1 7.1
France (FR/FRF) ...................... 2.3 2.3
Germany (GER/DEM) .................... 2.7 2.7
Indonesia (INDO/IDR) ................. 3.9 3.9
Norway (NOR/NOK) ..................... 6.3 6.3
South Africa (SAFR/ZAR/ZAL) .......... 6.4 6.4
Spain (SPN/ESP) ...................... 3.9 3.9
United Kingdom (UK/GBP) .............. 11.3 11.3
United States (US/USD) ............... 35.0 8.9 43.9
------ --- -----
Total ............................... 91.1 8.9 100.0
------ --- -----
------ --- -----
<FN>
- ----------------
{d} Percentages indicated are based on net assets of $26,759,984.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Market Value Unrealized
(U.S. Contract Delivery Appreciation
Contracts to Buy: Dollars) Price Date (Depreciation)
------------ ---------- --------- -------------
<S> <C> <C> <C> <C>
Deutsche Marks................................................................ 213,478 1.42407 11/30/95 $ 2,813
Swedish Krona................................................................. 662,756 7.16200 11/22/95 48,403
------------ -------------
Total Contracts to Buy (Payable amount $825,018).......................... 876,234 51,216
------------ -------------
<PAGE>
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF NET ASSETS IS 3.27%
<CAPTION>
Contracts to Sell:
<S> <C> <C> <C> <C>
Deutsche Marks................................................................ 106,739 1.45648 11/30/95 (3,750)
Deutsche Marks................................................................ 284,637 1.46545 11/30/95 (11,683)
French Francs................................................................. 409,069 5.07400 11/20/95 (14,903)
Swedish Krona................................................................. 662,756 7.41800 11/22/95 (69,605)
------------ -------------
Total Contracts to Sell (Receivable amount $1,363,260).................... 1,463,201 (99,941)
------------ -------------
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF NET ASSETS IS 5.47%
Total Open Forward Foreign Currency Contracts, Net........................ $ (48,725)
-------------
-------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES PORTFOLIO
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost
$26,144,944) (Note 1 )........................... $27,001,065
Foreign currencies (cost $1,757).................. 1,771
Dividends and dividend withholding tax reclaims
receivable....................................... 43,460
-----------
Total assets.................................... 27,046,296
-----------
Liabilities:
Payable for investment management and
administration fees (Note 2)..................... 213,856
Payable for open forward foreign currency
contracts, net (Note 1).......................... 48,725
Payable for professional fees..................... 7,553
Payable for printing and postage expenses......... 4,713
Payable for Trustees' fees and expenses (Note
2)............................................... 2,801
Payable for custodian fees (Note 1)............... 2,521
Other accrued expenses............................ 6,143
-----------
Total liabilities............................... 286,312
-----------
Net assets.......................................... $26,759,984
-----------
-----------
Net assets consist of:
Paid in capital................................... $27,781,110
Accumulated net investment income................. 692,942
Accumulated net realized loss on investments and
foreign currency transactions.................... (2,521,686)
Net unrealized depreciation on translation of
assets and liabilities in foreign currencies..... (48,503)
Net unrealized appreciation of investments........ 856,121
-----------
Total -- representing net assets applicable to
shares of beneficial interest outstanding.......... $26,759,984
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES PORTFOLIO
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income............................................ $ 437,615
Dividend income (net of foreign withholding tax of
$36,734).................................................. 392,475
-----------
Total investment income.................................. 830,090
-----------
Expenses:
Investment management and administration fees (Note 2)..... 213,856
Custodian fees (Note 1).................................... 40,204
Legal fees................................................. 12,300
Audit fees................................................. 8,750
Trustees' fees and expenses (Note 2)....................... 7,119
Other expenses............................................. 1,900
-----------
Total expenses before reductions......................... 284,129
-----------
Expense reductions (Notes 1 & 4)....................... (9,670)
-----------
Total net expenses....................................... 274,459
-----------
Net investment income........................................ 555,631
-----------
Net realized and unrealized gain (loss) on
investments and foreign currencies: (Note 1)
Net realized loss on investments........... $(2,302,171)
Net realized loss on foreign currency
transactions.............................. (89,256)
-----------
Net realized loss during the year........................ (2,391,427)
Net change in unrealized depreciation on
translation of assets and liabilities in
foreign currencies........................ (43,764)
Net change in unrealized appreciation of
investments............................... 177,530
-----------
Net unrealized appreciation during the year.............. 133,766
-----------
Net realized and unrealized loss on investments and foreign
currencies.................................................. (2,257,661)
-----------
Net decrease in net assets resulting from operations......... $(1,702,030)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAY 31, 1994
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
Increase (Decrease) in net assets
<S> <C> <C>
Operations:
Net investment income...................... $ 555,631 $ 137,311
Net realized loss on investments and
foreign currency transactions............. (2,391,427) (130,259)
Net change in unrealized depreciation on
translation of assets and
liabilities in foreign currencies......... (43,764) (4,739)
Net change in unrealized appreciation of
investments............................... 177,530 678,591
----------------- -----------------
Net increase (decrease) in net assets
resulting from operations............... (1,702,030) 680,904
Beneficial interest transactions:
Contributions.............................. 34,259,648 33,302,836
Withdrawals................................ (32,747,373) (7,134,101)
----------------- -----------------
Net increase from beneficial interest
transactions............................ 1,512,275 26,168,735
----------------- -----------------
Total increase (decrease) in net assets...... (189,755) 26,849,639
Net assets:
Beginning of period........................ 26,949,739 100,100
----------------- -----------------
End of period.............................. $ 26,759,984 $26,949,739
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES 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 MAY 31, 1994
OCTOBER 31, (COMMENCEMENT OF OPERATIONS)
1995 TO OCTOBER 31, 1994
----------- -----------------------------
<S> <C> <C>
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 26,760 $ 26,950
Ratio of net investment income to
average net assets..................... 1.88% 3.47 %(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
4)................................... 0.93% 2.15 %(a)
Without expense reductions............ 0.96% -- % *
Portfolio turnover rate................. 87% 137 %
</TABLE>
- ----------------
(a) Annualized.
* Calculation of "Ratio of expenses to net assets" was made without
considering the effect of expense reductions, if any.
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES PORTFOLIO
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Global Natural Resources 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 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.
(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 G.T. Capital Management,
Inc. ("G.T. Capital") 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 G.T.
Capital 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 fluctuations, 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 TRANSLATION
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 accrued 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 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 period 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 Contract") is an agreement between
two parties to buy
F-17
<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES PORTFOLIO
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 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 holds
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 stock 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 stock market and to fluctuations in currency values or interest
rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-
F-18
<PAGE>
<PAGE>
GLOBAL NATURAL RESOURCES PORTFOLIO
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 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 the loan. For
the year ended October 31, 1995, the Portfolio received $1,364 of income from
securities lending which was used to offset the Portfolio's custody expenses.
(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) 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 Portfolio's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the price of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
In addition, the Portfolio may focus its investments in certain related natural
resources industries, subjecting the Portfolio to greater risk than a fund that
is more diversified.
(K) 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.
(L) 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.
2. RELATED PARTIES
G.T. Capital is the Portfolio's investment manager and administrator. The
Portfolio pays investment management and administration fees to G.T. Capital at
the annualized rate of 0.725% on the first $500 million of average daily net
assets of the Portfolio; 0.70% on the next $500 million; 0.675% on the next $500
million; and 0.65% on amounts thereafter. These fees are computed daily and paid
monthly.
