<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 1996
SECURITIES ACT FILE NO. 33-
INVESTMENT COMPANY ACT FILE NO. 811-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. / /
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
GT GLOBAL FLOATING RATE FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
50 CALIFORNIA STREET, 27TH FLOOR
SAN FRANCISCO, CA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(415) 392-6181
------------------------
DAVID J. THELANDER, ESQ.
PRESIDENT
GT GLOBAL FLOATING RATE FUND, INC.
50 CALIFORNIA STREET, 27TH FLOOR
SAN FRANCISCO, CA 94111
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
ARTHUR J. BROWN, ESQ. DAVID J. THELANDER, ESQ.
DANIEL T. STEINER, ESQ. CHANCELLOR LGT ASSET MANAGEMENT, INC.
KIRKPATRICK & LOCKHART LLP 50 CALIFORNIA STREET, 27TH FLOOR
1800 MASSACHUSETTS AVENUE, N.W. SAN FRANCISCO, CA 94111
WASHINGTON, D.C. 20036
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Common Stock ($.001 par
value)...................... 1,000,000 $10.00 $10,000,000 $3,030.30
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 8(a) OF THE SECURITIES
ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
FORM N-2 CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART A
ITEM NUMBER CAPTION PROSPECTUS CAPTION
- ------------- ---------------------------- --------------------------------------------------------
<C> <S> <C>
1 Outside Front Cover......... Outside Front Cover of Prospectus
2 Inside Front and Outside
Back Cover Page............ Inside Front and Outside Back Cover Page of Prospectus
3 Fee Table and Synopsis...... Prospectus Summary; Fund Expenses
4 Financial Highlights........ Not Applicable
5 Plan of Distribution........ Outside Front Cover; Prospectus Summary; Purchase of
Shares; Description of Capital Stock
6 Selling Shareholders........ Not Applicable
7 Use of Proceeds............. Use of Proceeds; Investment Objective and Policies
8 General Description of
Registrant................. Prospectus Summary; The Fund; Investment Objective and
Policies; Investment Restrictions; Special
Considerations and Risk Factors; Description of Capital
Stock
9 Management.................. Management; Description of Capital Stock; Custodian,
Transfer and Dividend Disbursing Agent and Registrar
10 Capital Stock, Long-Term
Debt and Other
Securities................. Dividends and Other Distributions; Dividend Reinvestment
Plan; Taxes; Description of Capital Stock
11 Defaults and Arrears on
Senior Securities.......... Not Applicable
12 Legal Proceedings........... Not Applicable
13 Table of Contents of the
Statement of Additional
Information................ Not Applicable
</TABLE>
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
FORM N-2 CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART B
ITEM NUMBER CAPTION
- ------------- ----------------------------
<C> <S> <C>
14 Cover Page.................. Not Applicable
15 Table of Contents........... Not Applicable
16 General Information and
History.................... Not Applicable
17 Investment Objective and
Policies................... Investment Objective and Policies; Investment
Restrictions; Portfolio Transactions
18 Management.................. Management
19 Control Persons and
Principal Holders of
Securities................. Description of Capital Stock
20 Investment Advisory and
Other Services............. Management; Custodian, Transfer and Dividend Disbursing
Agent and Registrar
21 Brokerage Allocation and
Other Practices............ Portfolio Transactions
22 Tax Status.................. Taxes
23 Financial Statements........ Financial Statements
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURIITES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITAITON OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRAITON OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 6, 1996
GT GLOBAL FLOATING RATE FUND, INC.
COMMON STOCK
- --------------------------------------------------------------------------------
GT Global Floating Rate Fund, Inc. (the "Fund") is a newly organized,
continuously offered, non-diversified, closed-end fund. The Fund is managed by a
subsidiary of Chancellor LGT Asset Management, Inc., Chancellor LGT Senior
Secured Management, Inc. (the "Manager"). The Fund's investment objective is to
provide as high a level of current income and preservation of capital as is
consistent with investment in senior secured corporate loans ("Corporate Loans")
and senior secured debt securities ("Corporate Debt Securities") that meet
credit standards established by the Manager. The Fund seeks to achieve its
objective by investing all of its investable assets in Floating Rate Portfolio
(the "Portfolio"), a separate, non-diversified, closed-end investment company
that has the same investment objective as the Fund. As this structure is
different from many other investment companies that directly acquire and manage
their own portfolios, investors should carefully consider this investment
approach. The Portfolio's investments will primarily take the form of
assignments of, or participations in, Corporate Loans made by banks and other
financial institutions and Corporate Debt Securities. It is anticipated that the
Corporate Loans and Corporate Debt Securities will pay interest at rates that
float or reset at a margin above a generally recognized base lending rate such
as the London InterBank Offered Rate ("LIBOR"), the prime rate of a designated
U.S. bank, or the Certificate of Deposit rate. There can be no assurance that
the investment objective of the Fund will be achieved.
Shares of Common Stock of the Fund will be offered at $10 per share without a
front-end sales charge during a 60-day subscription offering period expected to
end on , 1997, unless extended. On the third business day after the
conclusion of this subscription offering period, the subscriptions will be
payable, the Common Stock will be issued and the Fund will commence operations.
After the completion of the subscription offering period, the Fund expects to
engage in a continuous offering of its Common Stock at a price equal to the next
determined net asset value per share without a front-end sales charge. The
minimum initial purchase during the subscription and continuous offering is
$1,000, and the minimum subsequent purchase in the continuous offering is $100,
except that different minimums are applicable to certain retirement accounts and
other retirement plans.
No market presently exists for the Fund's Common Stock and it is not currently
expected that a secondary market will develop. Since the Fund's Common Stock may
not be considered readily marketable, the Board of Directors of the Fund
presently intends to consider the making of tender offers on a quarterly basis
to repurchase all or a portion of the Common Stock of the Fund from stockholders
at the net asset value per share. See "Tender Offers." Shares of Common Stock
that have been held for less than four years and that are repurchased by the
Fund pursuant to tender offers will be subject to an "Early Withdrawal Charge"
that will not exceed 3.0% of the original purchase amount for such Common Stock.
See "Early Withdrawal Charge." The Common Stock of the Fund involves investment
risks, including fluctuations in value and the possible loss of some or all of
the principal investment. The Fund is authorized to borrow money to finance
tender offers, for temporary, extraordinary or emergency purposes, or, while it
has no current intention of doing so, for the purpose of financing additional
investments. Such leverage creates certain risks for holders of Common Stock,
including the risk of higher volatility of the net asset value of the Common
Stock. See "Special Considerations and Risk Factors -- Effects of Leveraging."
The Fund's Common Stock does not represent a deposit or obligation of, and is
not guaranteed or endorsed by, any bank or other insured depository institution,
and is not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other government agency.
This Prospectus sets forth information about the Fund that an investor should
know before investing. It should be read and retained for future reference.
Additional information concerning the Fund may be obtained by writing to the
Fund at 50 California Street, 27th Floor, San Francisco, California 94111, or by
calling (415) 392-6181.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-MISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO SALES LOAD PROCEEDS TO
PUBLIC (1) (2) FUND (3)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Per Share........................................................................... $ 10 None $ 10
Total............................................................................... $ None $
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Common Stock is offered on a best efforts basis at a price equal to net
asset value, which initially is $10 per share.
