<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1996.
-------------------------File No. 811-07363----------------------------
__________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1
GROWTH 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.
Vice President and 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 has been filed by
the Registrant pursuant to Section 8(b) of the Investment Company Act of
1940, as amended (the "1940 Act"). Beneficial interests in the Registrant
have not been registered under the Securities Act of 1933, as amended (the
"1933 Act") because 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 consti-
tute an offer to sell, or the solicitation of an offer to buy, any
beneficial interests in the Registrant.
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<TABLE>
<CAPTION> GROWTH PORTFOLIO
CROSS-REFERENCE SHEET
Item No. of Part A of
Form N-1A Captions in Document
--------------------- --------------------
<S> <C>
1. Cover Page . . . . . . . . . . . . . . . . . . . [Not Applicable]
2. Synopsis . . . . . . . . . . . . . . . . . . . . [Not Applicable]
3. Condensed Financial Information . . . . . . . . [Not Applicable]
4. General Description of Registrant . . . . . . . General Description of Registrant
5. Management of the Fund . . . . . . . . . . . . . Management of the Portfolio
6. Capital Stock and Other Securities . . . . . . . Capital Stock and Other
Securities
7. Purchase of Securities Being Offered . . . . . . Purchase of Securities
8. Redemption or Repurchase . . . . . . . . . . . . Redemption or Repurchase
9. Pending Legal Proceedings . . . . . . . . . . . Pending Legal Proceedings
Item No. of Part B of Captions in Document
Form N-1A --------------------
--------------------
10. Cover Page . . . . . . . . . . . . . . . . . . . [Not Applicable]
11. Table of Contents . . . . . . . . . . . . . . . Table of Contents
12. General Information and History . . . . . . . . General Information and History
13. Investment Objectives and Policies . . . . . . . Investment Objectives and
Policies
14. Management of the Registrant . . . . . . . . . . Management of the Portfolio
15. Control Persons and Principal Holders of Control Persons and Principal
Securities . . . . . . . . . . . . . . . . . . . Holders of Securities
16. Investment Advisory and Other Investment Advisory and Other
Services . . . . . . . . . . . . . . . . . . . . Services
17. Brokerage Allocation . . . . . . . . . . . . . . Brokerage Allocation and Other
Practices
18. Capital Stock and Other Securities . . . . . . . Capital Stock and Other
Securities
19. Purchase, Redemption and Pricing of Securities Purchase, Redemption and Pricing
Being Offered . . . . . . . . . . . . . . . . . of Securities
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20. Tax Status . . . . . . . . . . . . . . . . . . . Tax Status
21. Underwriters . . . . . . . . . . . . . . . . . . [Not Applicable]
22. Calculation of Performance Data . . . . . . . . [Not Applicable]
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
GROWTH PORTFOLIO
CONTENTS OF REGISTRATION STATEMENT
This registration statement of Growth Portfolio contains the following
documents:
Facing Sheet
Contents of Registration Statement
Cross-Reference Sheet
Part A
Part B
Part C
Signature Page
Exhibits
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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.
------------------------------------------
Growth 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 May 4, 1995, and amended and restated as
of September 25, 1995.
Beneficial interests in the Growth Portfolio are divided
currently into two separate subtrusts or "series" -- Small Cap Portfolio
and Value Portfolio (individually, "Portfolio"; collectively,
"Portfolios") -- each having a distinct investment objective and distinct
investment policies. Each Portfolio is described herein. Additional
subtrusts of Growth 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"), formerly G.T. Capital
Management, Inc. LGT Asset Management and its worldwide affiliates are
part of Liechtenstein Global Trust, formerly BIL GT Group Limited, a
provider of global asset management and private banking products and
services to individual and institutional investors.
Investment Objectives
The investment objective of each Portfolio is to seek long-term
capital appreciation. The Small Cap Portfolio seeks its investment
objective by normally investing at least 65% of its total assets in equity
securities, including common stocks, convertible preferred stocks, conver-
tible debt securities and warrants of small cap companies domiciled in the
United States. For purposes of the foregoing, "small cap" companies are
companies that, at the time of purchase of their securities by the Small
Cap Portfolio, have market capitalizations of up to $500 million. Market
capitalization means the total market value of a company's outstanding
common stock. There is no necessary correlation between market
capitalization and the financial attributes (such as level of assets,
<PAGE>
revenues or income) often used to measure a company's size. The remainder
of the Small Cap Portfolio's assets may be invested in common stocks,
convertible preferred stocks, convertible debt securities and warrants of
companies that are larger than small cap companies as defined above, non-
convertible preferred stocks, non-convertible debt securities, government
securities and high quality money market instruments such as government
obligations, high grade commercial paper, bank certificates of deposit and
bankers' acceptances of issuers domiciled in the United States. Small cap
companies may be more vulnerable than larger companies to adverse
business, economic or market developments. Securities of small cap
companies may also be less liquid and their prices more volatile than
those of larger companies.
The Value Portfolio seeks its investment objective by normally
investing at least 65% of its total assets in equity securities, including
common stocks, convertible preferred stocks, convertible debt securities
and warrants of medium to large cap issuers domiciled in the United States
that LGT Asset Management believes to be undervalued in relation to the
long-term earning power or other factors. For purposes of the foregoing,
"medium to large cap" issuers are issuers with a market capitalization
greater than $500 million at the time of purchase by the Value Portfolio.
The remainder of the Value Portfolio's assets may be invested in common
stocks, convertible preferred stocks, convertible debt securities and
warrants of companies that are smaller than the issuers defined above,
non-convertible preferred stocks, non-convertible debt securities,
government securities and high quality money market instruments such as
government obligations, high grade commercial paper, bank certificates of
deposit and bankers' acceptances of issuers domiciled in the United
States.
In selecting issuers for the Value Portfolio, LGT Asset
Management attempts to identify securities of issuers whose prospects and
growth potential, in LGT Asset Management's opinion, are currently
undervalued by investors. In LGT Asset Management's view, an issuer may
show favorable prospects as a result of many factors, including, but not
limited to, changes in management, shifts in supply and demand conditions
in the industry in which it operates, technological advances, new products
or product cycles or changes in macroeconomic trends. The securities of
such issuers may be undervalued by the market due to many factors,
including market decline, tax-loss selling, poor economic conditions,
limited coverage by the investment community, investors' reluctance to
overlook perceived financial, operational, managerial or other problems
affecting the issuer or the industry in which it operates, and other
factors. LGT Asset Management will attempt to identify those undervalued
issuers with the potential for attractive returns.
For purposes of the foregoing, an issuer is considered domiciled
in the United States if it is incorporated under the laws of any of its
states or territories or the District of Columbia and either (i) at least
50% of the value of its assets is located in the United States, or (ii) it
normally derives at least 50% of its income from operations or sales in
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the United States. There is no assurance that any Portfolio will achieve
its investment objective.
The debt obligations that the Portfolios may invest in are
limited to U.S. government securities and corporate debt securities of
issuers domiciled in the United States. The Portfolios will limit their
purchases of debt securities to investment grade obligations. "Investment
grade" debt securities are those debt securities rated within one of the
four highest ratings categories by Moody's Investors Service, Inc.
("Moody's") or by Standard & Poor's Ratings Group ("S&P") or, if not
similarly rated by any other nationally recognized statistical rating
organization ("NRSRO"), deemed by LGT Asset Management to be of equivalent
quality. Moody's considers securities rated in the lowest category of
investment grade, i.e., securities rated Baa, to have speculative
characteristics.
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 at
least thirty 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, economic or
political conditions. Accordingly, in the interest of preserving
interestholders' 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 may hold cash 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. government. To the extent a Portfolio employs
a temporary defensive investment position, it will not be invested so as
to achieve directly its investment objective.
In addition, pending investment of proceeds from sales of
Portfolio interests or to meet ordinary daily cash needs, each Portfolio
may hold cash and may invest in high quality domestic money market
instruments. Money market instruments in which the Portfolios may invest
include, but are not limited to, the following: U.S. government
securities, high-grade commercial paper, bank certificates of deposit and
banker's acceptances of issuers domiciled in the United States; 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 at the time of investment or, if not similarly rated by another
NRSRO, determined by LGT Asset Management to be of comparable quality.
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Other Policies. Each Portfolio may invest up to 15% of its net
assets in illiquid 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 and 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 to the Portfolio. 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 on such a transaction.
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, each Portfolio may borrow from banks or
through reverse repurchase agreements and "roll" transactions in
connection with meeting requests for redemptions of a Portfolio's
interests.
Each Portfolio also may borrow up to 5% of its total assets for
temporary or emergency purposes other than to meet redemptions. However,
no Portfolio will borrow for leveraging purposes, nor will any Portfolio
purchase securities while borrowings are outstanding.
Each Portfolio is authorized to make loans of portfolio
securities, for the purpose of realizing additional income, to
broker/dealers or to other institutional investors. At all times a loan is
outstanding, 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 the value of the borrowed
securities, plus any accrued interest. Each 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 limits 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 delays in receiving additional collateral or in recovery of
the securities and possible loss of rights in the collateral should the
borrower fail financially.
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Risk Factors
Each Portfolio's net asset value ("NAV") will fluctuate,
reflecting fluctuations in the market value of its portfolio positions.