The Portfolio pays each of its Trustees who is not an employee, officer or
director of G.T. Capital, 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, 1995, all of the shares of beneficial interest of the Portfolio
were owned either by G.T. Global Natural Resources Fund or G.T. Capital.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities by the Portfolio, other than short-term investments, aggregated
$20,836,799 and $23,399,771, respectively. There were no purchases or sales of
U.S. government obligations by the Portfolio for the year ended October 31,
1995.
4. EXPENSE REDUCTIONS
G.T. Capital has directed certain portfolio trades to brokers who paid a portion
of the Portfolio's expenses. For the year ended October 31, 1995, the
Portfolio's expenses were reduced by $8,306 under these arrangements.
F-19
<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Trustees of Global Consumer Products and
Services Portfolio:
We have audited the accompanying statement of assets and liabilities of Global
Consumer Products and Services Portfolio, including the portfolio of
investments, as of October 31, 1995, the related statement of operations, the
statement of changes in net assets and supplementary data for the period from
December 30, 1994 (commencement of operations) to October 31, 1995. 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 audit.
We conducted our audit 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 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, 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 audit provides 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
Consumer Products and Services Portfolio as of October 31, 1995, the results of
its operations, the changes in its net assets and the supplementary data for the
period from December 30, 1994 (commencement of operations) to October 31, 1995,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1995
F-9
<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (36.9%)
Gucci Group - NY Registered Shares{\/} .................... ITLY 9,000 $ 270,000 4.2
TEXTILES & APPAREL
Robert Mondavi Corp. "A"-/- ............................... US 8,400 237,300 3.7
BEVERAGES - ALCOHOLIC
Fila Holding S.p.A. - ADR{\/} ............................. ITLY 5,400 232,875 3.6
TEXTILES & APPAREL
Heineken N.V. ............................................. NETH 1,225 217,361 3.3
BEVERAGES - ALCOHOLIC
Mattel, Inc. .............................................. US 7,000 201,250 3.1
TOYS
Philip Morris Cos., Inc. .................................. US 2,225 188,013 2.9
TOBACCO
Healthy Planet Products, Inc.-/- .......................... US 14,000 171,500 2.6
OTHER CONSUMER GOODS
Noble China-/- ............................................ CAN 50,400 154,290 2.4
BEVERAGES - ALCOHOLIC
St. John Knits, Inc. ...................................... US 3,000 143,625 2.2
TEXTILES & APPAREL
Amway Japan Ltd. - ADR{\/} ................................ JPN 7,500 142,500 2.2
HOUSEHOLD PRODUCTS
De Rigo S.p.A. - ADR{\/} .................................. ITLY 5,000 103,125 1.6
TEXTILES & APPAREL
Seagram Co., Ltd. ......................................... CAN 2,800 101,919 1.6
BEVERAGES - ALCOHOLIC
Gillette Co. ............................................. US 2,000 96,750 1.5
PERSONAL CARE/COSMETICS
Nike, Inc. "B" ............................................ US 1,200 68,100 1.0
TEXTILES & APPAREL
Amway Asia Pacific Ltd.{\/} ............................... HK 1,900 62,225 1.0
HOUSEHOLD PRODUCTS
------------
2,390,833
------------
Services (30.7%)
Safeway, Inc.-/- .......................................... US 4,600 217,350 3.3
RETAILERS-FOOD
Vons Cos., Inc.-/- ........................................ US 8,100 205,538 3.2
RETAILERS-FOOD
Hennes & Mauritz AB "B" Free ............................. SWDN 2,970 194,314 3.0
RETAILERS-APPAREL
Wickes PLC ................................................ UK 94,000 184,969 2.8
RETAILERS-OTHER
Fast Retailing Co., Ltd. .................................. JPN 3,700 180,638 2.8
RETAILERS-APPAREL
Polygram N.V. - ADR{\/} ................................... NETH 2,900 179,800 2.8
BROADCASTING & PUBLISHING
Emmis Broadcasting Corp. "A"-/- ........................... US 6,400 169,600 2.6
BROADCASTING & PUBLISHING
Tandy Corp. ............................................... US 3,300 162,938 2.5
RETAILERS-OTHER
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Country Shares Value Assets {d}
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
La Quinta Inns, Inc. ..................................... US 5,900 $ 151,925 2.3
LODGING
Fabri-Centers of America: ................................. US -- -- 2.0
RETAILERS-APPAREL
"A"-/- .................................................. -- 4,900 72,888 --
"B"-/- .................................................. -- 4,900 56,963 --
Aoyama Trading Co., Ltd. ................................. JPN 4,400 118,814 1.8
RETAILERS-APPAREL
Capital Cities/ABC, Inc. .................................. US 900 106,763 1.6
BROADCASTING & PUBLISHING
------------
2,002,500
------------
Consumer Durables (12.3%)
Redman Industries, Inc.-/- ............................... US 8,100 210,600 3.2
HOUSING
Belmont Homes, Inc. ....................................... US 11,500 201,250 3.1
HOUSING
Black & Decker Corp. ...................................... US 5,800 196,475 3.0
APPLIANCES & HOUSEHOLD
Nokia AB Preferred - ADR{\/} .............................. FIN 3,500 195,125 3.0
CONSUMER ELECTRONICS
------------
803,450
------------
Multi Industry/Miscellaneous (3.0%)
Malbak Ltd. ............................................... SAFR 29,000 192,856 3.0
------------
CONGLOMERATE
Health Care (2.9%)
COR Therapeutics, Inc.-/- ................................. US 10,000 103,750 1.6
BIOTECHNOLOGY
Biovail Corporation International-/- ...................... US 2,200 85,250 1.3
PHARMACEUTICALS
------------
189,000
------------
Technology (0.9%)
Brooktree Corp.-/- ........................................ US 5,000 60,000 0.9
COMPUTERS & PERIPHERALS
------------ -----
TOTAL EQUITY INVESTMENTS (cost $5,256,327) ................. 5,638,639 86.7
------------ -----
<PAGE>
<CAPTION>
Market % of Net
Repurchase Agreement Value Assets {d}
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1995 with State Street Bank & Trust
Company, due November 1, 1995, for an effective yield of
5.8%, collateralized by $1,180,000 U.S. Treasury Bill, due
2/08/96 (market value of collateral is $1,162,595,
including accrued interest). (cost $1,138,183) .......... 1,138,183 17.5
------------ -----
TOTAL INVESTMENTS (cost $6,394,510) ......................... 6,776,822 104.2
Other Assets and Liabilities ................................ (274,568) (4.2)
------------ -----
NET ASSETS .................................................. $ 6,502,254 100.0
------------ -----
------------ -----
</TABLE>
- ----------------
{d} Percentages indicated are based on net assets of $6,502,254.
{\/} U.S. currency denominated.
-/- Non-income producing security.
The accompanying notes are an integral part of the financial statements.