(2) GT Global, Inc., the Fund's distributor, will pay all sales commissions to
selected dealers from its own assets.
(3) Before deduction of organizational and offering expenses payable by the
Fund, estimated at $ and $ , respectively. Organizational expenses
will be amortized over a period not to exceed 60 months from the date the
Fund invests in the Portfolio and thus commences investment operations.
Offering expenses will be deducted from net proceeds upon the completion of
the offering.
[LOGO]
Prospectus Page 1
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Fund Expenses............................................................................. 11
The Fund.................................................................................. 12
Use of Proceeds........................................................................... 12
Investment Objective and Policies......................................................... 12
Investment Restrictions................................................................... 21
Special Considerations and Risk Factors................................................... 22
Composite Performance..................................................................... 26
Purchase of Shares........................................................................ 28
Tender Offers............................................................................. 29
Early Withdrawal Charge................................................................... 31
Management................................................................................ 32
Portfolio Transactions.................................................................... 33
Dividends and Other Distributions......................................................... 35
Taxes..................................................................................... 36
Dividend Reinvestment Plan................................................................ 38
Automatic Investment Plan................................................................. 39
Exchanges................................................................................. 40
Net Asset Value........................................................................... 40
Description of Capital Stock.............................................................. 41
Yield Information......................................................................... 43
Custodian, Transfer and Dividend Disbursing Agent and Registrar........................... 43
Additional Information.................................................................... 44
Financial Statements...................................................................... 44
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus. Investors should
carefully consider information set forth under the heading "Special
Considerations and Risk Factors."
<TABLE>
<S> <C>
The Fund: GT Global Floating Rate Fund, Inc. (the "Fund") is a newly
organized, continuously offered, non-diversified, closed-end
management investment company. See "The Fund."
The Portfolio: Floating Rate Portfolio (the "Portfolio") is a newly organized,
non-diversified, closed-end management investment company. See
"Special Considerations and Risk Factors -- Fund/Portfolio
Investment Structure."
The Offering: GT Global, Inc. ("GT Global" or the "Distributor") and other
securities dealers that have entered into selected dealer
agreements with the Distributor will solicit subscriptions for
Common Stock of the Fund during a 60-day period expected to end
on , 1997, unless extended. On the third business day
after the conclusion of this subscription period, the
subscriptions will be payable, the Common Stock will be issued
and the Fund will commence operations. The public offering price
of the Common Stock during the subscription offering will be $10
per share without a front-end sales charge.
After the completion of the initial subscription offering, the
Fund will engage in a continuous offering of its Common Stock at
a price equal to the next determined net asset value per share
without a front-end sales charge. The minimum initial purchase
during the subscription and continuous offering periods is
$1,000, and the minimum subsequent purchase in the continuous
offering is $100, except that with respect to certain retirement
accounts and other retirement plans, the minimum initial purchase
is $250. The Fund reserves the right to waive or modify the
initial and subsequent minimum investment requirements at any
time.
The Fund currently intends to offer only shares of Common Stock.
Although the Fund has no present intention to do so, it may in
the future offer shares of preferred stock, subject to the
requirements of the Investment Company Act of 1940, as amended
(the "1940 Act").
Investment Objective and
Policies: The investment objective of the Fund and the Portfolio is to
provide as high a level of current income and preservation of
capital as is consistent with investment in senior secured
corporate loans ("Corporate Loans") and senior secured debt
securities ("Corporate Debt Securities") that meet credit
standards established by the Manager.
The Fund invests all of its investable assets in the Portfolio.
Under normal market conditions, the Portfolio in turn will invest
primarily in Corporate Loans and Corporate Debt Securities made
to or issued by U.S. or non-U.S. companies ("Borrowers"),
including those that: (i) have variable rates which adjust to a
base rate, such as the London InterBank Offered Rate ("LIBOR") or
the Certificate of Deposit ("CD")
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
rate on set dates, typically every 30 days but not to exceed one
year; and/or (ii) have interest rates that float at a margin
above a generally recognized base lending rate such as the prime
rate ("Prime Rate") of a designated U.S. bank.
Except during interim periods pending investment of the net
proceeds of the public offering of the Fund's securities and
during temporary defensive periods when, in the opinion of the
Manager, suitable Corporate Loans and Corporate Debt Securities
are not available for investment by the Portfolio or prevailing
market or economic conditions warrant, the Portfolio will invest
at least 80% of its total assets in Corporate Loans and Corporate
Debt Securities. Under normal conditions, the Portfolio may
invest up to 20% of its total assets in (i) senior loans and debt
securities made on an unsecured basis to Borrowers that meet the
credit standards established by the Manager ("Unsecured Corporate
Loans and Unsecured Corporate Debt Securities"), (ii) secured or
unsecured short-term debt obligations rated within the four
highest rating categories assigned by a nationally recognized
statistical rating organization ("NRSRO"), or determined to be of
comparable quality by the Manager, (iii) fixed rate obligations
of U.S. or non-U.S. companies that meet the credit standards
established by the Manager and that the Fund expects to swap to a
floating rate structure, or (iv) cash. Obligations rated in the
fourth highest rating category assigned by a NRSRO or determined
to be of comparable quality by the Manager, may include
obligations considered to have certain speculative
characteristics.
The Portfolio has no restrictions on portfolio maturity, but it
is anticipated that a majority of the Corporate Loans and
Corporate Debt Securities in which it will invest will have
stated maturities ranging from three to ten years. However,
Corporate Loans and Corporate Debt Securities often require
prepayments from excess cash flow or permit the Borrower to
prepay at its election. The degree to which Borrowers repay
Corporate Loans and Corporate Debt Securities, whether as a
contractual requirement or at their election, cannot be predicted
with accuracy. However, it is anticipated that the Portfolio's
Corporate Loans and Corporate Debt Securities will have an
expected average life of three to five years.
In general, the net asset value of the shares of an investment
company that invests primarily in fixed-income securities changes
as the general level of interest rates fluctuates. The Manager
expects the Fund's net asset value to be relatively stable during
normal market conditions because the Portfolio will consist
primarily of floating and variable rate Corporate Loans and
Corporate Debt Securities and to a lesser extent short-term
instruments. For this reason, the Manager expects the value of
the Portfolio to fluctuate less as a result of interest rate
changes than would a portfolio of fixed-rate obligations.
However, because the Portfolio's policy is to invest primarily in
floating and variable rate obligations and variable interest
rates only reset periodically, and
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
because the prevailing spreads between LIBOR, the CD rate, the
Prime Rate and other market rates at which Borrowers may borrow
are constantly changing, the Portfolio's, and thus the Fund's,
net asset value may fluctuate from time to time in the event of
an imperfect correlation between the interest rates on variable
rate loans held by the Portfolio and prevailing interest rates.
Also, defaults on Corporate Loans and Corporate Debt Securities
could cause a decline in the Portfolio's and the Fund's net asset
value. The Fund's net asset value also may be affected by changes
in the creditworthiness of Borrowers, and, in the case of
Corporate Loans, in the creditworthiness of Lenders or
Participants interposed between the Portfolio and the Borrowers.