SMALL CAP PORTFOLIO. Small cap companies may be more vulnerable
than larger companies to adverse business, economic or market
developments. Small cap companies may also have more limited product
lines, markets or financial resources than companies with larger
capitalizations and may be more dependent on a relatively small management
group. In addition, small cap companies may not be well-known to the
investing public, may not have institutional ownership and may have only
cyclical, static or moderate growth prospects. Most small cap company
stocks pay low or no dividends. Securities of small cap companies are
generally less liquid and their prices more volatile than those of
securities of larger companies. The securities of some small cap companies
may not be widely traded; the Small Cap Portfolio's position in securities
of such companies may be substantial in relation to the market for such
securities. Accordingly, it may be difficult for the Small Cap Portfolio
to dispose of securities of these small cap companies at prevailing market
prices in order to meet redemptions.
RISKS ASSOCIATED WITH DEBT SECURITIES. LGT Asset Management
allocates investments among fixed income securities of particular issuers
on the basis of its views as to the best values then currently available
in the market place. Such values are a function of yield, maturity, issue
classification and quality characteristics, coupled with expectations
regarding the economy, movements in the general level of interest rates
and political developments. If market interest rates decline, fixed income
securities generally appreciate in value, and vice versa.
OPTIONS AND FUTURES. Each Portfolio may use options on
securities, options on indices, futures contracts 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
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. These techniques are described
below and are further detailed in Item 13 of Part B.
Each 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 the Portfolio or that LGT Asset
Management intends to include in the Portfolio's securities portfolio. The
Portfolios also may buy and sell put and call options on equity and debt
security indices. Such stock index options serve to hedge against overall
fluctuations in the securities markets or market sectors generally, rather
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than anticipated increases or decreases in the value of a particular
security.
Further, the Portfolios 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 or market sector
decline that could adversely affect the Portfolios' holdings. The
Portfolios 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 and indices that are traded on recognized securities
exchanges and over-the-counter ("OTC") markets.
These practices may result in the loss of principal under certain
conditions. In addition, certain provisions of the Internal Revenue Code
of 1986, as amended ("Code"), limit the extent to which a Portfolio may
enter into future contracts or engage in options transactions. See "Tax
Status--Hedging Strategies" in Item 20 of Part B.
Although a Portfolio might not employ any of the foregoing
strategies, the use of options and futures would involve certain
investment risks and transaction costs to which it might not otherwise be
subject. These risks include: (1) dependence on LGT Asset Management's
ability to predict movements in the prices of individual securities,
fluctuations in the general securities markets and movements in interest
rates; (2) imperfect correlation, or even no correlation, between
movements in the price of options, futures contracts or options thereon
and movements in the price of the security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures
contracts and options thereon are different from those needed to select
the securities in which the Portfolios invest; (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 set aside securities
in connection with hedging transactions; and (6) the possible need to
defer closing out certain options, futures contracts and options thereon
in order to qualify for the beneficial tax treatment afforded regulated
investment companies under the Code. If LGT Asset Management incorrectly
forecasts securities market movements 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.
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REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase
agreements, which 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. 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
established by Growth Portfolio's Board of Trustees.
Investment Limitations
Each Portfolio is subject to certain investment limitations that
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. Unless specifically noted, the Portfolios' investment policies
described herein, including the policies with respect to investment in its
market sector's securities and the percentage limitations with respect to
such investments, are not fundamental policies and may be changed by vote
of Growth Portfolio's Board of Trustees without approval of its
interestholders. Each Portfolio's policies regarding lending, the
percentage of that Portfolio's assets that may be committed to borrowing
and diversification of investments are fundamental policies and may not be
changed without approval of that Portfolio's interestholders. See
"Investment Limitations" in Item 13 of Part B.
Item 5. MANAGEMENT OF THE PORTFOLIOS.
-------------------------------------
Growth 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 Growth
Portfolio.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by
LGT Asset Management as each Portfolio's investment manager and
administrator include 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 corporate officers and clerical
staff; providing office space, services and equipment; and supervising all
matters relating to its operations. 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
0.475% on the first $500 million, 0.45% on the next $500 million, 0.425%
on the next $500 million, and 0.40% 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
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Portfolio s average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of the GT Global Mutual
Funds and 0.02% to the assets in excess of $5 billion and allocating the
result according to each Fund s average daily net assets.
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, G.T. Capital Management, Inc. was renamed LGT Asset Management, 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
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 Herrengasse 12, FL-9490, Vaduz,
Liechtenstein.
As of December 31, 1995, LGT Asset Management and its worldwide
affiliates managed or administered approximately $27 billion, of which
approximately $15 billion consists of GT Global retail funds worldwide.
In the U.S., as of December 31, 1995, LGT Asset Management managed or
administered approximately $10 billion in GT Global Mutual Funds. As of
December 31, 1995, assets under advice by LGT Bank in Liechtenstein
totaled approximately $18 billion. As of December 31, 1995, asset
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
the Portfolio of these various investment offices around the world in
seeking to achieve the Portfolio s investment objective.
The investment professionals primarily responsible for the
portfolio management of each Portfolio are as follows:
<TABLE>
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<CAPTION>
Small Cap Portfolio
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Responsibilities Business Experience
Name/Office for the Portfolio Last Five Years
----------- ----------------- --------------------
<S> <C> <C>
Kevin L. Wenck Portfolio manager since Portfolio Manager for LGT Asset
San Francisco its inception Management since 1991. Prior thereto
Mr. Wenck was a Portfolio Manager for
Matuschka & Co. (Greenwich, CT).
Value Portfolio
---------------
Responsibilities Business Experience
Name/Office for the Portfolio Last Five Years
----------- ----------------- --------------------
Soraya M. Betterton Portfolio Manager since Portfolio Manager for LGT Asset
San Francisco its inception Management.
</TABLE>
In placing orders for a Portfolio's securities transactions, LGT
Asset Management seeks to obtain the best net results. LGT Asset
Management has no agreement or commitment to place orders with any
broker/dealer. Debt securities generally are traded on a "net" basis with
a dealer acting as principal for its own account without a stated
commission, although the price of the security usually includes a profit
to the dealer. U.S. government securities and money market instruments
generally are traded in the OTC markets. In underwritten offerings,
securities usually are purchased at a fixed price that includes an amount
of compensation to the underwriter. On occasion, securities may be
purchased directly from an issuer, in which case no commissions or
discounts are paid. Broker/dealers may receive commissions on futures and
options transactions. Consistent with its obligation to obtain the best
net results, LGT Asset Management may consider a broker/dealer's sale of
shares of the GT Global Mutual Funds as a factor in considering through
whom portfolio transactions will be effected. Brokerage transactions for
the Portfolios may be executed through any of the Liechtenstein Global
Trust affiliates.
LGT Asset Management anticipates that the annual turnover rate of
each Portfolio will not exceed 75%. However, LGT Asset Management does not
regard portfolio turnover as a limiting factor and will buy or sell
securities for each Portfolio as necessary in response to market
conditions to meet each Portfolio's objective of long-term capital
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appreciation. The portfolio turnover rate is calculated by dividing the
lesser of sales or purchases of portfolio securities by each Portfolio's
average month-end portfolio value, excluding short-term investments. For
purposes of this calculation, portfolio securities exclude purchases and
sales of debt securities having a maturity at the date of purchase of one
year or less. High portfolio turnover involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions
and other costs that a Portfolio will bear directly and may result in the
realization of net capital gains that are taxable to that Portfolio's
interestholders.
Growth 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, service, pricing,
accounting, 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 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.
-----------------------------------------------------
Not Applicable.
Item 6. CAPITAL STOCK AND OTHER SECURITIES.
-------------------------------------------
Growth 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 Growth
Portfolio. Growth Portfolio currently has two series (i.e., the
Portfolios). Growth Portfolio 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 interest 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 NAV. Each investor in a Portfolio 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
limited to circumstances in which that Portfolio had inadequate insurance
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and was unable to meet its obligations (including indemnification
obligations) out of its assets.
Growth Portfolio is not required to hold annual meetings of
investors, but it 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
Growth 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.
A Portfolio's net income consists of (i) all dividends, accrued
interest (including earned discount, both original issue and market
discount), and other income, including any net realized gains on the
Portfolio's assets, less (ii) all actual and accrued expenses of the
Portfolio, amortization of any premium, and net realized losses on the
Portfolio's assets, all as determined in accordance with generally
accepted accounting principles. All of a Portfolio's net income is
allocated pro rata among the investors in the Portfolio. A Portfolio's
net income generally is not distributed to the investors in the Portfolio,
except as determined by the Trustees from time to time, but instead is
included in the NAV of the investors' respective beneficial interests in
the Portfolios.
Under Growth Portfolio's anticipated method of operation, 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 Growth 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.
See Item 20 in Part B.
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. See Item 20 in Part B.
Investor inquiries may be directed to LGT Asset Management.
Item 7. PURCHASE OF SECURITIES.
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Beneficial interests in each Portfolio are issued solely in
private placement transactions that do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. Investments in a
Portfolio may only be made by investment companies, insurance company
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separate accounts, common or commingled trust funds or similar
organizations or entities that 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 NAV 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).
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 redeem any portion or all of its
investment at any time at the NAV next determined after a request in "good
order" is furnished by the investor to that Portfolio. The proceeds of a
redemption will be paid by a Portfolio in federal funds normally on the
next business day after the redemption 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
redemption may be suspended or the payment of the proceeds therefrom
postponed during any period (1) when the New York Stock Exchange, Inc.