F-11<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<TABLE>
<C> <S>
* For Federal income tax purposes, cost is $6,394,510 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 536,510
Unrealized depreciation: (154,198)
-------------
Net unrealized appreciation: $ 382,312
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1995, was concentrated in the
following countries:
<TABLE>
<CAPTION>
Percentage of Net Assets
{d}
---------------------------
Short-Term
Country(Country Code/Currency Code) Equity & Other Total
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Canada (CAN/CAD) ..................... 4.0 4.0
Finland (FIN/FIM) .................... 3.0 3.0
Hong Kong (HK/HKD) ................... 1.0 1.0
Italy (ITLY/ITL) ..................... 9.4 9.4
Japan (JPN/JPY) ...................... 6.8 6.8
Netherlands (NETH/NLG) ............... 6.1 6.1
South Africa (SAFR/ZAR) .............. 3.0 3.0
Sweden (SWDN/SEK) .................... 3.0 3.0
United Kingdom (UK/GBP) .............. 2.8 2.8
United States (US/USD) ............... 47.6 13.3 60.9
------ --- -----
Total ............................... 86.7 13.3 100.0
------ --- -----
------ --- -----
<FN>
- ----------------
{d} Percentages indicated are based on net assets of $6,502,254.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Market Value
(U.S. Contract Delivery Unrealized
Contracts to Sell: Dollars) Price Date Appreciation
------------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Japanese Yen.................................................................. 193,549 98.70000 11/24/95 $ 6,451
------------- -------------
Total Contracts to Sell (Receivable amount $200,000)...................... 193,549 6,451
------------- -------------
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF NET ASSETS IS 2.98%
Total Open Forward Foreign Currency Contracts, Net........................ $ 6,451
-------------
-------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost
$5,256,327) (Note 1)............................. $5,638,639
Repurchase agreement, at value and cost (Note
1)............................................... 1,138,183
Receivable for open forward foreign currency
contracts, net (Note 1).......................... 6,451
Dividends receivable.............................. 4,747
----------
Total assets.................................... 6,788,020
----------
Liabilities:
Payable for securities purchased.................. 192,170
Due to custodian.................................. 54,178
Payable for investment management and
administration fees (Note 2)..................... 16,284
Payable for professional fees..................... 8,405
Payable for Trustees' fees and expenses (Note
2)............................................... 6,080
Payable for printing and postage expenses......... 3,200
Payable for custodian fees (Note 1)............... 2,409
Other accrued expenses............................ 3,040
----------
Total liabilities............................... 285,766
----------
Net assets.......................................... $6,502,254
----------
----------
Net assets consist of:
Paid in capital................................... $5,710,341
Accumulated net investment income................. 6,706
Accumulated net realized gain on investments and
foreign currency transactions.................... 395,974
Net unrealized appreciation on translation of
assets and liabilities in foreign currencies..... 6,921
Net unrealized appreciation of investments........ 382,312
----------
Total -- representing net assets applicable to
shares of beneficial interest outstanding.......... $6,502,254
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
STATEMENT OF OPERATIONS
December 30, 1994 (commencement of operations) to October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income......................................... $ 37,739
Dividend income (net of foreign withholding tax of
$525).................................................. 22,144
--------
Total investment income............................... 59,883
--------
Expenses:
Investment management and administration fees (Note
2)..................................................... 16,284
Custodian fees (Note 1)................................. 15,890
Legal fees.............................................. 6,080
Trustees' fees and expenses (Note 2).................... 6,080
Audit fees.............................................. 4,280
Printing and postage expenses........................... 3,200
Other expenses.......................................... 3,040
--------
Total expenses before reductions...................... 54,854
--------
Expense reductions (Notes 1 & 4).................... (1,677)
--------
Total net expenses.................................... 53,177
--------
Net investment income..................................... 6,706
--------
Net realized and unrealized gain on
investments and foreign currencies: (Note 1)
Net realized gain on investments........... $402,673
Net realized loss on foreign currency
transactions.............................. (6,699)
--------
Net realized gain during the period................... 395,974
Net change in unrealized appreciation on
translation of assets and liabilities in
foreign currencies........................ 6,921
Net change in unrealized appreciation of
investments............................... 382,312
--------
Net unrealized appreciation during the period......... 389,233
--------
Net realized and unrealized gain on investments and
foreign currencies....................................... 785,207
--------
Net increase in net assets resulting from operations...... $791,913
--------
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 30, 1994
(COMMENCEMENT OF
OPERATIONS) TO
OCTOBER 31, 1995
-----------------
Increase in net assets
<S> <C>
Operations:
Net investment income............................. $ 6,706
Net realized gain on investments and foreign
currency transactions............................ 395,974
Net change in unrealized appreciation on
translation of assets and liabilities in foreign
currencies....................................... 6,921
Net change in unrealized appreciation of
investments...................................... 382,312
-----------------
Net increase in net assets resulting from
operations....................................... 791,913
-----------------
Beneficial interest transactions:
Contributions..................................... 6,002,349
Withdrawals....................................... (392,108)
-----------------
Net increase from beneficial interest
transactions................................... 5,610,241
-----------------
Total increase in net assets........................ 6,402,154
Net assets:
Beginning of period............................... 100,100
-----------------
End of period..................................... $6,502,254
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Contained below are ratios and supplemental data that have been derived
from information provided in the financial statements.
<TABLE>
<CAPTION>
DECEMBER 30, 1994
(COMMENCEMENT OF OPERATIONS)
TO OCTOBER 31, 1995
------------------------------
<S> <C>
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 6,502
Ratio of net investment income to
average net assets:.................... 0.30 %(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
4)................................... 2.37 %(a)
Without expense reductions............ 2.44 %(a)
Portfolio turnover rate................. 240 %(a)
</TABLE>
- ----------------
(a) Annualized.
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Global Consumer Products and Services 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 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.
(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 G.T. Capital Management,
Inc. ("G.T. Capital") 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 G.T.
Capital 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 TRANSLATION
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, 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.
F-17
<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contracts") 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 amount 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 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 holds
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 stock 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 stock market and to fluctuations in currency values or interest
rates.
F-18
<PAGE>
<PAGE>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
(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. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of the loan. At
October 31, 1995, there were no securities on loan to brokers. For the period
ended October 31, 1995, the Fund received fees of $107 which were used to reduce
the Fund's custodian fees.
(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) 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 Portfolio's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the price of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
In addition, the Portfolio may focus its investments in certain related consumer
products and services industries, subjecting the Portfolio to greater risk than
a fund that is more diversified.
(K) 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.
(L) 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.
2. RELATED PARTIES
G.T. Capital is the Portfolio's investment manager and administrator. The
Portfolio pays investment management and administration fees to G.T. Capital at
the annualized rate of 0.725% on the first $500 million of average daily net
assets of the Portfolio; 0.70% on the next $500 million; 0.675% on the next $500
million; and 0.65% on amounts thereafter. These fees are computed daily and paid
monthly.
The Portfolio pays each of its Trustees who is not an employee, officer or
director of G.T. Capital, 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, 1995, all of the shares of beneficial interest of the Portfolio
were owned either by G.T. Global Consumer Products and Services Fund or G.T.
Capital.
3. PURCHASES AND SALES OF SECURITIES
For the period ended October 31, 1995, purchases and sales of investment
securities by the Portfolio, other than short-term investments, aggregated
$8,990,298 and $4,141,883, respectively. There were no purchases or sales of
U.S. government obligations by the Portfolio for the period ended October 31,
1995.
4. EXPENSE REDUCTIONS
G.T. Capital has directed certain portfolio trades to brokers who paid a portion
of the Portfolio's expenses. For the period ended October 31, 1995, the
Portfolio's expenses were reduced by $1,570 under these arrangements.
F-19
<PAGE>
PART C
Item 24. Financial Statements and Exhibits.
--------------------------------------------
(a) Financial Statements
The following audited financial statements are included in
Part B: Reports of Coopers & Lybrand, Independent Auditors
and audited financial statements of Global Financial Services
Portfolio, Global Infrastructure Portfolio, Global Natural
Resources Portfolio for the fiscal year ended October 31, 1995
and a Report of Coopers & Lybrand and audited financial
statements of Global Consumer Products and Services Portfolio
for the period December 30, 1994 (commencement of operations)
to October 31, 1995.
(b) Exhibits
1. Declaration of Trust of the Registrant(1).
2. By-Laws of the Registrant - Filed herewith.
5. Investment Management and Administration Contract
between the Registrant and LGT Asset Management Filed
herewith.