In the event such institutions were to default on their
obligations, the Portfolio might experience a reduction of both
income and the value of its assets.
The Portfolio will invest in a Corporate Loan or Corporate Debt
Security only if, in the Manager's judgment, the Borrower can
meet debt service on such Corporate Loan or Corporate Debt
Security. The Manager will perform its own credit analysis of the
Borrower. The Corporate Loans and Corporate Debt Securities in
which the Portfolio invests generally are not rated by any NRSRO.
Further, the ratings of a Borrower on all its outstanding debt
may not have a meaningful relation to the quality of such
Borrower's senior secured debt. Accordingly, the Portfolio does
not impose any minimum standard regarding the rating of other
debt instruments of the Borrower. The Portfolio will invest only
in Unsecured Corporate Loans and Unsecured Corporate Debt
Securities made to Borrowers that meet the credit standards
established by the Manager for Corporate Loans and Corporate Debt
Securities.
A Corporate Loan in which the Portfolio may invest typically is
negotiated and structured by a syndicate of lenders ("Lenders")
consisting of commercial banks, thrift institutions, insurance
companies, finance companies or other financial institutions, one
or more of which administers the Loan on behalf of all the
Lenders (the "Agent Bank"). The investment of the Portfolio in a
Corporate Loan may take the form of participation interests in a
Corporate Loan ("Participation Interests") or assignments of a
Corporate Loan ("Assignments"). Participation Interests may be
acquired from a Lender or other holders of Participation
Interests ("Participants"). If the Portfolio purchases an
Assignment from a Lender, the Portfolio will generally become a
"Lender" for purposes of the relevant loan agreement, with direct
contractual rights thereunder and under any related collateral
security documents in favor of the Lenders. On the other hand, if
the Portfolio purchases a Participation Interest either from a
Lender or a Participant, the Portfolio will not have established
any direct contractual relationship with the borrower. The
Portfolio would be required to rely on the Lender or the
Participant that sold the Participation Interest not only for the
enforcement of the Portfolio's rights against the Borrower
</TABLE>
Prospectus Page 5
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
but also for the receipt and processing of payments due to the
Portfolio under the Corporate Loans. The Portfolio is thus
subject to the credit risk of both the Borrower and a Lender or
Participant who sold the Participation Interest. The Portfolio
will invest in Loans through the purchase of Participation
Interests only if at the time of investment, the outstanding debt
obligations of the Agent Bank and any Lenders and Participants
interposed between the Portfolio and a Borrower are investment
grade; i.e., rated BBB, A-3 or higher by Standard & Poor's, a
division of The McGraw Hill Companies, Inc. ("Standard &
Poor's"), or Baa, P-3 or higher by Moody's Investors Service,
Inc. ("Moody's"), or determined to be of comparable quality in
the judgment of the Manager. See "Investment Objective and
Policies."
Corporate Debt Securities typically are in the form of notes or
bonds issued in a public or private placement in the securities
markets. Corporate Debt Securities will typically have
substantially similar terms to Corporate Loans, but will not be
in the form of Participations or Assignments.
The Corporate Loans and Corporate Debt Securities in which the
Portfolio invests primarily consist of direct obligations of a
Borrower undertaken to finance the growth of the Borrower's
business internally or externally or to finance a capital
restructuring. It is anticipated that a significant portion of
such Corporate Loans and Corporate Debt Securities may be issued
in highly leveraged transactions such as leveraged buy-out loans,
leveraged recapitalization loans and other types of acquisition
financing. As noted above, the Portfolio may invest in Corporate
Loans and Corporate Debt Securities that are made to non-U.S.
Borrowers, provided that any such Borrower meets the credit
standards established by the Manager for U.S. Borrowers. The
Portfolio similarly may invest in loans to and securities issued
by U.S. Borrowers with significant non-dollar-denominated
revenues, provided that the loans are U.S. dollar-denominated or
otherwise provide for payment in U.S. dollars. In all cases where
the Corporate Loans or Corporate Debt Securities are not
denominated in U.S. dollars, provision will be made for payments
to the Lenders, including the Portfolio, in U.S. dollars pursuant
to foreign currency swap arrangements. See "Investment Objective
and Policies." Loans to such non-U.S. Borrowers or U.S. Borrowers
may involve risks not typically involved in domestic investment,
including fluctuation in foreign exchange rates, future foreign
political and economic developments, and the possible imposition
of exchange controls or other foreign or U.S. governmental laws
or restrictions applicable to such loans.
Leverage: Each of the Fund and the Portfolio may borrow money in amounts up
to 33 1/3% of the value of its total assets to finance tender
offers, for temporary, extraordinary or emergency purposes, or,
while neither the Fund nor the Portfolio has any current
intention of doing so, for the purpose of financing additional
investments. See "Tender Offers." The Fund also may issue one or
more series of preferred shares, although it
</TABLE>
Prospectus Page 6
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
has no present intention to do so. The Portfolio or Fund, as the
case may be, may borrow to finance additional investments or
issue a class of preferred shares only when it believes that the
return that may be earned on investments purchased with the
proceeds of such borrowings or offerings will exceed the costs,
including debt service and dividend obligations, associated
therewith. However, to the extent such costs exceed the return on
the additional investments, the return realized by the Fund's
Common Stockholders will be adversely affected.
Leverage creates certain risks for holders of Common Stock,
including the risk of higher volatility of the net asset value of
the Common Stock, and the risk that fluctuations in the dividend
rates on the preferred shares will affect the yield to holders of
Common Stock. Additionally, changes in certain factors could
cause the relationship between the rates paid by the Fund as
dividends on the preferred shares, if any, and the rates received
by the Portfolio on its investment portfolio to change so that
rates on the preferred shares may substantially increase relative
to rates on the obligations in which the Portfolio may be
invested. Under such conditions, the benefit of leverage to
holders of Common Stock would be reduced and the Fund's leveraged
capital structure could result in a lower rate of return to
holders of Common Stock than if the Fund were not leveraged.
Any issuance of preferred shares by the Fund or any bank
borrowings by the Fund or Portfolio are subject to and will
comply with the requirements of the 1940 Act. Pursuant to the
1940 Act, among other things, the Fund may not issue preferred
shares unless immediately after their issuance the Fund is able
to maintain asset coverage of at least 200%. In the case of bank
borrowings, asset coverage of at least 300% must be maintained.
Investment Manager: A subsidiary of Chancellor LGT Asset Management, Inc., Chancellor
LGT Senior Secured Management, Inc. (the "Manager"), is the
Portfolio's investment manager. The Manager is part of
Liechtenstein Global Trust, a provider of global asset management
and private banking products and services to individual and
institutional investors, entrusted with approximately $80 billion
in total assets.
The Manager will determine the investment composition of the
Portfolio, place all orders for the purchase and sale of
securities and for other transactions, and oversee the settlement
of the Portfolio's securities and other transactions. The
Portfolio will pay the Manager monthly investment management fees
at the annual rate of 0.95% of the Portfolio's average net
assets. See "Management."