("NYSE") is closed (other than customary weekend or holiday closings) or
trading on the NYSE is restricted as determined by the Securities and
Exchange Commission ("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.
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Not applicable.
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PART B
Item 10. COVER PAGE.
--------------------
Part A contains information about the investment objectives and
policies of Small Cap Growth Portfolio ("Small Cap Portfolio") and Value
Portfolio (individually, "Portfolio"; collectively, "Portfolios"), each a
subtrust or "series" of Growth 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.
Item 11. TABLE OF CONTENTS.
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Page
General Information and History . . . . . . . . . . . . . . B-1
Investment Objectives and Policies . . . . . . . . . . . . . B-1
Management of the Portfolios . . . . . . . . . . . . . . . . B-21
Control Persons and Principal Holders of Interests . . . . . B-24
Investment Advisory and Other Services . . . . . . . . . . . B-24
Brokerage Allocation and Other Practices . . . . . . . . . . B-25
Capital Stock and Other Securities . . . . . . . . . . . . . B-28
Purchase, Redemption and Pricing of Interests . . . . . . . B-29
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . B-31
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . B-33
Calculation of Performance Data . . . . . . . . . . . . . . B-33
Financial Statements . . . . . . . . . . . . . . . . . . . . B-33
Item 12. GENERAL INFORMATION AND HISTORY.
-----------------------------------------
Not applicable.
Item 13. INVESTMENT OBJECTIVES AND POLICIES.
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Selection of Equity Investments
For investment purposes, an issuer is considered as domiciled in
the United States if it is incorporated under the laws of any of its
states or territories or the District of Columbia and either (i) at least
50% of the value of its assets is located in the United States or (ii) it
normally derives at least 50% of its income from operations or sales in
the United States.
Investment in Other Investment Companies
Each Portfolio may invest in the securities of closed-end
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 involve the
payment of substantial premiums above the value of such companies'
portfolio securities. The Portfolios do not intend to invest in such
investment companies unless, in the judgment of LGT Asset Management, Inc.
("LGT Asset Management"), the investment manager for each Portfolio, 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.
Warrants or Rights
Warrants or rights may be acquired by a 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. A
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 New York or American 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. These limits
are not fundamental policies of the Portfolios and may be changed by a
vote of the Portfolios' Board of Trustees without the approval of
interestholders.
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 the
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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 Growth Portfolio's Board of
Trustees. The Portfolios may pay reasonable administrative and custodial
fees in connection with the loans of their securities. 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. If the borrower failed to maintain the requisite
amount of collateral, the loan would terminate automatically and the
Portfolio could use the collateral to replace the securities while holding
the borrower liable for any excess of the replacement over the value of
the collateral. Each Portfolio has a right to call each loan and obtain
the securities on five business days' notice. The Portfolios will not
have the right to vote equity securities while they are being lent, but
they retain the right to call for the return of the loaned securities at
any time on reasonable notice and may call in a loan in anticipation of
any important vote. The Portfolios also will be able to call such loans
if LGT Asset Management made the investment decision that the loaned
securities should be sold. On termination of a loan, the borrower would
be required to return the securities to the Portfolio and any gain or loss
in market price during the loan would inure to the Portfolio. The risks in
lending portfolio securities, as with other 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. In the event of the default or
bankruptcy by such party, the Portfolios would suffer a loss. The law
regarding the rights of the Portfolios is unsettled with respect to a
borrower becoming subject to bankruptcy or similar proceedings. Under
these circumstances, there may be a restriction on the Portfolios' ability
to sell the collateral and the Portfolios could suffer a loss. Loans will
be made only 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
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. Although a Portfolio
typically will acquire obligations issued and supported by the credit of
U.S. 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.
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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.
Repurchase agreements carry certain risks not associated with direct
investments in securities, including possible decline in the market value
of the underlying securities and delays and costs to the Portfolio if the
other party to the repurchase agreement becomes bankrupt. 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. LGT Asset Management reviews and
monitors the creditworthiness of such institutions under the general
supervision of Growth Portfolio's Board. 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.
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. No
Portfolio will purchase securities while borrowings are outstanding. 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. Each Portfolio
also may borrow up to an additional 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 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. Each Portfolio,
however, is 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 Growth 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 NAV. When a Portfolio's income
and gains on securities purchased with the proceeds of borrowing exceed
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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. A
reverse repurchase agreement is a borrowing transaction in which the
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. Each Portfolio also may engage in "roll" borrowing
transactions, which involve the sale of Government National Mortgage
Association 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. No segregation is required for reverse
repurchase agreements with banks.
Options and Futures
Special Risks of Options and Futures
The use of options and futures 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 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
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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 securities 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, a 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
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 and
indices. Call options generally will be written on securities 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 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 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 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 above the exercise price,
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and retains the risk of loss should the price of the security decline.
Unlike one who owns securities not subject to an option, a Portfolio has
no control over when it may be required to sell the underlying securities,
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 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, which will be increased or offset by the premium received. Each
Portfolio does not consider a security 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 appreciates to a price higher than the exercise price of the call
option, it can be expected that the option will be exercised and a
Portfolio will be obligated to sell the security 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
from being called, or to permit the sale of the underlying security.
Furthermore, effecting a closing transaction will permit a Portfolio to
write another call option on the underlying security 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 at the time the
options are written. From time to time, a Portfolio may purchase an
underlying security for delivery in accordance with the exercise of an
option, rather than delivering such security from its portfolio. In such
cases, additional costs will be incurred.
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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, 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 owned by a Portfolio.
Writing Put Options
Each Portfolio may write put options on securities and indices.
A put option gives the purchaser of the option the right to sell, and the
writer (seller) the obligation to buy, the underlying security 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.
A Portfolio generally would write put options in circumstances
where LGT Asset Management wishes to purchase the underlying security for
that Portfolio's holdings at a price lower than the current market price
of the security. 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 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
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 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 purchase the security at greater than its
market value.
Purchasing Put Options
Each Portfolio may purchase put options on securities and
indices. As the holder of a put option, a Portfolio would have the right
to sell the underlying security 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 such options or permit such options to expire.
Each Portfolio may purchase a put option on an underlying
security ("protective put") owned by that Portfolio in order to protect
against an anticipated decline in the value of the security. Such hedge
protection is provided only during the life of the put option when the
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Portfolio, as the holder of the put option, is able to sell the underlying
security at the put exercise price regardless of any decline in the
underlying security's market price. For example, a put option may be
purchased in order to protect unrealized appreciation of a security when
LGT Asset Management deems it desirable to continue to hold the security
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 is eventually sold.
Each Portfolio also may purchase put options at a time when that
Portfolio does not own the underlying security. By purchasing put options
on a security it does not own, that Portfolio seeks to benefit from a
decline in the market price of the underlying security. If the put option
is not sold when it has remaining value, and if the market price of the
underlying security 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 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 and indices.
As the holder of a call option, such Portfolio would have the right to
purchase the underlying security 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 such options or permit such options to expire.
Call options may be purchased by a Portfolio for the purpose of
acquiring the underlying security for its portfolio. Utilized in this
fashion, the purchase of call options would enable a Portfolio to acquire
the security at the exercise price of the call option plus the premium
paid. At times, the net cost of acquiring the security in this manner may
be less than the cost of acquiring the security 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 itself, the Portfolio is partially protected from any
unexpected decline in the market price of the underlying security 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 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 having a current
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market value below the price at which such security 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. Accordingly, a Portfolio could purchase a call
option on the same underlying security, 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 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.
Aggregate premiums paid for put and call options will not exceed
5% of each Portfolio's total assets at the time of purchase.
Options either may be 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. In the
case of OTC options, there can be no assurance that a liquid secondary
market will exist for any particular option at any specific time.
The staff of 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
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
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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
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
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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 amount
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 and Stock Index Futures Contracts
Each Portfolio may enter into interest rate or stock index
futures contracts (collectively, "Futures" or "Futures Contracts"), as a
hedge against changes in prevailing levels of interest rates or stock
price levels in order to establish more definitely the effective return on
securities held or intended to be acquired by the 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 stock
prices, and purchases of Futures as an offset against the effect of
expected declines in interest rates or increases in stock prices.
The Portfolios 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").
Although techniques other than sales and purchases of Futures
Contracts could be used to reduce a Portfolio's exposure to interest rate
and stock market fluctuations, the Portfolio may be able to hedge exposure
more effectively and at a lower cost through using Futures Contracts.
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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 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, 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 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 September stock index Futures
Contract 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 September stock index
Futures Contract 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.
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 that a Portfolio owns, or
Futures Contracts will be purchased to protect the Portfolio against an
increase in the price of securities 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
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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 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 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 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, 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 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 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 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,
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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
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 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.
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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 and Options on Futures
To the extent that a Portfolio enters into Futures Contracts and
options on Futures Contracts, in each case other than for bona fide
hedging purposes (as defined by the CFTC), the aggregate initial margin
and premiums required to establish these positions (excluding the amount
by which options are "in-the-money") will not exceed 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. 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 Growth
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%.
Cover
Transactions using 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 or other options 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 Futures Contract or option is
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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.
Risk Factors
ILLIQUID SECURITIES. A 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
securities for approximately the amount at which the Portfolio values such
securities. See "Investment Limitations" below. 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 the sale of liquid securities such as securities
eligible for trading on U.S. securities exchanges or in the OTC 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 on resale.