8. Custodian Agreement between the Registrant and State
Street Bank and Trust Company (2).
9. Investment Management and Administration Fee
Agreement.
11. Consent of Coopers & Lybrand, Independent
Accountants - Filed herewith.
13. Investment representation letters of initial investors
- Filed herewith.
_______________
(1) Incorporated by reference to the identically
enumerated Exhibit of the Registration Statement on
Form N-1A, filed on March 23, 1994.
(2) Incorporated by reference to the identically
enumerated Exhibit of the Amendment to the
Registration Statement on Form N-1A, filed February
28, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant.
-----------------------------------------------------------------------
<PAGE>
Not applicable.
Item 26. Number of Holders of Securities.
------------------------------------------
(1) (2)
Title of Class Number of Record Holders
Series of Beneficial (as of February 14, 1996)
Interests
Global Financial Services 2
Portfolio
Global Infrastructure 2
Portfolio
Global Natural Resources 2
Portfolio
Global Consumer Products and 2
Services Portfolio
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 Registrant's Trustees and officers will be insured under a
directors and officers/errors and omissions liability insurance policy and
the Registrant will be insured under a fidelity bond required by Rule 17g-
1 under the Investment Company Act of 1940.
Item 28. Business and Other Connections of Investment Adviser.
--------------------------------------------------------------
See the material under Item 5 (Management of the Fund) included in
Part A of this Registration Statement and the material under Items 14
(Management of the Fund) and 16 (Investment Advisory and Other Services)
included in Part B of this Registration Statement. Information as to the
directors and officers of 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.
C-2
<PAGE>
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, LGT
Asset Management, Inc., 50 California Street, 27th Floor, San Francisco,
California 94111.
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.
-----------------------
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, Registrant has duly caused this Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco and State of California on the
28th day of February, 1996.
GLOBAL INVESTMENT PORTFOLIO
By /s/ Helge K. Lee
----------------------------
Helge K. Lee
Vice President and Secretary
C-4
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1. Declaration of Trust of the Registrant(1).
2. By-Laws of the Registrant - Filed herewith.
5. Investment Management and Administration Contract
between the Registrant and LGT Asset Management Filed
herewith.
8. Custodian Agreement between the Registrant and State
Street Bank and Trust Company (2).
9. Investment Management and Administration Fee
Agreement.
11. Consent of Coopers & Lybrand, Independent
Accountants - Filed herewith.
13. Investment representation letters of initial investors
- Filed herewith.
_______________
(1) Incorporated by reference to the identically
enumerated Exhibit of the Registration Statement on
Form N-1A, filed on March 23, 1994.
(2) Incorporated by reference to the identically
enumerated Exhibit of the Amendment to the
Registration Statement on Form N-1A, filed
February 28, 1995.
<PAGE>
<PAGE>
GLOBAL INVESTMENT PORTFOLIO
___________________________
BY-LAWS
As Adopted January 11, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I -- Meetings of Holders 1
Section 1.1 Fixing Record Dates . . . . . . . . . . . . . 1
Section 1.2 Records at Holder Meetings . . . . . . . . . 1
Section 1.3 Inspectors of Election . . . . . . . . . . . 1
Section 1.4 Proxies; Voting . . . . . . . . . . . . . . . 2
ARTICLE II -- Meetings of Trustees . . . . . . . . . . . . . . . . . 2
Section 2.1 Annual and Other Meetings . . . . . . . . . . 2
Section 2.2 Notice . . . . . . . . . . . . . . . . . . . 2
ARTICLE III -- Officers . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.1 Officers of the Trust . . . . . . . . . . . . 2
Section 3.2 Election and Tenure . . . . . . . . . . . . . 2
Section 3.3 Removal of Officers . . . . . . . . . . . . . 3
Section 3.4 Bonds and Surety . . . . . . . . . . . . . . 3
Section 3.5 Chairman, President and Vice President . . . 3
Section 3.6 Secretary . . . . . . . . . . . . . . . . . . 4
Section 3.7 Chief Financial Officer . . . . . . . . . . . 4
Section 3.8 Chief Accounting Officer . . . . . . . . . . 4
Section 3.9 Other Officers and Duties . . . . . . . . . . 4
ARTICLE IV -- Miscellaneous . . . . . . . . . . . . . . . . . . . . 5
Section 4.1 Depositories . . . . . . . . . . . . . . . . 5
Section 4.2 Signatures . . . . . . . . . . . . . . . . . 5
Section 4.3 Seal . . . . . . . . . . . . . . . . . . . . 5
Section 4.4 Indemnification . . . . . . . . . . . . . . . 5
Section 4.5 Distribution Disbursing Agents and the Like . 5
ARTICLE V -- Regulations; Amendment of By-Laws . . . . . . . . . . 6
Section 5.1 Regulations . . . . . . . . . . . . . . . . . 6
Section 5.2 Amendment and Repeal of By-Laws . . . . . . . 6
- i -
<PAGE>
BY-LAWS
OF
GLOBAL INVESTMENT PORTFOLIO
_____________________
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing GLOBAL INVESTMENT PORTFOLIO (the
"Trust"), dated as of January 11, 1994, as from time to time amended (the
"Declaration"). All words and terms capitalized in these By-Laws shall
have the meaning or meanings set forth for such words or terms in the
Declaration.
ARTICLE I
Meetings of Holders
-------------------
Section 1.1. Fixing Record Dates. If the Trustees do not, prior
to any meeting of the Holders, fix a record date, then the date of mailing
notice of the meeting shall be the record date.
Section 1.2. Records at Holder Meetings. At each meeting of the
Holders there shall be open for inspection the minutes of the last
previous meeting of Holders of the Trust and a list of the Holders of the
Trust, certified to be true and correct by the Secretary or other proper
agent of the Trust, as of the record date of the meeting. Such list of
Holders shall contain the name of each Holder in alphabetical order and
the address and Interest owned by such Holder on such record date.
Section 1.3. Inspectors of Election. In advance of any meeting
of the Holders, the Trustees may appoint Inspectors of Election to act at
the meeting or any adjournment thereof. If Inspectors of Election are not
so appointed, the chairman, if any, of any meeting of the Holders may, and
on the request of any Holder or his proxy shall, appoint Inspectors of
Election. The number of Inspectors of Election shall be either one or
three. If appointed at the meeting on the request of one or more Holders
or proxies, a Majority Interests Vote shall determine whether one or three
Inspectors of Election are to be appointed, but failure to allow such
determination by the Holders shall not affect the validity of the
appointment of Inspectors of Election. In case any individual appointed
as an Inspector of Election fails to appear or fails or refuses to so act,
the vacancy may be filled by appointment made by the Trustees in advance
of the convening of the meeting or at the meeting by the individual acting
as chairman of the meeting. The Inspectors of Election shall determine
the Interest owned by each Holder, the Interests represented at the
meeting, the existence of a quorum, the authenticity, validity and effect
of proxies, shall receive votes, ballots or consents, shall hear and
determine all challenges and questions in any way arising in connection
with the right to vote, shall count and tabulate all votes or consents,
shall determine the results, and shall do such other acts as may be proper
<PAGE>
to conduct the election or vote with fairness to all Holders. If there
are three Inspectors of Election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate
of all. On request of the chairman, if any, of the meeting, or of any
Holder or his proxy, the Inspectors of Election shall make a report in
writing of any challenge or question or matter determined by them and
shall execute a certificate of any facts found by them.
Section 1.4. Proxies; Voting. No proxy shall be valid after one
year from the date of its execution, unless a longer period is expressly
stated in such proxy.