Administrator: Chancellor LGT Asset Management, Inc. ("Chancellor LGT" or the
"Administrator") will provide administration services to the Fund
and the Portfolio. These will include, among other things,
furnishing officers and office space, preparing or assisting in
preparing materials for stockholders and regulatory bodies and
overseeing the provision of
</TABLE>
Prospectus Page 7
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
accounting services. The Fund will pay administration fees at the
annual rate of % of the Fund's average net assets.
Distributions: The Fund intends to distribute substantially all of its net
investment income to holders of Common Stock by declaring
dividends daily and paying them monthly. Substantially all net
capital gains, if any, will be distributed at least annually to
holders of Common Stock. See "Dividends and Other Distributions."
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"),
each stockholder will be deemed to have elected, unless the
stockholder instructs otherwise in writing, to have all dividends
and other distributions, net of any applicable withholding taxes,
automatically reinvested in additional shares of Common Stock.
See "Dividend Reinvestment Plan."
Tender Offers: The Fund's Common Stock will not be listed on any exchange and it
is not currently anticipated that a secondary market will
develop. In view of this, the Board of Directors of the Fund
intends to consider each quarter the making of tender offers
(each a "Tender Offer") to repurchase all or a portion of its
Common Stock of the Fund from stockholders at a price per share
equal to the net asset value per share of the Common Stock
determined at the close of business on the day an offer
terminates. The Board is under no obligation to authorize the
making of a Tender Offer and no assurance can be given that in
any particular quarter a Tender Offer will be made. Further, the
Fund will not conduct a Tender Offer for Fund shares unless the
Portfolio simultaneously conducts a tender offer for Portfolio
interests. If a Tender Offer is not made, stockholders may be
unable to sell their shares. Shares of Common Stock that have
been held for less than four years and which are repurchased by
the Fund pursuant to Tender Offers will be subject to an early
withdrawal charge of up to 3% of the lesser of the then current
net asset value or the original purchase price of the Common
Stock being tendered. See "Tender Offers" and "Early Withdrawal
Charge."
Special Considerations and
Risk Factors: As a newly organized entity, the Fund has no operating history.
The Fund expects that there will be no secondary market for its
Common Stock. Moreover, GT Global and other selected dealers are
prohibited under applicable law from making a market in the
Fund's Common Stock while the Fund is making either a public
offering of or a tender offer to repurchase its Common Stock. To
the extent a secondary market does develop, however, investors
should be aware that the shares of closed-end funds frequently
trade in the secondary market at a discount from their net asset
value. Should there be a secondary market for the Fund's shares
of Common Stock, the market price of the shares may vary from net
asset value from time to time.
Because of the lack of a secondary market and the early
withdrawal charge the Fund is designed primarily for long-term
investors and should not be considered a vehicle for trading
purposes.
</TABLE>
Prospectus Page 8
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Each of the Fund and the Portfolio has registered as a
"non-diversified" investment company so that it will be able to
invest more than 5% of its assets in the obligations of any
single issuer, subject to the diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), applicable to the Fund. Since the Portfolio may
invest a relatively high percentage of its assets in the
obligations of a limited number of issuers, the Fund may be more
susceptible than a more widely diversified fund to any single
economic, political or regulatory occurrence. However, the
Portfolio has no current intention of investing more than 15% of
its assets in the obligations of any single Borrower.
Although the Portfolio may, consistent with its fundamental
limitations, invest up to 25% of its total assets in the
obligations of Borrowers in any single industry, the Manager has
no current intention of investing more than 20% of the
Portfolio's assets in the obligations of Borrowers in any single
industry. However, because the Fund and the Portfolio will regard
the issuer of a Corporate Loan as including the Agent Bank and
any Intermediate Participant as well as the Borrower, the
Portfolio may be deemed to be concentrated in securities of
issuers in the industry group consisting of financial
institutions and their holding companies, including commercial
banks, thrift institutions, insurance companies and finance
companies. As a result, the Portfolio is subject to certain risks
associated with such institutions, including, among other things,
changes in governmental regulation, interest rate levels and
general economic conditions. See "Investment Objective and
Policies -- Description of Participation Interests and
Assignments" and "Investment Restrictions."
The Corporate Loans, Corporate Debt Securities and other debt
obligations in which the Portfolio may invest are subject to the
risk of nonpayment of scheduled interest or principal payments.
In the event that a nonpayment occurs, the Portfolio may
experience a decline in the value of the debt obligations,
resulting in a decline in the net asset value of the Fund's
shares of Common Stock. There is no assurance that the
liquidation of collateral underlying Corporate Loans and
Corporate Debt Securities will satisfy the related Borrowers'
obligations in the event of nonpayment of scheduled interest or
principal, or that the collateral could be readily resold.
Corporate Loans and Corporate Debt Securities made in connection
with highly leveraged transactions are subject to greater credit
risks than other Corporate Loans and Corporate Debt Securities in
which the Portfolio may invest. These credit risks include a
greater possibility of default or bankruptcy of the Borrower and
the assertion that the pledging of collateral to secure the loan
constituted a fraudulent conveyance or preferential transfer that
can be nullified or subordinated to the rights of other creditors
of the Borrower under applicable law. Highly leveraged Corporate
Loans and Corporate Debt
</TABLE>
Prospectus Page 9
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Securities also may be less liquid than other Corporate Loans and
Corporate Debt Securities.
Generally, changes in interest rates may affect the market value
of debt investments, resulting in changes in the net asset value
of the shares of funds investing in such investments. It is
expected, however, that a portfolio consisting primarily of
floating and variable rate Corporate Loans and Corporate Debt
Securities, Unsecured Corporate Loans and Unsecured Corporate
Debt Securities, and short-term instruments will experience less
significant fluctuations in value as a result of interest rate
changes than would a portfolio of fixed rate obligations.
However, prepayments of principal by Borrowers (whether as a
result of a decline in interest rates or excess cash flow) may
require that the Portfolio replace its Corporate Loan, Corporate
Debt Security or other investment with a lower yielding security,
which may adversely affect the net asset value of the Portfolio.
Some or all of the Corporate Loans and Corporate Debt Securities
in which the Portfolio may invest will be considered to be
illiquid, which may impair the Portfolio's ability to realize the
full value of its assets in the event of a voluntary or
involuntary liquidation of such assets. To the extent that such
investments are illiquid, the Portfolio may have difficulty
disposing of portfolio securities and the Fund may in turn have
difficulty repurchasing shares of its Common Stock pursuant to
tender offers, if any. The Board of Directors of the Fund will
consider the liquidity of the Portfolio's securities in
determining whether a tender offer should be made by the Fund
and, if so, for what percentage of the Fund's outstanding shares
the tender offer should be made. See "Net Asset Value" for
information with respect to the valuation of illiquid Corporate
Loans.
The Fund's Articles of Incorporation include provisions that
could have the effect of limiting the ability of other entities
or persons to acquire control of the Fund or to change the
composition of its Board of Directors and could have the effect
of depriving holders of Common Stock an opportunity to sell their
shares at a premium over prevailing market prices by discouraging
a third party from seeking to obtain control of the Fund. See
"Description of Capital Stock -- Certain Anti-Takeover Provisions
of the Articles of Incorporation."