With respect to liquidity determinations generally, Growth
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 Securities Act of 1933, are liquid or illiquid. The Board
of Trustees has delegated the function of making day-to-day determinations
of liquidity to LGT Asset Management in accordance with procedures
approved by the Board. LGT Asset Management takes into account a number of
factors in reaching liquidity decisions, including, but not limited to:
(i) 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 effected (e.g., the time needed to sell the security, how offers are
solicited, and the mechanics of transfer.) LGT Asset Management monitors
the liquidity of securities in each Portfolio's securities portfolio and
periodically reports such determinations to Growth Portfolio's Board of
Trustees.
Risks of Debt Securities
Each Portfolio is permitted to purchase investment grade debt
securities. In selecting securities for each Portfolio, LGT Asset
Management reviews and monitors the creditworthiness of each issuer and
issue and analyzes interest rate trends and specific developments which
may affect individual issuers, in addition to relying on ratings assigned
by S&P, Moody's or another NRSRO as indicators of quality. Debt securities
rated Baa by Moody's or BBB by S&P are investment grade, although Moody's
considers securities rated Baa to have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity for such securities to make principal and
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interest payments than is the case for higher grade debt securities. Each
Portfolio is also permitted to purchase debt securities that are not rated
by S&P, Moody's or another NRSRO but that LGT Asset Management determines
to be of comparable quality to that of rated securities in which such
Portfolio may invest. Such securities are included in the computation of
any percentage limitations applicable to the comparable rated securities.
Ratings of Portfolio securities represent the rating agencies'
opinions regarding their quality, are not a guarantee of quality and may
be reduced after a Portfolio has acquired the security. LGT Asset
Management will consider such an event in determining whether a Portfolio
should continue to hold the security but is not required to dispose of it.
Credit ratings attempt to evaluate the safety of principal and interest
payments and do not reflect an assessment of the volatility of the
security's market value or the liquidity of an investment in the security.
Also, NRSROs 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 the rating indicates.
Other Policies
There may be times when, in the opinion of LGT Asset Management,
changes in market, political, or economic conditions warrant reducing the
proportion of a Portfolio's assets invested in equity securities and
increasing the proportion held in or high quality domestic money market
instruments issued by corporations or the U.S. government as part of a
defensive strategy. To the extent a Portfolio adopts a temporary
defensive position, it will not be investing so as to directly achieve its
investment objectives. In addition, pending investment proceeds from new
shares or to meets its ordinary daily cash needs, each Portfolio may hold
cash and may invest in high quality domestic money market instruments.
Money market instruments in which the Portfolios may invest include, but
are not limited to, the following: U.S. government securities, high grade
commercial paper, bank certificates of deposit and bankers' acceptances of
issuers domiciled in the United States and repurchase agreements related
to any of the foregoing. High grade commercial paper refers to commercial
paper rated P-1 by Moody's or A-1 by S&P at the time of investment or, if
not similarly rated by another NRSRO, deemed by LGT Asset Management to be
of comparable quality.
Investment Limitations
Each Portfolio has adopted the following fundamental investment
limitations which (unless otherwise noted) may not be changed without
approval by the affirmative vote 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.
No Portfolio may:
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(1) Invest in companies for the purpose of exercising control or
management;
(2) Purchase or sell real estate; provided that a Portfolio may
invest in securities secured by real estate or interests therein or issued
by companies that invest in real estate or interests therein;
(3) Purchase or sell interests in oil, gas or other mineral
exploration or development programs, except that the Portfolio may invest
in the securities of companies that engage in these activities;
(4) Purchase or sell commodities or commodity contracts, except
that each Portfolio may purchase and sell futures contracts and options;
(5) Mortgage, pledge, or in any other manner transfer as security
for any indebtedness, any of its assets except to secure permitted
borrowings. Collateral arrangements with respect to initial or variation
margin for futures contracts and options will not be deemed to be a pledge
of a Portfolio's assets;
(6) Borrow money in excess of 33-1/3% of the Portfolio's total
assets (including the amount borrowed), less all liabilities and
indebtedness (other than borrowing). Transactions involving options,
futures contracts, options on futures contracts and collateral
arrangements relating thereto will not be deemed to be borrowings;
(7) Purchase securities on margin or effect short sales, except
that a Portfolio may obtain such short-term credits as may be necessary
for the clearance of purchases or sales of securities and except in
connection with the use of options, futures contracts or options thereon.
The Portfolios may make deposits of margin in connection with futures
contracts and options thereon;
(8) Participate on a joint or a joint and several basis in any
trading account in securities. (The "bunching" of orders for the sale or
purchase of marketable portfolio securities with other accounts under the
management of LGT Asset Management to save brokerage costs or average
prices among them is not deemed to result in a securities trading
account);
(9) Make loans, except that each Portfolio may purchase debt
securities and enter into repurchase agreements and make loans of
portfolio securities;
(10) Purchase or retain the securities of an issuer if, to the
knowledge of the Portfolio after reasonable inquiry, any of the Trustees
or officers of Growth Portfolio or the Portfolio's investment adviser
individually own beneficially more than 1/2 of 1% of the outstanding
securities of such issuer and together own beneficially more than 5% of
the securities;
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(11) Underwrite securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, the
Portfolio may be deemed an underwriter under federal or state securities
laws; and
(12) Invest more than 25% of the value of the Portfolio's total
assets in securities of issuers conducting their principal business
activities in any one industry, except that this limitation shall not
apply to securities issued or guaranteed as to principal and interest by
the U.S. government or any of its agencies or instrumentalities.
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 (excluding the United States Government, its agencies or
instrumentalities), and each Portfolio will purchase no more than 10% of
the outstanding voting securities of any one issuer. This policy cannot
be changed without approval by the holders of a majority of a Portfolio's
outstanding voting securities, as defined above.
The following investment restrictions of each Portfolio are not
fundamental and may be changed by action of Growth Portfolio's Board of
Trustees without investor approval. Each Portfolio may not:
(1) Invest more than 15% of its net assets in
illiquid securities, a term which means securities that cannot be disposed
of within seven days in the normal course of business at approximately the
amount at which the Portfolio has valued the securities and includes,
among other things, repurchase agreements maturing in more than seven
days;
(2) Invest more than 5% of its assets in securities
of companies which, together with their predecessors, have been in
operation for less than three years;
(3) Borrow money except for temporary or emergency
purposes (not for leveraging) not in excess of 33 1/3% of the value of the
Portfolio's total assets;
(4) Enter into a futures contract, or an option on a
futures contract, in each case other than for bona fide hedging purposes
(as defined by the CFTC), if the aggregate initial margin and premiums
required to establish all of these 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; or
(5) Purchase securities of other investment
companies, except to the extent permitted by the 1940 Act, in the open
market at no more than customary commission rates. This limitation does
not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of reorganization, consolidation, or merger.
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A Portfolio will not knowingly exercise rights or otherwise
acquire securities when to do so would jeopardize the Portfolio's status
under the 1940 Act as a diversified investment company. If a percentage
restriction on investment or utilization of assets in a fundamental policy
or restriction is adhered to at the time an investment is made, a later
change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not
be considered a violation of a Portfolio's investment policies or
restrictions. A Portfolio may exchange securities, exercise conversion or
subscription rights, warrants, or other rights to purchase common stock or
other equity securities and may hold, except to the extent limited by the
1940 Act, any such securities so acquired without regard to the
Portfolio's investment policies and restrictions. The original cost of
the securities so acquired will be included in any subsequent
determination of a Portfolio's compliance with the investment percentage
limitations referred to above.
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Item 14. MANAGEMENT OF THE PORTFOLIOS.
--------------------------------------
The Growth Portfolio's Trustees and executive officers are listed
below.
Names, Position(s) with the Principal Occupations and Business
Portfolios and Address Experience for the Past 5 Years
--------------------------- ----------------------------------
David A. Minella,* 43 Director of Liechtenstein Global Trust
Trustee, Chairman of the (holding company of the various
Board and President international LGT companies) since
50 California Street 1990; President of the Asset Management
San Francisco, CA 94111 Division, Liechtenstein Global Trust
since 1995; Director and President of
LGT Asset Management Holdings, Inc.
("LGT Asset Management Holdings") since
1988; Director and President of LGT
Asset Management since 1989; Director
of GT Global since 1987; 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.
__________________________
* Mr. Minella is an "interested person" of the Growth Portfolio as
defined by the 1940 Act due to his affiliations with the LGT companies.
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Names, Position(s) with the Principal Occupations and Business
Portfolios and Address Experience for the Past 5 Years
--------------------------- ----------------------------------
C. Derek Anderson, 54 Chief Executive Officer of Anderson
Trustee Capital Management, Inc. from 1988 to
220 Sansome Street present; Chairman and Chief Executive
Suite 400 Officer of Plantagenet Holdings, Ltd.
San Francisco, CA 94104 from 1991 to present; Director,
Munsingwear, Inc.; Director, American
Heritage Group Inc. and various 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, 56 A Partner of Baker & McKenzie (a law
Trustee firm); and Director and Chairman of
2 Embarcadero Center C.D. Stimson Company (a private
Suite 2400 investment company). 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.
Arthur C. Patterson, 51 Managing Partner of Accel Partners (a
Trustee venture capital firm). He also serves
One Embarcadero Center as a director of various computing and
Suite 3820 software companies. Mr. Patterson 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.