ARTICLE II
Meetings of Trustees
--------------------
Section 2.1. Annual and Other Meetings. The Trustees shall hold
an annual meeting for the election of officers and the transaction of
other business which may come before such meeting, and may hold such other
meetings as the President may direct.
Section 2.2. Notice. Notice of a meeting shall be given by
mail, by telegram (which term shall include a cablegram), by telecopier or
delivered personally (which term shall include by telephone). Neither the
business to be transacted at, nor the purpose of, any meeting of the
Trustees need be stated in the notice or waiver of notice of such meeting,
and no notice need be given of action proposed to be taken by written
consent.
ARTICLE III
Officers
--------
Section 3.1. Officers of the Trust. The officers of the Trust
shall consist of a Chairman, if any, a President, a Secretary, a Chief
Financial Officer, a Chief Accounting Officer and such other officers or
assistant officers, including Vice Presidents, as may be elected by the
Trustees. Any two or more of the offices may be held by the same person.
The Trustees may designate a Vice President as an Executive Vice President
and may designate the order in which the other Vice Presidents may act.
The Chairman shall be a Trustee, but no other officer of the Trust,
including the President, need be a Trustee.
Section 3.2. Election and Tenure. At the initial organization
meeting and thereafter at each annual meeting of the Trustees, the
Trustees shall elect the Chairman, if any, the President, the Secretary,
the Chief Financial Officer, the Chief Accounting Officer and such other
officers as the Trustees shall deem necessary or appropriate in order to
carry out the business of the Trust. Such officers shall hold office
until the next annual meeting of the Trustees and until their successors
have been duly elected and qualified. The Trustees may fill any vacancy
in office or add any additional officer at any time.
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<PAGE>
Section 3.3. Removal of Officers. Any officer may be removed at
any time, with or without cause, by action of a majority of the Trustees.
This provision shall not prevent the making of a contract of employment
for a definite term with any officer and shall have no effect upon any
cause of action which any officer may have as a result of removal in
breach of a contract of employment. Any officer may resign at any time by
notice in writing signed by such officer and delivered or mailed to the
Chairman, if any, the President or the Secretary, and such resignation
shall take effect immediately, or at a later date according to the terms
of such notice in writing.
Section 3.4. Bonds and Surety. Any officer may be required by
the Trustees to be bonded for the faithful performance of his duties in
such amount and with such sureties as the Trustees may determine.
Section 3.5. Chairman, President and Vice Presidents. The
Chairman, if any, shall, if present, preside at all meetings of the
Holders and of the Trustees and shall exercise and perform such other
powers and duties as may be from time to time assigned to him by the
Trustees. Subject to such supervisory powers, if any, as may be given by
the Trustees to the Chairman, if any, the President shall be the chief
executive officer of the Trust and, subject to the control of the
Trustees, shall have general supervision, direction and control of the
business of the Trust and of its employees and shall exercise such general
powers of management as are usually vested in the office of President of a
corporation. In the absence of the Chairman, if any, the President shall
preside at all meetings of the Holders and, in the absence of the
Chairman, the President shall preside at all meetings of the Trustees.
The President shall be, ex officio, a member of all standing committees of
Trustees. Subject to the direction of the Trustees, the President shall
have the power, in the name and on behalf of the Trust, to execute any and
all loan documents, contracts, agreements, deeds, mortgages and other
instruments in writing, and to employ and discharge employees and agents
of the Trust. Unless otherwise directed by the Trustees, the President
shall have full authority and power to attend, to act and to vote, on
behalf of the Trust, at any meeting of any business organization in which
the Trust holds an interest, or to confer such powers upon any other
person, by executing any proxies duly authorizing such person. The
President shall have such further authorities and duties as the Trustees
shall from time to time determine. In the absence or disability of the
President, the Vice Presidents in order of their rank or the Vice
President designated by the Trustees, shall perform all of the duties of
the President, and when so acting shall have all the powers of and be
subject to all of the restrictions upon the President. Subject to the
direction of the President, each Vice President shall have the power in
the name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages and other instruments in writing,
and, in addition, shall have such other duties and powers as shall be
designated from time to time by the Trustees or by the President.
Section 3.6. Secretary. The Secretary shall keep the minutes of
all meetings of, and record all votes of, Holders, Trustees and the
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Executive Committee, if any. The results of all actions taken at a
meeting of the Trustees, or by written consent of the Trustees, shall be
recorded by the Secretary. The Secretary shall be custodian of the seal
of the Trust, if any, and the Secretary (and any other person so
authorized by the Trustees) shall affix the seal or, if permitted, a
facsimile thereof, to any instrument executed by the Trust which would be
sealed by a New York corporation executing the same or a similar
instrument and shall attest the seal and the signature or signatures of
the officer or officers executing such instrument on behalf of the Trust.
The Secretary shall also perform any other duties commonly incident to
such office in a New York corporation, and shall have such other
authorities and duties as the Trustees shall from time to time determine.
Section 3.7. Chief Financial Officer. Except as otherwise
directed by the Trustees, the Chief Financial Officer shall have the
general supervision of the monies, funds, securities, notes receivable and
other valuable papers and documents of the Trust, and shall have and
exercise under the supervision of the Trustees and of the President all
powers and duties normally incident to his office. The Chief Financial
Officer may endorse for deposit or collection all notes, checks and other
instruments payable to the Trust or to its order and shall deposit all
funds of the Trust as may be ordered by the Trustees or the President.
The Chief Financial Officer shall have such other duties and authorities
as the Trustees shall from time to time determine. Notwithstanding
anything to the contrary herein contained, the Trustees may authorize the
Investment Manager and Administrator to maintain bank accounts and deposit
and disburse funds on behalf of the Trust.
Section 3.8. Chief Accounting Officer. Except as otherwise
directed by the Trustees, the Chief Accounting Officer shall keep accurate
account of the books of the Trust's transactions, which shall be the
property of the Trust, and which together with all other property of the
Trust in his possession, shall be subject at all times to the inspection
and control of the Trustees and shall have and exercise under the
supervision of the Trustees and of the President all powers and duties
normally incident to his office. The Chief Accounting Officer shall have
such other duties and authorities as the Trustees shall from time to time
determine. Notwithstanding anything to the contrary herein contained, the
Trustees may authorize the Investment Manager and Administrator to
maintain bank accounts and deposit and disburse funds on behalf of the
Trust.
Section 3.9. Other Officers and Duties. The Trustees may elect
such other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business of
the Trust. Assistant officers shall act generally in the absence of the
officer whom they assist and shall assist that officer in the duties of
his office. Each officer, employee and agent of the Trust shall have such
other duties and authorities as may be conferred upon him by the Trustees
or delegated to him by the President.
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ARTICLE IV
Miscellaneous
-------------
Section 4.1. Depositories. The funds of the Trust shall be
deposited in such depositories as the Trustees shall designate and shall
be drawn out on checks, drafts or other orders signed by such officer,
officers, agent or agents (including the Investment Manager and
Administrator) as the Trustees may from time to time authorize.
Section 4.2. Signatures. All contracts and other instruments
shall be executed on behalf of the Trust by such officer, officers, agent
or agents as provided in these By-Laws or as the Trustees may from time to
time by resolution provide.
Section 4.3. Seal. The seal of the Trust, if any, may be
affixed to any document, and the seal and its attestation may be
lithographed, engraved or otherwise printed on any document with the same
force and effect as if it had been imprinted and attested manually in the
same manner and with the same effect as if done by a New York corporation.