</TABLE>
Prospectus Page 10
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
FUND EXPENSES
- --------------------------------------------------------------------------------
The following tables are intended to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear, directly or
indirectly.
<TABLE>
<CAPTION>
STOCKHOLDER TRANSACTION EXPENSES
<S> <C>
Sales Load (as a percentage of offering price)................................................................. None
Dividend Reinvestment Plan Fees................................................................................ None
Maximum Early Withdrawal Charge (1)............................................................................ 3%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO COMMON STOCK) (2)
Investment Management Fee...................................................................................... 0.95%
Service Fee (3)................................................................................................ 0.25%
Other Expenses (4)............................................................................................. 0.25%
---------
Total Annual Operating Expenses................................................................................ 1.45%
---------
---------
</TABLE>
- --------------
(1) Calculated based on the lesser of the then current net asset value or the
original price of the shares being tendered. The maximum early withdrawal
charge applies to shares sold to the Fund pursuant to a Tender Offer during
the first year after purchase; the early withdrawal charge declines annually
thereafter, reaching zero after four years. See "Early Withdrawal Charge."
(2) See "Management" for additional information. "Other Expenses" have been
estimated for the current fiscal year.
(3) See "Purchase of Shares -- Continuous Offering" for additional information.
(4) Because the Fund has no operating history, "Other Expenses," which include
administrative expenses, are estimated. See "Management."
EXAMPLE
The following Example demonstrates the projected dollar amount of total
cumulative expense that would be incurred over various periods with respect to a
hypothetical investment in the Fund. These amounts are based upon payment by the
Fund and the Portfolio of operating expenses at the levels set forth in the
above table.
An investor would directly or indirectly pay the following expenses of a $1,000
investment in the Fund, assuming (i) a 5% annual return and (ii) reinvestment of
all dividends and other distributions at net asset value:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- ------------- --------------- ------------- -----------
<S> <C> <C> <C>
$ 15 $ 48 $ 84 $ 191
</TABLE>
This Example assumes that the percentage amounts listed under Total Annual
Operating Expenses remain the same in the years shown, except as to Ten Years,
for the completion of organizational expense amortization. The above tables and
the assumption in the Example of a 5% annual return and reinvestment at net
asset value are required by regulation of the Securities and Exchange Commission
applicable to all closed-end investment companies; the assumed 5% annual return
is not a prediction of, and does not represent, the projected or actual
performance of the Common Stock. Actual expenses and annual rates of return may
be more or less than those assumed for purposes of the Example. In addition,
although the Example assumes reinvestment of all dividends and other
distributions at net asset value, participants in the Plan may receive shares of
the Common Stock obtained at or based on the market price in effect at the time,
which may be at, above or below net asset value.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES, AND
THE FUND'S AND THE PORTFOLIO'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
Prospectus Page 11
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
THE FUND
- --------------------------------------------------------------------------------
The Fund is a newly organized, continuously offered, non-diversified, closed-end
management investment company. The Fund was incorporated under the laws of the
State of Maryland on December 4, 1996 and has registered under the 1940 Act. The
Fund's principal office is located at 50 California Street, 27th Floor, San
Francisco, California 94111, and its telephone number is (415) 392-6181.
- --------------------------------------------------------------------------------
USE OF PROCEEDS
- --------------------------------------------------------------------------------
Assuming all shares of Common Stock currently registered are sold pursuant to
the offering, the net proceeds from the sale of the Common Stock offered hereby
will be $ after payment of organizational and offering expenses by the Fund
and will be invested in the Portfolio, a separate closed-end, non-diversified
management investment company with the same investment objective as the Fund.
The Portfolio will invest the Fund's net proceeds in accordance with the Fund's
and the Portfolio's investment objective and policies within approximately six
months after completion of the offering of Common Stock, depending on the
availability of Corporate Loans and Corporate Debt Securities and other relevant
conditions. Pending such investment, it is anticipated that the proceeds will be
invested in short-term debt obligations or instruments. See "Investment
Objective and Policies."
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's and the Portfolio's investment objective is to provide as high a
level of current income and preservation of capital as is consistent with
investment in senior secured Corporate Loans and Corporate Debt Securities that
meet credit standards established by the Manager. This is a fundamental policy
of the Fund and may not be changed without a vote of majority of the outstanding
shares of the Fund. There can be no assurance that the investment objective of
the Fund will be achieved.
All of the Fund's assets will be invested in the Portfolio. Under normal market
conditions, the Portfolio will invest at least 80% of its total assets in
interests in Corporate Loans and Corporate Debt Securities made to or issued by
Borrowers (which may include U.S. and non-U.S.companies), including those that:
(i) have variable rates which adjust to a base rate, such as the LIBOR or the CD
rate on set dates, typically every 30 days but not to exceed one year; and/or
(ii) have interest rates that float at a margin above a generally recognized
base lending rate such as the Prime Rate of a designated U.S. bank. The
Portfolio may invest up to 20% of its total assets in any of the following: (a)
senior loans made and notes issued on an unsecured basis to Borrowers that meet
the credit standards established by the Manager ("Unsecured Corporate Loans" and
"Unsecured Corporate Debt Securities"); (b) secured or unsecured short-term debt
obligations including,
Prospectus Page 12
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
but not limited to, U.S. Government and Government agency securities (some of
which may not be backed by the full faith and credit of the United States), bank
money instruments (such as certificates of deposit and bankers' acceptances),
corporate and commercial obligations (such as commercial paper and medium-term
notes) and repurchase agreements, none of which are required to be secured but
all of which will be (or counterparties associated therewith will be) investment
grade (rated Baa, P-3 or higher by Moody's or BBB, A-3 or higher by Standard &
Poor's or, if unrated, determined to be of comparable quality in the judgment of
the Manager); (c) fixed rate obligations which the Portfolio will swap for a
floating rate structure; or (d) cash. Securities rated Baa, BBB, P-3 or A-3 are
considered to have adequate capacity for payment of principal and interest, but
are more susceptible to adverse economic conditions and, in the case of
securities rated BBB or Baa (or comparable unrated securities), have speculative
characteristics. Such securities or cash will not exceed 20% of the Portfolio's
total assets except (i) during interim periods pending investment of the net
proceeds of public offerings of the Fund's securities, (ii) pending reinvestment
of proceeds of the sale of a security, and (iii) during temporary defensive
periods when, in the opinion of the Manager, suitable Corporate Loans and
Corporate Debt Securities are not available for investment by the Portfolio or
prevailing market or economic conditions warrant. Investments in Unsecured
Corporate Loans and Unsecured Corporate Debt Securities will be made on the same
basis as investments in Corporate Loans and Corporate Debt Securities as
described herein, except with respect to collateral requirements. To a limited
extent, incidental to and in connection with its lending activities, the
Portfolio also may acquire warrants and other equity securities.
The Portfolio has no restrictions on portfolio maturity, but it is anticipated
that a majority of the Corporate Loans and Corporate Debt Securities in which it
will invest will have stated maturities ranging from three to ten years.
However, Corporate Loans usually will require, in addition to scheduled payments
of interest and principal, the prepayment of the Corporate Loan from excess cash
flow, as discussed above, and may permit the Borrower to prepay at its election.