Ruth H. Quigley, 60 Private investor. From 1984 to 1986,
Trustee Ms. Quigley was President of Quigley
1055 California Street Friedlander & Co., Inc. (a financial
San Francisco, CA 94108 advisory services firm). Ms. Quigley
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.
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Names, Position(s) with the Principal Occupations and Business
Portfolios and Address Experience for the Past 5 Years
--------------------------- ----------------------------------
F. Christian Wignall, 39 Director of LGT Asset Management
Vice President and Chief Holdings since 1989; Senior Vice
Investment Officer - Global President, Chief Investment Officer --
Equities Global Equities and a Director of LGT
50 California Street Asset Management since 1987, and
San Francisco, CA 94111 Chairman of the Investment Policy
Committee of the affiliated
international LGT companies since 1990.
Helge K. Lee, 50 Senior Vice President and General
Vice President and Secretary Counsel of LGT Asset Management, GT
50 California Street Global, GT Services and G.T. Insurance
San Francisco, CA 94111 since May 1994. Mr. Lee was the Senior
Vice President, General Counsel and
Secretary of Strong/Corneliuson
Management, Inc. and Secretary of each
of the 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
Assistant Secretary Holdings, LGT Asset Management, GT
50 California Street Global, GT Services and G.T. Insurance
San Francisco, CA 94111 since February 1996. Assistant General
Counsel of LGT Asset Management
Holdings, LGT Asset Management, G.T.
Global and G.T. Services since 1991.
Assistant General Counsel of G.T.
Insurance since 1992. From 1989 to
1991, Mr. Guarino was an attorney at
The Dreyfus Corporation.
B-24
<PAGE>
Names, Position(s) with the Principal Occupations and Business
Portfolios and Address Experience for the Past 5 Years
--------------------------- ----------------------------------
David J. Thelander, 40 Vice President of LGT Asset Management
Assistant Secretary Holdings, Inc., LGT Asset Management,
50 California Street GT Global, GT Services and G.T.
San Francisco, CA 94111 Insurance. Assistant General Counsel
of LGT Asset Management since January
1995. From 1993 to 1994, Mr. Thelander
was an associate at Kirkpatrick &
Lockhart LLP (a law firm). Prior
thereto, he was an attorney with the
U.S. Securities and Exchange
Commission.
James R. Tufts, 37 President of GT Services since 1995;
Vice President and Chief from 1994 to 1995, Senior Vice
Financial Officer President - Finance and Administration
50 California Street of LGT Asset Management Holdings, LGT
San Francisco, CA 94111 Asset Management, GT Global, GT
Services and G.T. Insurance. From 1990
to 1994, Mr. Tufts was Vice President -
Finance of LGT Asset Management
Holdings, Inc., LGT Asset Management,
GT Services and GT Global; 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 of Mutual Fund
Vice President and Accounting at LGT Asset Management
Chief Accounting since 1992. Mr. Chancey was Vice
Officer President of Putnam Fiduciary Trust
50 California Street Company from 1989 to 1992.
San Francisco, CA 94111
The Board of Trustees has a Nominating and Audit Committee,
comprised of Ms. Quigley and Messrs. Anderson, Bayley and Patterson, which
is responsible for nominating persons to serve as Trustees, reviewing
audits of Growth Portfolio and its Portfolios recommending firms to serve
as independent auditors for Growth Portfolio. Each of the Trustees and
officers of the Growth Portfolio is also a Director and officer of G.T.
Investment Portfolios, Inc., G.T. Investment Funds, Inc., G.T. Global
Developing Markets Fund, Inc., a Trustee and officer of G.T. Global Growth
Series, G.T. Greater Europe Fund, G.T. Global Variable Investment Trust,
B-25
<PAGE>
G.T. Global Variable Investment Series, Global Investment Portfolio and
Global High Income Portfolio, which also are registered investment
companies managed and administered by LGT Asset Management. Each Trustee
and Officer serves in total as a Director, Trustee and/or 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 per fund 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 Growth Portfolio. For the fiscal year ended
December 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
$99,676.78, $95,368.64, $92,139.90 and $94,457.55, respectively, from the
40 series managed or administered by LGT Asset Management for which he or
she served 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.
Item 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF BENEFICIAL INTERESTS.
-----------------------------------------------------------------------
As of the date of this filing, GT Global America Small Cap Growth
Fund and GT Global America Value Fund (each a "Fund," collectively,
"Funds") owned 99.9% and 99.9% of the value of the outstanding beneficial
interests in Small Cap Portfolio and Value Portfolio, respectively (a
"corresponding Portfolio"). Because each Fund currently controls its
corresponding Portfolio, each Fund may take actions affecting its
corresponding Portfolio without the approval of any other investor.
Each Fund has informed its corresponding Portfolio that whenever
it 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.
Item 16. INVESTMENT ADVISORY AND OTHER SERVICES.
------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION. LGT Asset Management
serves as each Portfolio's investment manager under an Investment
Management and Administration Contract dated October 1, 1995 ("Management
Contract"). As investment manager and administrator, LGT Asset Management
makes all investment decisions for the Portfolios and administers each
Portfolio's affairs. LGT Asset Management provides a continuous
B-26
<PAGE>
investment program for each Portfolio, including investment research and
management with respect to all securities and cash equivalents of each
Portfolio. LGT Asset Management determines 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. LGT Asset Management also 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 its average daily
net assets, at the annualized rate of 0.475% on the first $500 million,
0.45% on the next $500 million, 0.425% on the next $500 million, and 0.40%
on all amounts thereafter.
The Management Contract has an initial two-year term. The
Management Contract may be renewed for additional one-year terms
thereafter, provided that any such renewal has been specifically approved
at least annually by (i) Growth Portfolio's Board of Trustees, or by the
vote of a majority of a Portfolio's 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 purpose of voting on such approval. The Management Contract was
approved with respect to each Portfolio by vote of the Board of Trustees
of Growth Portfolio on June 30, 1995, and by LGT Asset Management as the
initial interestholder of each Portfolio on October 17, 1995. The
Management Contract provides with respect to each Portfolio that either
the Portfolio or LGT Asset Management may terminate the Management
Contract without penalty upon sixty days' written notice to the other
party. The Management Contract, which is an investment advisory contract
as defined under the 1940 Act, would terminate automatically in the event
of its assignment (as defined in the 1940 Act). For the period October
18, 1995 (commencement of operations) to December 31, 1995, the Small Cap
Portfolio and the Value Portfolio paid investment management and
administration fees of $1,293 and $622, respectively, to LGT Asset
Management. For the period October 18, 1995 (commencement of operations)
to December 31, 1995, LGT Asset Management reimbursed the Small Cap
Portfolio and Value Portfolio for their respective investment management
and administration fees in the amounts of $1,293 and $622, respectively.
Under the Management Contract, LGT Asset Management has agreed to
reimburse each Portfolio if that Portfolio's annual ordinary expenses
exceed the most stringent limits prescribed by any state in which its
corresponding Fund's shares are offered for sale. Currently, the most
restrictive applicable limitation provides that a Fund's expenses may not
exceed an annual rate of 2 1/2% of the first $30 million of average net
assets, 2% of the next $70 million of average net assets and 1 1/2% of
assets in excess of that amount.
B-27
<PAGE>
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of each Portfolio's
assets.
INDEPENDENT ACCOUNTANTS. Growth Portfolio's independent
accountants are Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts 02109.
Item 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
--------------------------------------------------
Subject to policies established by Growth 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/dealer or group of 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' securities
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 trans-
actions 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. 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 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 in over-the-counter markets.
B-28
<PAGE>
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 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 the Portfolios.
Under a policy adopted by Growth 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 that, consistent with the policy of
obtaining the best net results, brokerage transactions may be conducted
through certain companies that are members of Liechtenstein Global Trust.
The Growth 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.
Aggregate brokerage commissions paid for the period October 18,
1995 (commencement of operations), to December 31, 1995, for the Small Cap
Portfolio and Value Portfolio were $3,317 and $1,032, respectively.
PORTFOLIO TRADING AND TURNOVER. Although each Portfolio
generally does not intend 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 Item 20).
B-29
<PAGE>
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
rate should not exceed 75%. However, the portfolio turnover rate will not
be a limiting factor when management deems portfolio changes appropriate.
A 75% 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 75% 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 a Portfolio will bear directly.
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 Growth Portfolio or in a Portfolio, as the case may be, may
control the outcome of these votes. Growth Portfolio is not required to
hold annual meetings of investors but Growth 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 Growth
Portfolio (or a Portfolio) request in writing a meeting of investors in
Growth Portfolio (or Portfolio). No amendment required to be approved by
investors by law may be made to Growth 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).
B-30
<PAGE>
Growth Portfolio may enter into a merger or consolidation, or
sell all or substantially all of its (or a Portfolio's) assets, upon such
terms and conditions and for such consideration when and as authorized by
the Trustees. Any such merger shall be deemed for all such purposes to
have been accomplished under and pursuant to the law of the State of New
York. A Portfolio may also be dissolved (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 their investment), (ii) by the Trustees by
written notice to its investors, or (iii) 120 days after a holder of
beneficial interests in a Portfolio either (a) makes an assignment for the
benefit of creditors, or (b) files a voluntary petition in bankruptcy, or
(c) is adjudged a bankrupt or insolvent or has entered against it an order
for relief in any bankruptcy or insolvency proceeding, or (d) files a
petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any bankruptcy statute or regulation, or (e) files an answer or
other pleading admitting or failing to contest the material allegations of
a petition filed against it in any proceeding referred to in clauses (iii)
or (iv) above, or (vi) seeks, consents to or acquiesces in the appointment
of a trustee, receiver or liquidator of such holder of beneficial interest
or of all or any substantial part of its properties, or (vii) is expelled
from the Portfolio, whichever occurs first. However, within such 120
days, holders of beneficial interests of the Portfolio (excluding the
holder with respect to which an event described in (i) - (vii) has
occurred) owning a majority of the beneficial interests in a Portfolio may
vote to continue its business, even if such a dissolution has occurred.