Section 4.4. Indemnification. Insofar as the conditional
advancing of indemnification monies under Section 5.4 of the Declaration
for actions based upon the 1940 Act may be concerned, such payments will
be made only on the following conditions: (i) the advances must be
limited to amounts used, or to be used, for the preparation or
presentation of a defense to the action, including costs connected with
the preparation of a settlement; (ii) advances may be made only upon
receipt of a written promise by, or on behalf of, the recipient to repay
the amount of the advance which exceeds the amount which it is ultimately
determined that he is entitled to receive from the Trust by reason of
indemnification; and (iii) (a) such promise must be secured by a surety
bond, other suitable insurance or an equivalent form of security which
assures that any repayment may be obtained by the Trust without delay or
litigation, which bond, insurance or other form of security must be
provided by the recipient of the advance, or (b) a majority of a quorum of
the Trust's disinterested, non-party Trustees, or an independent legal
counsel in a written opinion, shall determine, based upon a review of
readily available facts, that the recipient of the advance ultimately will
be found entitled to indemnification.
Section 4.5. Distribution Disbursing Agents and the Like. The
Trustees shall have the power to employ and compensate such distribution
disbursing agents, warrant agents and agents for the reinvestment of
distributions as they shall deem necessary or desirable. Any of such
agents shall have such power and authority as is delegated to any of them
by the Trustees.
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ARTICLE V
Regulations; Amendment of By-Laws
---------------------------------
Section 5.1. Regulations. The Trustees may make such additional
rules and regulations, not inconsistent with these By-Laws, as they may
deem expedient concerning the sale and purchase of Interests of the Trust.
Section 5.2. Amendment and Repeal of By-Laws. In accordance
with Section 2.7 of the Declaration, the Trustees shall have the power to
alter, amend or repeal the By-Laws or adopt new By-Laws at any time.
Action by the Trustees with respect to the By-Laws shall be taken by an
affirmative vote of a majority of the Trustees. The Trustees shall in no
event adopt By-Laws which are in conflict with the Declaration.
The Declaration refers to the Trustees as Trustees, but not as
individuals or personally; and no Trustee, officer, employee or agent of
the Trust shall be held to any personal liability, nor shall resort be had
to their private property for the satisfaction of any obligation or claim
or otherwise in connection with the affairs of the Trust.
____________________
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<PAGE>
INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT
BETWEEN GLOBAL INVESTMENT PORTFOLIO AND
G.T. CAPITAL MANAGEMENT, INC.
Contract made as of January 11, 1994, between Global Investment
Portfolio ("Master Portfolio"), a New York common law trust, and G.T.
Capital Management, Inc. ("G.T. Capital"), a California corporation.
WITNESSETH:
-----------
WHEREAS the Master Portfolio, which is registered under the
Investment Company Act of 1940, as amended ("1940 Act") as an open-end
management investment company, has established several subtrusts with each
subtrust having its own assets and investment policies; and
WHEREAS the Master Portfolio desires to retain G.T. Capital as
investment manager and administrator to furnish certain administrative,
investment advisory and portfolio management services to the subtrusts
listed in Schedule A attached hereto, and to such other subtrusts of the
Master Portfolio hereinafter established as may be agreed to from time to
time by the parties, and listed in an addendum to Schedule A (hereinafter
"Portfolios" shall refer to each subtrust that is subject to this
Agreement), and G.T. Capital is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. Appointment. The Master Portfolio hereby appoints G.T.
Capital as investment manager and administrator of the Portfolios for the
period and on the terms set forth in the Contract. G.T. Capital accepts
such appointment and agrees to render the services herein set forth, for
the compensation herein provided.
2. Duties as Investment Manager.
(a) Subject to the supervision of the Master Portfolio's Board
of Trustees ("Board"), G.T. Capital will provide a continuous investment
program for each Portfolio, including investment research and management
with respect to all securities and investments and cash equivalents of
each Portfolio. G.T. Capital will determine from time to time what
securities and other investments will be purchased, retained or sold by
each Portfolio, and the brokers and dealers through whom trades will be
executed.
(b) G.T. Capital agrees that in placing orders with brokers and
dealers it will attempt to obtain the best net results in terms of price
and execution. Consistent with this obligation, G.T. Capital may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers who sell shares of investment companies which invest all of their
investable assets in a Portfolio or provide a Portfolio or G.T. Capital's
other clients with research, analysis, advice and similar services. G.T.
<PAGE>
Capital may pay to brokers and dealers, in return for research and
analysis, a higher commission or spread than may be charged by other
brokers and dealers, subject to G.T. Capital's determining in good faith
that such commission or spread is reasonable in terms either of the
particular transaction or of the overall responsibility of G.T. Capital to
the Portfolios and its other clients and that the total commissions or
spreads paid by the Portfolios will be reasonable in relation to the
benefits to the Portfolios over the long term. In no instance will
portfolio securities be purchased from or sold to G.T. Capital or any
affiliated person thereof except in accordance with the federal securities
laws and the rules and regulations thereunder. Whenever G.T. Capital
simultaneously places orders to purchase or sell the same security on
behalf of a Portfolio and one or more other accounts advised by G.T.
Capital, such orders will be allocated as to price and amount among all
such accounts in a manner believed to be equitable to each account. The
Portfolios recognize that in some cases this procedure may adversely
affect the results obtained for a Portfolio.
(c) G.T. Capital will oversee the maintenance of all books and
records with respect to the securities transactions of the Portfolios, and
will furnish the Board with such periodic and special reports as the Board
reasonably may request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, G.T. Capital hereby agrees that all records which it
maintains for the Portfolios are the property of the Portfolios, agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any
records which it maintains for the Portfolios and which are required to be
maintained by Rule 31a-1 under the 1940 Act, and further agrees to
surrender promptly to the Portfolios any records which it maintains for
the Portfolios upon request.
(d) G.T. Capital will oversee the computation of the net asset
value and the net income of each Portfolio as described in the
registration statement of the Master Portfolio under the 1940 Act
("Registration Statement") or as more frequently requested by the Board.
3. Duties as Administrator. G.T. Capital will administer the
affairs of the Portfolios subject to the supervision of the Board and the
following understandings:
(a) G.T. Capital will supervise all aspects of the
operations of the Portfolios, including the oversight of
custodial, pricing and accounting services, except as hereinafter
set forth; provided, however, that nothing herein contained shall
be deemed to relieve or deprive the Board of its responsibility
for control of the conduct of the affairs of the Portfolios.
(b) At G.T. Capital's expense, G.T. Capital will provide
the Portfolios with such corporate, administrative and clerical
personnel (including officers of the Master Portfolio) and
services as are reasonably deemed necessary or advisable by the
Board.
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<PAGE>
(c) G.T. Capital will arrange, but not pay, for the
periodic preparation, updating, filing and dissemination (as
applicable) of the Portfolios' proxy material, tax returns and
required reports with or to the Portfolios' investors, the
Securities and Exchange Commission and other appropriate federal
or state regulatory authorities.
(d) G.T. Capital will provide the Portfolios with, or
obtain for them, adequate office space and all necessary office
equipment and services, including telephone service, heat,
utilities, stationery supplies and similar items.
4. Further Duties. In all matters relating to the performance
of this Contract, G.T. Capital will act in conformity with the Declaration
of Trust, By-Laws and Registration Statement of the Master Portfolio and
with the instructions and directions of the Board and will comply with the
requirements of the 1940 Act, the rules thereunder, and all other
applicable federal and state laws and regulations.