The degree to which Borrowers prepay Corporate Loans, whether as a contractual
requirement or at their election, cannot be predicted with accuracy, and may be
affected by general business conditions, the financial condition of the Borrower
and competitive conditions among lenders, among other factors. However, it is
anticipated that the Portfolio's Corporate Loans and Corporate Debt Securities
will have an average expected life of three to five years. See "Description of
Corporate Loans and Corporate Debt Securities."
Investment in shares of Common Stock of the Fund offers several benefits. The
Fund offers investors the opportunity to receive a high level of current income
by investing in a professionally managed portfolio comprised primarily of
Corporate Loans, a type of investment typically not available directly to
individual investors. In managing the Portfolio, the Manager provides the
Portfolio, the Fund and its stockholders with professional credit analysis and
portfolio diversification. The Fund also relieves the investor of the burdensome
administrative details involved in managing a portfolio of such investments, if
available to individual investors. The benefits are at least partially offset by
the expenses involved in operating an investment company. Such expenses
primarily consist of the management and administrative fees and operations
costs.
Generally, the net asset value of the shares of an investment company which
invests primarily in fixed-income securities changes as the general levels of
interest rates fluctuate. When interest rates decline, the value of a
fixed-income portfolio can be expected to decline. The Manager expects the
Fund's net asset value to be relatively stable during normal market conditions,
because the Portfolio in which the Fund's assets are invested will consist
primarily of floating and variable rate Corporate Loans and Corporate Debt
Securities, of fixed rate Corporate Loans and Corporate Debt Securities hedged
by interest rate swap transactions and of short-term instruments. For these
reasons, the Manager expects the value of the Portfolio to fluctuate
significantly less as a result of interest rate changes than would a portfolio
of fixed-rate obligations. However, because variable interest rates only reset
periodically, the Fund's net asset value may fluctuate from time to time in the
event of an imperfect correlation between either the interest rates on variable
rate loans in the Portfolio or the variable interest rates on nominal amounts in
the Portfolio's interest rate swap transactions, and prevailing interest rates.
Also, a default on a Corporate Loan or Corporate Security in which the Portfolio
has invested or a sudden and extreme increase in prevailing interest rates may
cause a decline in the Fund's net asset value. Conversely, a
Prospectus Page 13
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
sudden and extreme decline in interest rates could result in an increase in the
Fund's net asset value.
Each of the Fund and the Portfolio is classified as non-diversified within the
meaning of the 1940 Act, which means that neither the Fund nor the Portfolio is
limited by such Act in the proportion of its assets that it may invest in
securities of a single issuer. However, the Portfolio's investments will be
limited so as to enable the Fund to qualify as a "regulated investment company"
("RIC") for purposes of the Code. Accordingly, the Portfolio will limit its
investments so that, at the close of each quarter of its taxable year, (i) not
more than 25% of the value of its total assets will be invested in the
securities (including Corporate Loans but excluding Government securities) of a
single issuer and (ii) with respect to 50% of the value of its total assets, its
investments will consist of cash, U.S. Government securities and securities of
other issuers limited, in respect of any one issuer to not more than 5% of the
value of its total assets and not more than 10% of the issuer's outstanding
voting securities. To the extent the Portfolio assumes large positions in the
securities of a small number of issuers, the Fund's yield may fluctuate to a
greater extent than that of a diversified company as a result of changes in the
financial condition or in the market's assessment of the issuers. However, the
Portfolio has no current intention of investing more than 15% of its assets in
the obligations of any single Borrower.
DESCRIPTION OF CORPORATE LOANS AND
CORPORATE DEBT SECURITIES
The Corporate Loans and Corporate Debt Securities in which the Portfolio invests
primarily consist of obligations of a Borrower undertaken to finance the growth
of the Borrower's business internally or externally, or to finance a capital
restructuring. Corporate Loan and Corporate Debt Securities may also include
senior obligations of a borrower issued in connection with a restructuring
pursuant to Chapter 11 of the United States Bankruptcy Code provided that such
senior obligations meet the credit standards established by the Manager. It is
anticipated that a significant portion of such Corporate Loans and Corporate
Debt Securities may be issued in highly leveraged transactions such as leveraged
buy-out loans, leveraged recapitalization loans and other types of acquisition
financing. Such Corporate Loans and Corporate Debt Securities present special
risks. See "Special Considerations and Risk Factors." Such Corporate Loans may
be structured to include both term loans, which are generally fully funded at
the time of the Portfolio's investment, and revolving credit facilities, which
would require the Portfolio to make additional investments in the Corporate
Loans as required under the terms of the credit facility. Such Corporate Loans
may also include receivables purchase facilities, which are similar to revolving
credit facilities secured by a Borrower's receivables.
The Portfolio may invest in Corporate Loans and Corporate Debt Securities which
are made to non-U.S. Borrowers, provided that the loans are U.S.
dollar-denominated or otherwise provide for payment in U.S. dollars, and any
such Borrower meets the credit standards established by the Manager for U.S.
Borrowers. The Portfolio similarly may invest in Corporate Loans and Corporate
Debt Securities made to U.S. Borrowers with significant non-U.S. dollar
denominated revenues, provided that the loans are U.S. dollar-denominated or
otherwise provide for payment to the Portfolio in U.S. dollars. In all cases
where the Corporate Loans or Corporate Debt Securities are not denominated in
U.S. dollars, provision will be made for payments to the Lenders, including the
Portfolio, in U.S. dollars pursuant to foreign currency swap arrangements. Loans
to such non-U.S. Borrowers or U.S. Borrowers may involve risks not typically
involved in domestic investment, including fluctuation in foreign exchange
rates, future foreign political and economic developments, and the possible
imposition of exchange controls or other foreign or U.S. governmental laws or
restrictions applicable to such loans. With respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
the Portfolio's investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment position. In
addition, information with respect to non-U.S. Borrowers may differ from that
available with respect to U.S. Borrowers, since foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to U.S.
Borrowers.
The Corporate Loans and Corporate Debt Securities in which the Portfolio invests
will, in most instances, hold the most senior position in the capitalization
structure of the Borrower, and in any case will, in the judgment of the Manager,
be in the
Prospectus Page 14
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
category of senior debt of the Borrower. Each Corporate Loan and Corporate Debt
Security will generally be secured by collateral the value of which generally
will be determined by reference to financial statements of the Borrower, by an
independent appraisal, by obtaining the market value of such collateral (e.g.,
cash or securities) if it is readily ascertainable and/or by other customary
valuation techniques considered appropriate in the judgment of the Manager. In
the event of a default, however, the ability of the lender to have access to the
collateral may be limited by bankruptcy and other insolvency laws. The value of
the collateral may decline subsequent to the Portfolio's investment in the loan
or debt security. Under certain circumstances, the collateral may be released
with the consent of the Agent Bank and Lenders or pursuant to the terms of the
underlying credit agreement with the Borrower or bond indenture. There is no
assurance that the liquidation of the collateral would satisfy the Borrower's
obligation in the event of nonpayment of scheduled interest or principal, or
that the collateral could be readily liquidated. As a result, the Portfolio
might not receive payments to which it is entitled and thereby may experience a
decline in the value of the investment and, possibly, its net asset value.