Growth 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 may 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 Growth Portfolio against liabilities and expenses
incurred in connection with litigation in which they may be involved
B-31
<PAGE>
because of their offices with Growth Portfolio, unless, as to liability to
Growth 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 Growth 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. See Items 4 and 7 in Part A.
Each Portfolio determines its NAV 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
NAV next following the receipt of an order.
Each Portfolio's portfolio securities and other assets are valued
as follows:
Equity securities, 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 other assets for which market quotations are not readily
available (including restricted securities that 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
B-32
<PAGE>
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
valuations represent fair value.
Options on indices and securities purchased by the Portfolios 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 in the case of OTC
options. When market quotations for futures and options on futures held by
a Portfolio are readily available, those positions will be valued based
upon such quotations.
Securities and other 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 generally is 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
connection with such disposition). In addition, other factors, 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, generally are considered.
Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of regular
trading on the NYSE will not be reflected in the Portfolios' NAVs unless
LGT Asset Management, under the supervision of Growth Portfolio's Board of
Trustees, determines that the particular event would materially affect
NAV. As a result, a Portfolio's NAV may be significantly affected by such
trading on days when an interest holder has no access to the 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 NAV (a redemption in kind). If
payment is made in securities, an investor may incur transaction expenses
in selling any such securities so received and would be subject to any
increase or decrease in the value of the securities until they were sold.
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 NAV of such Portfolio
by the percentage representing that investor's share of the aggregate
beneficial interests in that Portfolio. Any additions or reductions which
B-33
<PAGE>
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 NAV 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.
--------------------
GENERAL
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 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 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 Fund's basis for its interest in its
corresponding Portfolio generally will equal the amount of cash and the
basis of any property the Fund invests in the Portfolio, increased by the
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<PAGE>
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.
HEDGING TRANSACTIONS
The Portfolios' use of hedging transactions, such as writing
(selling) and purchasing options and Futures (collectively "Hedging
Instruments"), involves complex rules that will determine for federal
income tax purposes the character and timing of recognition of the gains
and losses the Portfolios realize in connection therewith. For each
Portfolio, income from transactions in Hedging Instruments derived by it
with respect to its business of investing in securities will qualify as
permissible income for its corresponding Fund and other RIC investors
under the requirement that at least 90% of a RIC's gross income each
taxable year consist of specified types of income. However, income from
the disposition by a Portfolio of Hedging Instruments held for less than
three months will be subject to the requirement applicable to its
corresponding Fund and other RIC investors that less than 30% of a RIC's
gross income each taxable year consist of certain short-term gains
("Short-Short Limitation").
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 hedging
position during the period of the hedge for purposes of determining
whether the Portfolio's corresponding Fund and other RIC investors satisfy
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 will consider whether it should seek to
qualify for this treatment for its hedging transactions. To the extent a
Portfolio does not so qualify, it may be forced to defer the closing out
of certain Hedging Instruments beyond the time when it otherwise would be
advantageous to do so, in order for its corresponding Fund and other RIC
investors to qualify as RICs.
Exchange-traded Futures Contracts and listed options thereon 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 federal income tax purposes. Sixty percent of
any net gain or loss recognized as a result of 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.
Item 21. UNDERWRITERS.
----------------------
Not applicable.
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<PAGE>
Item 22. CALCULATION OF PERFORMANCE DATA.
-----------------------------------------
Not applicable.
Item 23. FINANCIAL STATEMENTS.
------------------------------
The financial statements of each Portfolio for the period October
18, 1995 (commencement of operations) through December 31, 1995, included
herein have been included in reliance on the report of Coopers & Lybrand
L.L.P., independent auditors, given on the authority of said firm as
experts in auditing and accounting.
B-36
<PAGE>
Statement of Additional Information Page 42
SMALL CAP GROWTH PORTFOLIO
VALUE PORTFOLIO
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Trustees of Global America Small Cap Growth
Portfolio and Global America Value Portfolio:
We have audited the accompanying statements of assets and liabilities of Global
America Small Cap Growth Portfolio and Global America Value Portfolio, including
the portfolios of investments, as of December 31, 1995, the related statements
of operations, the statements of changes in net assets and supplementary data
for the period from October 18, 1995 (commencement of operations) to December
31, 1995. These financial statements and the supplementary data are the
responsibility of the Portfolios' 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 audits 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
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the supplementary data referred to
above present fairly, in all material respects, the financial position of Global
America Small Cap Growth Portfolio and Global America Value Portfolio as of
December 31, 1995, the results of their operations, the changes in their net
assets and the supplementary data for the period from October 18, 1995
(commencement of operations) to December 31, 1995, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 12, 1996
Statement of Additional Information Page 43
<PAGE>
SMALL CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Shares Value Assets {d}
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Services (26.3%)
Rio Hotel and Casino, Inc.-/- ..................................... 10,200 $ 121,125 3.2
LEISURE & TOURISM
Claire's Stores, Inc. .............................................. 6,600 116,324 3.1
RETAILERS-APPAREL
Friedman's, Inc. "A"-/- ............................................ 6,000 115,500 3.1
RETAILERS-OTHER
United Video Satellite Group, Inc. "A"-/- .......................... 4,000 108,000 2.9
CABLE TELEVISION
AnnTaylor Stores, Inc.-/- .......................................... 10,400 106,600 2.8
RETAILERS-APPAREL
Younkers, Inc.-/- ................................................. 4,100 104,038 2.8
RETAILERS-APPAREL
Michaels Stores, Inc.-/- ........................................... 7,500 103,125 2.8
RETAILERS-OTHER
Anchor Gaming-/- .................................................. 3,300 75,075 2.0
LEISURE & TOURISM
Ascent Entertainment Group, Inc.-/- ................................ 3,900 61,425 1.6
BROADCASTING & PUBLISHING
Buckle, Inc.-/- .................................................... 3,300 58,575 1.6
RETAILERS-APPAREL
META Group, Inc.-/- ................................................ 500 15,313 0.4
CONSUMER SERVICES
------------
985,100
------------
Finance (12.3%)
Trans Financial, Inc. .............................................. 7,100 126,913 3.4
BANKS-REGIONAL
RFS Hotel Investors, Inc. ......................................... 7,800 119,925 3.2
REAL ESTATE INVESTMENT TRUST
AmVestors Financial Corp. .......................................... 10,000 111,250 3.0
INSURANCE-LIFE
Winston Hotels, Inc. ............................................... 8,200 97,375 2.6
REAL ESTATE
Mid-America Apartment Communities, Inc. ............................ 100 2,475 0.1
REAL ESTATE
------------
457,938
------------
Consumer Durables (10.0%)
Lifetime Hoan Corp.-/- ............................................. 14,400 133,200 3.6
APPLIANCES & HOUSEHOLD
REX Stores Corp.-/- ............................................... 7,000 124,250 3.3
CONSUMER ELECTRONICS
Syratech Corp.-/- .................................................. 5,800 116,725 3.1
APPLIANCES & HOUSEHOLD
------------
374,175
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 44
<PAGE>
SMALL CAP GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Shares Value Assets {d}
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Materials/Basic Industry (7.3%)
NCI Building Systems, Inc.-/- ...................................... 6,000 $ 148,500 4.0
BUILDING MATERIALS & COMPONENTS
Commercial Intertech Corp. ......................................... 6,900 125,063 3.3
METALS - NON-FERROUS
------------
273,563
------------
Consumer Non-Durables (7.1%)
National Picture & Frame Co.-/- .................................... 15,000 138,750 3.7
HOUSEHOLD PRODUCTS
Haggar Corp. ....................................................... 6,200 111,600 3.0
TEXTILES & APPAREL
Hart Brewing, Inc. ................................................. 1,000 15,250 0.4
BEVERAGES - ALCOHOLIC
------------
265,600
------------
Technology (5.1%)
Dallas Semiconductor Corp.-/- ...................................... 5,600 116,200 3.1
SEMICONDUCTORS
SQA, Inc.-/- ....................................................... 1,000 19,250 0.5
SOFTWARE
Objective Systems Integrators, Inc.-/- ............................. 300 16,425 0.4
COMPUTERS & PERIPHERALS
Citrix Systems, Inc.-/- ............................................ 500 16,250 0.4
COMPUTERS & PERIPHERALS
MetaTools, Inc.-/- ................................................. 500 13,000 0.3
SOFTWARE
Visioneer, Inc.-/- ................................................ 500 11,125 0.3
COMPUTERS & PERIPHERALS
Pixar, Inc.-/- ..................................................... 100 2,888 0.1
COMPUTERS & PERIPHERALS
------------
195,138
------------
Capital Goods (4.9%)
Plasma & Materials Technologies, Inc.-/- .......................... 10,200 114,750 3.1
ELECTRICAL PLANT/EQUIPMENT
Belmont Homes, Inc.-/- ............................................ 3,100 56,188 1.5
CONSTRUCTION
Westell Technologies, Inc.-/- ...................................... 500 12,563 0.3
TELECOM EQUIPMENT
------------
183,501
------------
Health Care (2.7%)
Coventry Corp.-/- .................................................. 4,900 101,061 2.7
HEALTH CARE SERVICES
------------ -----
TOTAL EQUITY INVESTMENTS (cost $2,831,283) ........................... 2,836,076 75.7
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 45<PAGE>
SMALL CAP GROWTH PORTFOLIO
<TABLE>
<CAPTION>
Principal Market % of Net
Short-Term Investments Amount Value Assets {d}
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Treasury Bills (18.6%)
United States (18.6%)
United States Treasury Bill, effective yield 5.48%, due 1/11/96
(cost $699,319) ................................................. 700,000 $ 699,319 18.6
------------ -----
<CAPTION>
Market % of Net
Repurchase Agreement Value Assets {d}
- ---------------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C>
Dated December 29, 1995, with State Street Bank & Trust Company, due
January 2, 1996, for an effective yield of 5.55%, collateralized by
$405,000 U.S. Treasury Bills, 6.125% due 5/15/98 (market value of
collateral is $416,109, including accrued interest). (cost
$407,188) ........................................................ 407,188 10.9
------------ -----
TOTAL INVESTMENTS (cost $3,937,790)* ................................. 3,942,583 105.2
Other Assets and Liabilities ......................................... (196,234) (5.2)
------------ -----
NET ASSETS ........................................................... $ 3,746,349 100.0
------------ -----
------------ -----
</TABLE>
- ----------------
{d} Percentages indicated are based on net assets of $3,746,349.