5. Delegation of G.T. Capital's Duties as Investment Manager and
Administrator. G.T. Capital may enter into one or more agreements ("Sub-
Advisory or Sub-Administration Contract") with a sub-adviser or sub-
administrator in which G.T. Capital delegates to such sub-adviser or sub-
administrator the performance of any or all of the services specified in
Paragraphs 2 and 3 of this Contract, provided that: (i) each Sub-Advisory
or Sub-Administration Contract imposes on the sub-adviser or sub-
administrator bound thereby all the duties and conditions to which G.T.
Capital is subject with respect to the delegated services under Paragraphs
2, 3 and 4 of this Contract; (ii) each Sub-Advisory or Sub-Administration
Contract meets all requirements of the 1940 Act and rules thereunder; and
(iii) G.T. Capital shall not enter into a Sub-Advisory or Sub-
Administration Contract unless it is approved by the Board prior to
implementation.
6. Services Not Exclusive. The services furnished by G.T.
Capital hereunder are not to be deemed exclusive and G.T. Capital shall be
free to furnish similar services to others so long as its services under
this Contract are not impaired thereby. Nothing in this Contract shall
limit or restrict the right of any director, officer or employee of G.T.
Capital, who may also be a Trustee, officer or employee of the Master
Portfolio, to engage in any other business or to devote his or her time
and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature.
7. Expenses.
(a) During the term of this Contract, the Portfolios will bear
all expenses which are not specifically assumed by G.T. Capital.
(b) Expenses borne by the Portfolios will include but not be
limited to the following: (i) the cost (including brokerage commissions,
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<PAGE>
if any) of securities purchased or sold by a Portfolio and any losses
incurred in connection therewith; (ii) fees payable to and expenses
incurred on behalf of the Portfolios by G.T. Capital under this Contract;
(iii) expenses of organizing the Portfolios; (iv) filing fees and expenses
relating to the registration and qualification of the Master Portfolio or
any of the Portfolios under federal and/or state securities laws and
maintaining such registrations and qualifications; (v) fees and salaries
payable to the Master Portfolio's Trustees who are not parties to this
Contract or interested persons of any such party ("Independent Trustees");
(vi) all expenses incurred in connection with the Independent Trustees'
services, including travel expenses; (vii) taxes (including any income or
franchise taxes) and governmental fees; (viii) costs of any liability,
uncollectible items of deposit and other insurance and fidelity bonds;
(ix) any costs, expenses or losses arising out of a liability of or claim
for damages or other relief asserted against the Master Portfolio or any
of the Portfolios for violation of any law; (x) legal, accounting and
auditing expenses, including legal fees of special counsel for the
Independent Trustees; (xi) charges of custodians, pricing agents and other
agents; (xii) expenses of setting in type, printing and mailing reports
and proxy materials for existing investors; (xiii) any extraordinary
expenses (including fees and disbursements of counsel, costs of actions,
suits or proceedings to which the Master Portfolio or the Portfolios are a
party and the expenses the Master Portfolio may incur as a result of its
legal obligation to provide indemnification to its Trustees, officers,
employees and agents) incurred by the Master Portfolio or the Portfolios;
(xiv) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; (xv) costs
of mailing and tabulating proxies and costs of meetings of investors, the
Board and any committees thereof; (xvi) the cost of investment company
literature and other publications provided by the Master Portfolio to its
Trustees and officers; and (xvii) costs of mailing, stationery and
communications equipment.
(c) All general expenses of the Master Portfolio and joint
expenses of the Portfolios shall be allocated among the Portfolios on a
basis deemed fair and equitable by G.T. Capital, subject to the Board's
supervision.
(d) G.T. Capital will assume the cost of any compensation for
services provided to the Master Portfolio received by the officers of the
Master Portfolio and by the Trustees of the Master Portfolio who are not
Independent Trustees.
(e) The payment or assumption by G.T. Capital of any expense of
the Master Portfolio or any Portfolio that G.T. Capital is not required by
this Contract to pay or assume shall not obligate G.T. Capital to pay or
assume the same or any similar expense of the Master Portfolio or any
Portfolio on any subsequent occasion.
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<PAGE>
8. Compensation.
(a) For the services provided under this Contract, each
Portfolio will pay G.T. Capital a fee, based on the average daily net
assets of each Portfolio, at the annualized rate of .725% on the first
$500 million, .70% on the next $500 million, .675% on the next $500
million, and .65% on all amounts thereafter.
(b) For the services provided under this Contract, each
Portfolio as hereafter may be established and become subject to this
Contract, will pay to G.T. Capital a fee in an amount to be agreed upon in
a written fee agreement ("Fee Agreement") executed by the Master Portfolio
on behalf of such Portfolio and by G.T. Capital. All such Fee Agreements
shall provide that they are subject to all terms and conditions of this
Agreement.
(c) The fee shall be computed daily and paid monthly to G.T.
Capital on or before the last business day of the next succeeding calendar
month.
(d) G.T. Capital agrees to reduce the fee payable to it under
this Contract by the amount by which the ordinary operating expenses
(exclusive of brokerage commissions, organization expenses, interest,
taxes, certain expenses attributable to investing outside the United
States and extraordinary expenses) of a Portfolio for any fiscal year
borne by an investor in that Portfolio, together with the direct ordinary
operating expenses (exclusive of organization expenses, taxes, interest,
distribution-related expenses and extraordinary expenses) of that investor
(collectively, "Expenses"), shall exceed the most stringent limits
prescribed by any state in which shares of any investor in the Portfolio
are offered for sale. Proper accruals shall be made for the Portfolio for
any projected reduction hereunder and corresponding amounts shall be
withheld from the fees paid by such Portfolio to G.T. Capital. Any
additional reduction computed as being necessary at the end of the fiscal
year shall be deducted from the fee for the last month of such fiscal
year. If the amount of the fee payable by a Portfolio to G.T. Capital is
less than the amount by which such Portfolio's Expenses exceed an
applicable expense limitation, G.T. Capital shall reimburse that Portfolio
in an amount sufficient to enable that Portfolio to meet such limitation.
(e) If this Contract becomes effective or terminates before the
end of any month, the fee for the period from the effective date to the
end of the month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full month in which such
effectiveness or termination occurs.
9. Limitation of Liability of G.T. Capital and Indemnification.
G.T. Capital shall not be liable, and the Master Portfolio and the
Portfolios shall indemnify G.T. Capital and its directors, officers and
employees, for any costs or liabilities arising from any error of judgment
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<PAGE>
or mistake of law or any loss suffered by the Master Portfolio or the
Portfolios in connection with the matters to which this Contract relates,
except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of G.T. Capital in the performance by G.T. Capital
of its duties or from reckless disregard by G.T. Capital of its
obligations and duties under this Contract. Any person, even though also
an officer, partner, employee, or agent of G.T. Capital, who may be or
become a Trustee, officer, employee or agent of the Master Portfolio shall
be deemed, when rendering services to the Portfolios or acting with
respect to any business of the Portfolios to be rendering such service to
or acting solely for the Portfolios and not as an officer, partner,
employee, or agent or one under the control or direction of G.T. Capital
even though paid by it.
10. Duration and Termination.
(a) This Contract shall become effective with respect to a
Portfolio upon the date written above, provided that this Contract shall
not take effect unless it has first been approved (i) by a vote of a
majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by vote of a majority
of such Portfolio's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract
shall continue in effect for two years from the above written date or
until June 30, 1995, whichever is earlier. Thereafter, if not terminated,
with respect to each Portfolio, this Contract shall continue automatically
for successive periods ending on June 30, provided that such continuance
is specifically approved at least annually (i) by a vote of a majority of
the Independent Trustees, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by the Board or by vote of a
majority of the outstanding voting securities of that Portfolio.