In the case of highly leveraged loans, a Borrower generally is required to
pledge collateral which may include (i) working capital assets, such as accounts
receivable or inventory, (ii) tangible fixed assets, such as real property,
buildings and equipment, (iii) intangible assets, such as trademarks, copyrights
and patent rights and (iv) security interests in securities of subsidiaries or
affiliates. In the case of Corporate Loans to or Corporate Debt Securities of
privately held companies, the companies' owners may pledge additional security
in the form of guarantees and/or other securities that they own. There may be
temporary periods in the course of providing financing to a Borrower where the
collateral for the loan consists of common stock having a value not less than
200% of the value of the loan on the date the loan is made. Under such
circumstances, the Borrower generally proceeds with a subsequent transaction
which will permit it to pledge assets of a company as collateral for the loan,
although there can be no assurance that the Borrower will be able to effect such
transaction.
The rate of interest payable on floating or variable rate Corporate Loans or
Corporate Debt Securities is established as the sum of a base lending rate plus
a specified margin. These base lending rates generally are LIBOR, the Prime Rate
of a designated U.S. bank, the CD rate, or another base lending rate used by
commercial lenders. The interest rate on Prime Rate-based Corporate Loans and
Corporate Debt Securities floats daily as the Prime Rate changes, while the
interest rate on LIBOR-based and CD-based Corporate Loans and Corporate Debt
Securities is reset periodically, typically every 30 days to one year. Certain
of the floating or variable rate Corporate Loans and Corporate Debt Securities
in which the Portfolio will invest may permit the Borrower to select an interest
rate reset period of up to one year. A portion of the Portfolio's investments
may consist of Corporate Loans with interest rates that are fixed for the term
of the loan. Investment in Corporate Loans and Corporate Debt Securities with
longer interest rate reset periods or fixed interest rates may increase
fluctuations in the Fund's net asset value as a result of changes in interest
rates. However the Fund will attempt to hedge all of its fixed-rate Corporate
Loans and Corporate Debt Securities against fluctuations in interest rates by
entering into interest rate swap transactions. The Portfolio also will attempt
to maintain a portfolio of Corporate Loans and Corporate Debt Securities that
will have a dollar weighted average period to the next interest rate adjustment
of no more than 90 days.
Corporate Loans and Corporate Debt Securities traditionally have been structured
so that Borrowers pay higher margins when they elect LIBOR and CD-based borrower
options, in order to permit lenders to obtain generally consistent yields on
Corporate Loans and Corporate Debt Securities, regardless of whether Borrowers
select the LIBOR or CD-based options, or the Prime-based option. In recent
years, however, the differential between the lower LIBOR and CD base rates and
the higher Prime Rate base rates prevailing in the commercial bank markets has
widened to the point where the higher margins paid by Borrowers for LIBOR and
CD-based pricing options do not currently compensate for the differential
between the Prime Rate and the LIBOR and CD base rates. Consequently, Borrowers
have increasingly selected the LIBOR-based pricing option, resulting in a yield
on Corporate Loans and Corporate Debt Securities that is consistently lower than
the yield would be if Borrowers selected the Prime Rate-based pricing option.
This trend will significantly limit the ability of the Fund to achieve a net
return to stockholders that consistently approximates the average published
prime rate of leading U.S. banks. At the date of this Prospectus, the
Prospectus Page 15
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
Manager cannot predict any significant change in this market trend.
The Portfolio may receive and/or pay certain fees in connection with its lending
activities. These fees are in addition to interest payments received and may
include facility fees, commitment fees, commissions and prepayment penalty fees.
When the Portfolio buys a Corporate Loan or Corporate Debt Security it may
receive a facility fee and when it sells a Corporate Loan or Corporate Debt
Security may pay a facility fee. In certain circumstances, the Portfolio may
receive a prepayment penalty fee on the prepayment of a Corporate Loan or
Corporate Debt Security by a Borrower. In connection with the acquisition of
Corporate Loans or Corporate Debt Securities, the Portfolio may also acquire
warrants and other equity securities of the Borrower or its affiliates. The
acquisition of such equity securities will only be incidental to the Portfolio's
purchase of a Corporate Debt Security or an interest in a Corporate Loan.
The Portfolio will invest in a Corporate Loan or Corporate Security only if, in
the Manager's judgment, the Borrower can meet debt service on such loan. In
addition, the Manager will consider other factors deemed by it to be appropriate
to the analysis of the Borrower and the Corporate Loan or Corporate Debt
Security. Such factors include financial ratios of the Borrower such as interest
coverage, fixed charge coverage and leverage ratios. In its analysis of these
factors, the Manager also will be influenced by the nature of the industry in
which the Borrower is engaged, the nature of the Borrower's assets and the
Manager's assessment of the general quality of the Borrower. The factors
utilized have been reviewed and approved by the Portfolio's Board of Trustees.
The Corporate Loans and Corporate Debt Securities in which the Portfolio invests
generally are not rated by any NRSRO.
The primary consideration in selecting such Corporate Loans and Corporate Debt
Securities for investment by the Portfolio is the creditworthiness of the
Borrower. In evaluating Corporate Loans and Corporate Debt Securities, the
quality ratings assigned to other debt obligations of a Borrower may not be a
determining factor, since they will often be subordinated to the Corporate Loans
or Corporate Debt Securities. Instead, the Manager will perform its own
independent credit analysis of the Borrower, and of the collateral structure for
the loan or security. In making this analysis, the Manager will utilize any
offering materials and in the case of Corporate Loans, information prepared and
supplied by the Agent Bank, Lender or Participant from whom the Portfolio
purchases its Participation Interest in a Corporate Loan. The Manager's analysis
will continue on an ongoing basis for any Corporate Loans and Corporate Debt
Securities in which the Portfolio has invested. Although the Manager will use
due care in making such analysis, there can be no assurance that such analysis
will disclose factors which may impair the value of the Corporate Loan or
Corporate Debt Security.
Corporate Loans and Corporate Debt Securities made in connection with highly
leveraged transactions are subject to greater credit risks than other Corporate
Loans and Corporate Debt Securities in which the Portfolio may invest. These
credit risks include a greater possibility of default or bankruptcy of the
Borrower and the assertion that the pledging of collateral to secure the loan
constituted a fraudulent conveyance or preferential transfer which can be
nullified or subordinated to the rights of other creditors of the Borrower under
applicable law. Highly leveraged Corporate Loans and Corporate Debt Securities
also may be less liquid than other Corporate Loans and Corporate Debt
Securities.
A Borrower also must comply with various restrictive covenants contained in any
Corporate Loan agreement between the Borrower and the lending syndicate
("Corporate Loan Agreement") or in any trust indenture or comparable document in
connection with a Corporate Debt Security ("Corporate Debt Security Document").