-/- Non-income producing security.
* For Federal income tax purposes, cost is $3,937,790 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 95,442
Unrealized depreciation: (90,649)
-------------
Net unrealized appreciation: $ 4,793
-------------
-------------
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 46
<PAGE>
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Shares Value Assets {d}
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Health Care (19.8%)
Watson Pharmaceuticals, Inc.-/- ................................... 1,620 $ 79,380 4.2
PHARMACEUTICALS
Amgen, Inc.-/- .................................................... 1,310 77,781 4.1
BIOTECHNOLOGY
Merck & Co., Inc. ................................................. 1,140 74,955 4.0
PHARMACEUTICALS
Pharmacia & Upjohn, Inc. ........................................... 1,870 72,463 3.9
PHARMACEUTICALS
U.S. Surgical Corp. ................................................ 3,190 68,186 3.6
MEDICAL TECHNOLOGY & SUPPLIES
------------
372,765
------------
Finance (18.0%)
Lehman Brothers Holdings, Inc. ..................................... 3,600 76,500 4.1
INVESTMENT MANAGEMENT
Green Tree Financial Corp. ........................................ 2,850 75,169 4.0
CONSUMER FINANCE
Citicorp ........................................................... 1,110 74,648 4.0
BANKS-MONEY CENTER
Mercury General Corp. .............................................. 1,555 74,251 3.9
INSURANCE - PROPERTY-CASUALTY
ITT Hartford Group, Inc.-/- ........................................ 565 27,332 1.5
INSURANCE - MULTI-LINE
Investors Financial Services Corp.-/- .............................. 500 10,375 0.5
OTHER FINANCIAL
------------
338,275
------------
Multi-Industry/Miscellaneous (13.9%)
Eastman Kodak Co. ................................................. 1,110 74,370 4.0
MISCELLANEOUS
General Electric Co. ............................................... 1,025 73,800 3.9
CONGLOMERATE
Polaroid Corp. ..................................................... 1,450 68,694 3.7
MISCELLANEOUS
ITT Corp. - New-/- ................................................. 565 29,945 1.6
CONGLOMERATE
ITT Industries, Inc. .............................................. 565 13,560 0.7
CONGLOMERATE
------------
260,369
------------
<PAGE>
Technology (4.9%)
Cisco Systems, Inc.-/- ............................................. 795 59,326 3.2
NETWORKING
Objective Systems Integrators, Inc.-/- ............................. 300 16,425 0.9
COMPUTERS & PERIPHERALS
Pixar, Inc.-/- ..................................................... 500 14,438 0.8
COMPUTERS & PERIPHERALS
------------
90,189
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 47
<PAGE>
VALUE PORTFOLIO
<TABLE>
<CAPTION>
Market % of Net
Equity Investments Shares Value Assets {d}
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Materials/Basic Industry (3.9%)
Monsanto Co. ....................................................... 600 $ 73,500 3.9
------------
CHEMICALS
Energy (3.8%)
Sonat Offshore Drilling Co. ........................................ 1,610 72,048 3.8
------------
OIL
Services (3.7%)
HFS, Inc.-/- ....................................................... 855 69,896 3.7
------------
LEISURE & TOURISM
Capital Goods (3.6%)
Lockheed Martin Corp. .............................................. 850 67,150 3.6
------------
AEROSPACE/DEFENSE
Consumer Non-Durables (3.5%)
Coca-Cola Co. ..................................................... 735 54,573 2.9
BEVERAGES - NON-ALCOHOLIC
Estee Lauder Cos. "A"-/- ........................................... 200 6,975 0.4
PERSONAL CARE/COSMETICS
Boston Beer Co., Inc. "A"-/- ....................................... 200 4,750 0.2
BEVERAGES - ALCOHOLIC
------------
66,298
------------ -----
TOTAL EQUITY INVESTMENTS (cost $1,355,813) ........................... 1,410,490 75.1
------------ -----
<CAPTION>
Principal Market % of Net
Short-Term Investments Amount Value Assets {d}
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Treasury Bills (21.2%)
United States (21.2%)
United States Treasury Bill, effective yield 5.48%, due 1/11/96
(cost $399,611) ................................................. 400,000 399,611 21.2
------------ -----
<CAPTION>
Market % of Net
Repurchase Agreement Value Assets {d}
- ---------------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C>
Dated December 29, 1995, with State Street Bank and Trust Company,
due January 2, 1996, for an effective yield of 5.55%,
collateralized by $84,000 U.S. Treasury Notes, 6.125% due 5/15/98
(market value of collateral is $86,304, including accrued
interest). (cost $84,039) ....................................... 84,039 4.5
------------ -----
TOTAL INVESTMENTS (cost $1,839,463) * ............................... 1,894,140 100.8
Other Assets and Liabilities ......................................... (15,552) (0.8)
------------ -----
<PAGE>
NET ASSETS ........................................................... $ 1,878,588 100.0
------------ -----
------------ -----
</TABLE>
- ----------------
{d} Percentages indicated are based on net assets of $1,878,588.
-/- Non-income producing security.
* For Federal income tax purposes, cost is $1,839,463 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 85,039
Unrealized depreciation: (30,362)
-------------
Net unrealized appreciation: $ 54,677
-------------
-------------
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 48
<PAGE>
SMALL CAP GROWTH PORTFOLIO
VALUE PORTFOLIO
STATEMENTS OF ASSETS
AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP
GROWTH VALUE
PORTFOLIO PORTFOLIO
---------- ----------
<S> <C> <C>
Assets:
Investments in securities, at value (cost
$3,937,790 and $1,839,463, respectively)
(Note 1).................................. $3,942,583 $1,894,140
U.S. currency.............................. 699,173 392
Unamortized organizational costs (Note
1)........................................ 23,986 23,986
Dividends receivable....................... 1,968 870
---------- ----------
Total assets............................. 4,667,710 1,919,388
---------- ----------
Liabilities:
Payable for securities purchased........... 901,394 22,595
Payable for organization expenses (Note
1)........................................ 15,418 15,418
Payable for custodian fees................. 3,256 2,164
Payable for investment management and
administration fees (Note 2).............. 1,293 623
---------- ----------
Total liabilities........................ 921,361 40,800
---------- ----------
Net assets................................... $3,746,349 $1,878,588
---------- ----------
---------- ----------
Net assets consist of:
Paid in capital............................ $3,736,811 $1,825,278
Accumulated net investment income (loss)... 4,745 (1,367)
Net unrealized appreciation of
investments............................... 4,793 54,677
---------- ----------
Total -- representing net assets applicable
to shares of beneficial interest
outstanding................................. $3,746,349 $1,878,588
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 49
<PAGE>
SMALL CAP GROWTH PORTFOLIO
VALUE PORTFOLIO
STATEMENTS OF OPERATIONS
October 18, 1995 (commencement of operations) to December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP
GROWTH VALUE
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
Investment income: (Note 1)
Interest income............................ $ 9,113 $ 3,185
Dividend income............................ 2,009 1,154
--------- ---------
Total investment income.................. 11,122 4,339
--------- ---------
Expenses:
Custodian fees............................. 4,070 4,070
Investment management and administration
fees (Note 2)............................. 1,293 622
Amortization of organization costs (Note
1)........................................ 1,014 1,014
--------- ---------
Total expenses............................. 6,377 5,706
--------- ---------
Net investment income (loss)................. 4,745 (1,367)
Net realized and unrealized gain on
investments during the period: (Note 1)
Net unrealized appreciation of
investments............................... 4,793 54,677
--------- ---------
Net increase in net assets resulting from
operations.................................. $ 9,538 $ 53,310
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 50
<PAGE>
SMALL CAP GROWTH PORTFOLIO
VALUE PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
October 18, 1995 (commencement of operations) to December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP
GROWTH VALUE
PORTFOLIO PORTFOLIO
---------- ----------
<S> <C> <C>
Increase in net assets
Operations:
Net investment income (loss)............... $ 4,745 $ (1,367)
Net unrealized appreciation of
investments............................... 4,793 54,677
---------- ----------
Net increase in net assets resulting from
operations................................ 9,538 53,310
---------- ----------
Beneficial interest transactions:
Contributions.............................. 4,573,559 1,861,769
Withdrawals................................ (936,848) (136,591)
---------- ----------
Net increase from beneficial interest
transactions.............................. 3,636,711 1,725,178
---------- ----------
Total increase in net assets................. 3,646,249 1,778,488
Net assets:
Beginning of period........................ 100,100 100,100
---------- ----------
End of period.............................. $3,746,349 $1,878,588
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 51
<PAGE>
SMALL CAP GROWTH PORTFOLIO
VALUE PORTFOLIO
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Contained below are ratios and supplemental data that have been derived
from information provided in the financial statements.