(c) Notwithstanding the foregoing, this Contract may be
terminated at any time, without the payment of any penalty, by vote of the
Board or by a vote of a majority of the outstanding voting securities of a
Portfolio on sixty days' written notice to G.T. Capital or by G.T. Capital
at any time, without the payment of any penalty, on sixty days' written
notice to the Master Portfolio. Termination of this Contract with respect
to one Portfolio shall not effect the continued effectiveness of this
Contract with respect to any other Portfolio. This Contract will
automatically terminate in the event of its assignment.
11. Amendment. No provision of this Contract may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought, and no amendment of this
Contract shall be effective until approved by vote of a majority of the
respective Portfolio's outstanding voting securities.
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12. Governing Law. This Contract shall be construed in
accordance with the laws of the State of California and the 1940 Act. To
the extent that the applicable laws of the State of California conflict
with the applicable provisions of the 1940 Act, the latter shall control.
13. Miscellaneous. The captions in this Contract are included
for convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
If any provision of this Contract shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Contract shall
not be affected thereby. This Contract shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors. As used in this Contract, the terms "majority of the
outstanding voting securities," "interested person," "assignment,"
"broker," "dealer," "investment adviser," "national securities exchange,"
"net assets," "prospectus," "sale," "sell" and "security" shall have the
same meaning as such terms have in the 1940 Act, subject to such exemption
as may be granted by the Securities and Exchange Commission by any rule,
regulation or order. Where the effect of a requirement of the 1940 Act
reflected in any provision of this Contract is made less restrictive by a
rule, regulation or order of the Securities and Exchange Commission,
whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated as of the day and
year first above written.
Attest: GLOBAL INVESTMENT PORTFOLIO
/s/ Peter R. Guarino /s/ F. Christian Wignall
_______________________________ By__________________________
Peter R. Guarino F. Christian Wignall
Attest: G.T. CAPITAL MANAGEMENT, INC.
/s/ Peter R. Guarino /s/ James R. Tufts
______________________________ By____________________________
Peter R. Guarino James R. Tufts
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<PAGE>
SCHEDULE A
----------
Global Financial Services Portfolio
Global Infrastructure Portfolio
Global Natural Resources Portfolio
<PAGE>
<PAGE>
December 30, 1994
G.T. Capital Management, Inc.
50 California Street
27th Floor
San Francisco, CA 94111
RE: Investment Management and Administration Fee
Agreement for Global Consumer Products and Services Portfolio
-------------------------------------------------------------
Ladies and Gentlemen:
Global Investment Portfolio (the "Master Trust") has appointed G.T.
Capital Management, Inc. ("G.T. Capital") to act as investment manager and
administrator to a new portfolio organized as a sub-trust of the Master
Trust, Global Consumer Products and Services Portfolio (the "Portfolio"),
pursuant to the terms of the Investment Management and Administration
Contract between the Master Trust and G.T. Capital currently in effect
(the "Management Contract"). For providing services to the Portfolio
pursuant to the Management Contract, the Portfolio will pay G.T. Capital
investment management and administration fees at the annualized rate of
.725% on the first $500 million, .70% on the next $500 million, .675% on
the next $500 million and .65% on all amounts thereafter, of the
Portfolio's average daily net assets. Such fees are to be calculated
daily and paid monthly by the Portfolio.
Please indicate your agreement with the provisions of the foregoing
paragraph by executing this letter in the space set forth for such
execution below.
Sincerely,
GLOBAL INVESTMENT PORTFOLIO
/s/ F. Christian Wignall
By: ____________________________
F. Christian Wignall
Vice President
AGREED AND ACCEPTED:
G.T. CAPITAL MANAGEMENT, INC.
/s/ James R. Tufts
By: ____________________________
James R. Tufts
Vice President-Finance
<PAGE>
<PAGE>
COOPERS Coopers & Lybrand L.L.P.
& LYBRAND a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Global Investment Portfolio:
Global Financial Services Portfolio
Global Infrastructure Portfolio
Global Natural Resources Portfolio
Global Consumer Products and Services Portfolio
We consent to the inclusion in the Registration Statement of Global
Investment Portfolio of our reports dated December 15, 1995 on the
financial statements of Global Financial Services Portfolio, Global
Infrastructure Portfolio, Global Natural Resources Portfolio, and Global
Consumer Products and Services Portfolio as of and for the year ended
October 31, 1995. We also consent to the reference to our firm under the
caption "Independent Accountants" in such Registration Statement.
/s/ Coopers & Lybrand L.L.P.
-----------------------------
COOPERS & LYBRAND L.L.P
Boston, Massachusetts
February 27, 1996
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International,
a limited liability association incorporated in Switzerland
<PAGE>
<PAGE>
EXHIBIT 13
GLOBAL INVESTMENT PORTFOLIO
LETTER OF INVESTMENT INTENT
To the Board of Trustees of Global Investment Portfolio:
The undersigned (the "Purchaser") hereby subscribes to purchase a
beneficial interest ("Interest") of Global Infrastructure Portfolio in
consideration for which the Purchaser agrees to transfer to you upon
demand cash in the amount of One Hundred Thousand Dollars ($100,000.00).
The Purchaser agrees that the Interest is being purchased for
investment with no present intention of reselling or redeeming said
Interest.
Dated and effective this 15th day of April, 1994
GLOBAL INFRASTRUCTURE PORTFOLIO
/s/ David A. Minella
____________________________
By: David A. Minella,
President
<PAGE>
<PAGE>
EXHIBIT 13
GLOBAL INVESTMENT PORTFOLIO
LETTER OF INVESTMENT INTENT
To the Board of Trustees of Global Investment Portfolio:
The undersigned (the "Purchaser") hereby subscribes to purchase a
beneficial interest ("Interest") of Global Financial Services Portfolio in
consideration for which the Purchaser agrees to transfer to you upon
demand cash in the amount of One Hundred Thousand Dollars ($100,000.00).
The Purchaser agrees that the Interest is being purchased for
investment with no present intention of reselling or redeeming said
Interest.
Dated and effective this 15th day of April, 1994
GLOBAL FINANCIAL SERVICES PORTFOLIO
/s/ David A. Minella
------------------------------
By: David A. Minella,
President
<PAGE>
<PAGE>
EXHIBIT 13
GLOBAL INVESTMENT PORTFOLIO
LETTER OF INVESTMENT INTENT
To the Board of Trustees of Global Investment Portfolio:
The undersigned (the "Purchaser") hereby subscribes to purchase a
beneficial interest ("Interest") of Global Consumer Products and Services
Portfolio in consideration for which the Purchaser agrees to transfer to
you upon demand cash in the amount of One Hundred Thousand ($100,000.00).
The Purchaser agrees that the interest is being purchased for investment
with no present intention of reselling or redeeming said Interest.
Dated and effective this 20th day of December, 1994.
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
/s/ Helge K. Lee
-------------------------------
By: Helge K. Lee
Vice President and Secretary
<PAGE>
<PAGE>
EXHIBIT 13
GLOBAL INVESTMENT PORTFOLIO
LETTER OF INVESTMENT INTENT
To the Board of Trustees of Global Investment Portfolio:
The undersigned (the "Purchaser") hereby subscribes to purchase a
beneficial interest ("Interest") of Global Natural Resources Portfolio in
consideration for which the Purchaser agrees to transfer to you upon
demand cash in the amount of One Hundred Thousand ($100,000.00).
The Purchaser agrees that the Interest is being purchased for
investment with no present intention of reselling or redeeming said
Interest.
Dated and effective this 15th day of April, 1994
GLOBAL NATURAL RESOURCES PORTFOLIO
/s/ David A. Minella
-------------------------------
By: David A. Minella,
President
<PAGE>
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