<TABLE>
<CAPTION>
SMALL CAP
GROWTH PORTFOLIO VALUE PORTFOLIO
---------------------------- ----------------------------
OCTOBER 18, 1995 OCTOBER 18, 1995
(COMMENCEMENT OF OPERATIONS) (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995 TO DECEMBER 31, 1995
---------------------------- ----------------------------
<S> <C> <C>
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $3,746 $1,879
Ratio of net investment income
(loss) to average net
assets....................... 1.74% (a) (1.04)% (a)
Ratio of expenses to average
net assets................... 2.33% (a) 4.33% (a)
Portfolio turnover rate....... --% --%
</TABLE>
- ----------------
(a) Annualized
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 52
<PAGE>
SMALL CAP GROWTH PORTFOLIO
VALUE PORTFOLIO
NOTES TO
FINANCIAL STATEMENTS
December 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Global America Small Cap Growth Portfolio and Global America Value Portfolio
("Portfolios") are organized as New York Trusts and are registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as diversified,
open-end management investment companies. The following is a summary of
significant accounting policies consistently followed by the Portfolios in the
preparation of the financial statements. The policies are in conformity with
generally accepted accounting principles, and, therefore, the financial
statements may include certain estimates made by management.
(A) PORTFOLIO VALUATION
The Portfolios calculate the net asset value of and complete 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 LGT Asset Management, Inc.
("LGT", formerly known as G.T. Capital Management, Inc.) to be the primary
market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when LGT
deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments with a maturity of 60 days
or less are valued at amortized cost adjusted for foreign exchange translation
and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Portfolios' Board of Trustees.
(B) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolios, it is the
Portfolios' 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 Portfolios
under each agreement at its maturity.
(C) OPTION ACCOUNTING PRINCIPLES
When a 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, unless a quotation
from only one broker is available, in which case only that broker's price will
be used. If an option expires on its stipulated expiration date or if a
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. A
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 Portfolios may use options to manage their exposure to the
stock market and to fluctuations in currency values or interest rates.
The premium paid by a Portfolio for the purchase of a call or put option is
included in the Portfolio's "Statement of Assets and Liabilities" as an
investment
Statement of Additional Information Page 53
<PAGE>
SMALL CAP GROWTH PORTFOLIO
VALUE PORTFOLIO
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which a Portfolio has purchased expires on the stipulated
expiration date, the Portfolio realizes a loss in the amount of the cost of the
option. If a 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 a 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 a 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 a 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
a 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 a
Portfolio may not be able to enter into a closing transaction because of an
illiquid secondary market.
(D) 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 a
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, a 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 Portfolios may use futures contracts to manage their exposure
to the stock market and to fluctuations in currency values or interest rates.
(E) 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. A 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.
(F) PORTFOLIO SECURITIES LOANED
Cash collateral is received by the Portfolios 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 December 31, 1995, there were no securities on loan to brokers.
(G) TAXES
It is the policy of the Portfolios 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.
<PAGE>
(H) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Portfolios in connection with their organization, their
initial registration with the Securities and Exchange Commission and with
various states and the initial public offering of their shares aggregated
$25,000 for each Portfolio. These expenses are being amortized on a straightline
basis over a five-year period.
(I) INDEXED SECURITIES
A 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.
(J) RESTRICTED SECURITIES
A 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
LGT is the Portfolios' investment manager and administrator. Each Portfolio pays
investment
Statement of Additional Information Page 54
<PAGE>
SMALL CAP GROWTH PORTFOLIO
VALUE PORTFOLIO
management and administration fees to LGT at the annualized rate of 0.475% on
the first $500 million of average daily net assets of the Portfolio; 0.45% on
the next $500 million; 0.425% on the next $500 million; and 0.40% on amounts
thereafter. These fees are computed daily and paid monthly.
The Portfolios pay each of their Trustees who is not an employee, officer or
director of LGT, GT Global or GT Global Investor Services, Inc. $500 per year
plus $150 for each meeting of the board or any committee thereof attended by the
Trustees.
At December 31, 1995, all of the shares of beneficial interest of the Portfolios
were owned either by GT Global America Small Cap Growth Fund and GT Global
America Value Fund or LGT.
3. PURCHASES AND SALES OF SECURITIES
For the period ended December 31, 1995, purchases and sales of investment
securities by the Global America Small Cap Growth Portfolio, other than
short-term investments, aggregated $2,831,283 and $0, respectively. Purchases
and sales of investment securities by the Global America Value Portfolio, other
than short-term investments, aggregated $1,355,813 and $0, respectively. There
were no purchases or sales of U.S. government obligations by the Portfolios for
the period ended December 31, 1995.
Statement of Additional Information Page 55
<PAGE>
PART C
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
-------------------------------------------
(a) Financial Statements
The following financial statements as of December 31,
1995, and for the fiscal year then ended for Small Cap
Portfolio and Value Portfolio are included herewith.
--Report of Independent Accountants
--Portfolios of Investments
--Statements of Assets and Liabilities
--Statements of Operations
--Statements of Changes in Net Assets
--Supplementary Data
--Notes to Financial Statements
(b) Exhibits
1. Amended and Restated Declaration of Trust of the
Registrant. (1)
2. Form of By-Laws of the Registrant. (1)
5. Investment Management and Administration Contract
between the Registrant and LGT Asset
Management. (1)
8. Custodian Agreement between the Registrant and
State Street Bank and Trust Company. (1)
9. Transfer Agency Agreement between the Registrant
and GT Services (1)
11. Consent of Coopers & Lybrand L.L.P., 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 October 17, 1995.
<PAGE>
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
-----------------------------------------------------------------------
Not applicable.
Item 26. NUMBER OF HOLDERS OF SECURITIES.
-----------------------------------------
(1) (2)
Title of Class Number of Record Holders
Series of Beneficial (as of April 23, 1996)
Interests
Small Cap Portfolio 2
Value Portfolio 2
Item 27. INDEMNIFICATION.
-------------------------
Reference is hereby made to Article V of the Registrant's
Declaration of Trust, filed as Exhibit 1 to the Registration Statement on
Form N-1A, filed on October 17, 1995.
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, as amended.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
--------------------------------------------------------------
See the material under Item 5 (Management of the Portfolios)
included in Part A of this Registration Statement and the material under
Items 14 (Management of the Portfolios) 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, 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 29th day of
April, 1996.
GROWTH 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. Amended and Restate Declaration of Trust of the
Registrant.(1)
2. Form of By-Laws of the Registrant.(1)
5. Investment Management and Administration Contract
between the Registrant and LGT Asset Management.(1)
8. Custodian Agreement between the Registrant and
State Street Bank and Trust Company.(1)
9. Transfer Agency Agreement between the Registrant
and GT Services. (1)
11. Consent of Coopers & Lybrand L.L.P., 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 October 17, 1995.
C-5
<PAGE>
C-6
<PAGE>
C-7
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Growth Portfolio:
Small Cap Portfolio
Value Portfolio
We consent to the inclusion in the Registration Statement on Form N-1A of
our reports dated February 12, 1996 on our audits of the financial
statements of Growth Portfolio (Small Cap Portfolio and Value Portfolio).
We also consent to the references to our firm under the caption
"Independent Accountants."
/s/ Coopers & Lybrand L.L.P
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 29, 1996
<PAGE>
<PAGE>
Exhibit 13
GROWTH PORTFOLIO
LETTER OF INVESTMENT INTENT
To the Board of Trustees of Growth Portfolio:
The undersigned (the "Purchaser") hereby subscribes to purchase a
beneficial interest ("Interest") of Small Cap Growth 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 17th day of October, 1995.
SMALL CAP GROWTH PORTFOLIO
/s/ Helge K. Lee
_______________________
By: Helge K. Lee
Vice President and Secretary
<PAGE>
<PAGE>
Exhibit 13
GROWTH PORTFOLIO
LETTER OF INVESTMENT INTENT
To the Board of Trustees of Growth Portfolio:
The undersigned (the "Purchaser") hereby subscribes to purchase a
beneficial interest ("Interest") of Value 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 17th day of October, 1995.
VALUE PORTFOLIO
/s/ Helge K. Lee
_______________________
By: Helge K. Lee
Vice President and Secretary
<PAGE>
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<PAGE>
<ARTICLE> 6
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
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<PAGE>
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<PAGE>
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