Such covenants, in addition to requiring the scheduled payment of interest and
principal, may include restrictions on dividend payments and other distributions
to stockholders, provisions requiring the Borrower to maintain specific
financial ratios or relationships and limits on total debt. In addition, the
Corporate Loan Agreement or Corporate Debt Security Document may contain a
covenant requiring the Borrower to prepay the Corporate Loan or Corporate Debt
Security with any excess cash flow. Excess cash flow generally includes net cash
flow after scheduled debt service payments and permitted capital expenditures,
among other things, as well as the proceeds from asset dispositions or sales of
securities. A breach of a covenant (after giving effect to any cure period) in a
Corporate Loan Agreement which is not waived by the Agent Bank and the lending
syndicate normally is an event of acceleration; i.e., the Agent Bank has the
right to demand immediate repayment in full of the outstanding Corporate Loan.
Acceleration
Prospectus Page 16
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
may also occur in the case of the breach of a covenant in a Corporate Debt
Security Document.
It is expected that a majority of the Corporate Loans and Corporate Debt
Securities held by the Portfolio will have stated maturities ranging from three
to ten years. However, such Corporate Loans and Corporate Debt Securities
usually will require, in addition to scheduled payments of interest and
principal, the prepayment of the Corporate Loan or Corporate Debt Security from
excess cash flow, as discussed above, and may permit the Borrower to prepay at
its election. The degree to which Borrowers prepay Corporate Loans and Corporate
Debt Securities, whether as a contractual requirement or at their election, may
be affected by general business conditions, the financial condition of the
Borrower and competitive conditions among lenders, among other factors.
Accordingly, prepayments cannot be predicted with accuracy. Upon a prepayment,
the Portfolio may receive both a prepayment penalty fee from the prepaying
Borrower and a facility fee on the purchase of a new Corporate Loan or Corporate
Debt Security with the proceeds from the prepayment of the former. Such fees may
help mitigate any adverse impact on the yield on the Portfolio's investments
which may arise as a result of prepayments and the reinvestment of such proceeds
in Corporate Loans or Corporate Debt Securities bearing lower interest rates.
Loans to non-U.S. Borrowers and to U.S. Borrowers with significant non-U.S.
dollar-denominated revenues may provide for conversion of all or part of the
loan from a U.S. dollar-denominated obligation into a foreign currency
obligation at the option of the Borrower. The Portfolio may invest in Corporate
Loans and Corporate Debt Securities which have been converted into non-U.S.
dollar-denominated obligations only when provision is made for payments to the
lenders in U.S. dollars pursuant to foreign currency swap arrangements. Foreign
currency swaps involve the exchange by the lenders, including the Portfolio,
with another party (the "counterparty") of the right to receive the currency in
which the loans are denominated for the right to receive U.S. dollars. The
Portfolio will enter into a transaction subject to a foreign currency swap only
if, at the time of entering into such swap, the outstanding debt obligations of
the counterparty are investment grade, i.e., rated BBB or A-3 or higher by
Standard & Poor's or Baa or P-3 or higher by Moody's or determined to be of
comparable quality in the judgment of the Manager. The amounts of U.S. dollar
payments to be received by the lenders and the foreign currency payments to be
received by the counterparty are fixed at the time the swap arrangement is
entered into. Accordingly, the swap protects the Portfolio from the fluctuations
in exchange rates and locks in the right to receive payments under the loan in a
predetermined amount of U.S. dollars. If there is a default by the counterparty,
the Portfolio will have contractual remedies pursuant to the swap arrangements;
however, the U.S. dollar value of the Portfolio's right to foreign currency
payments under the loan will be subject to fluctuations in the applicable
exchange rate to the extent that a replacement swap arrangement is unavailable
or the Portfolio is unable to recover damages from the defaulting counterparty.
If the Borrower defaults on or prepays the underlying Corporate Loan or
Corporate Debt Security, the Portfolio may be required pursuant to the swap
arrangements to compensate the counterparty to the extent of fluctuations in
exchange rates adverse to the counterparty. In the event of such a default or
prepayment, an amount of cash or high grade liquid debt securities having an
aggregate net asset value at least equal to the amount of compensation that must
be paid to the counterparty pursuant to the swap arrangements will be maintained
in a segregated account by the Portfolio's custodian.
DESCRIPTION OF PARTICIPATION INTERESTS AND ASSIGNMENTS
A Corporate Loan in which the Portfolio may invest typically is originated,
negotiated and structured by a syndicate of Lenders consisting of commercial
banks, thrift institutions, insurance companies, finance companies or other
financial institutions, which is administered on behalf of the syndicate by an
Agent Bank. The investment of the Portfolio in a Corporate Loan may take the
form of Participation Interests or Assignments. Participation Interests may be
acquired from a Lender or other Participants. If the Portfolio purchases a
Participation Interest either from a Lender or a Participant, the Portfolio will
not have established any direct contractual relationship with the borrower. The
Portfolio would be required to rely on the Lender or the Participant that sold
the Participation Interest not only for the enforcement of the Portfolio's
rights against the Borrower but also for the receipt and processing of payments
due to the Portfolio under the Corporate Loans. The Portfolio is thus subject to
the credit risk of both the Borrower and a Participant. Lenders and Participants
interposed between the Portfolio and a
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GT GLOBAL FLOATING RATE FUND, INC.
Borrower, together with Agent Banks, are referred to herein as "Intermediate
Participants."
On the other hand, if the Portfolio purchases an Assignment from a Lender, the
Portfolio will generally become a "Lender" for purposes of the relevant loan
agreement, with direct contractual rights thereunder and under any related
collateral security documents in favor of the Lenders. An Assignment from a
Lender gives the Portfolio the right to receive payments of principal and
interest and other amount directly from the Borrower and to enforce its rights
as a Lender directly against the Borrower. The Portfolio will not act as an
Agent Bank guarantor, sole negotiator or sole structuror with respect to a
Corporate Loan.
Because it may be necessary to assert through an Intermediate Participant such
rights as may exist against the Borrower, in the event the Borrower fails to pay
principal and interest when due, the Portfolio may be subject to delays,
expenses and risks that are greater than those that would be involved if the
Portfolio could enforce its rights directly against the Borrower. Moreover,
under the terms of a Participation, the Portfolio may be regarded as a creditor
of the Intermediate Participant (rather than of the Borrower), so that the
Portfolio may also be subject to the risk that the Intermediate Participant may
become insolvent. Similar risks may arise with respect to the Agent Bank, as
described below. Further, in the event of the bankruptcy or insolvency of the
Borrower, the obligation of the Borrower to repay the Corporate Loan may be
subject to certain defenses that can be asserted by such Borrower as a result of
improper conduct by the Agent Bank or Intermediate Participant. The Portfolio
will invest in Corporate Loans only if, at the time of investment, all
outstanding debt obligations of the Agent Bank and Intermediate Participants are
investment grade, i.e., rated BBB or A-3 or higher by Standard & Poor's or Baa
or P-3 or higher by Moody's or determined to be of comparable quality in the
judgment of the Manager.
The Portfolio has no current intention of investing more than 20% of its assets
in the obligations of Borrowers in any single industry. However, because the
Fund and the Portfolio will regard the issuer of a Corporate Loan as including
the Agent Bank and any Intermediate Participant as well as the Borrower, the
Portfolio may be deemed to be concentrated in securities of issuers in the
industry group consisting of financial institutions and their holding companies,
including commercial banks, thrift institutions, insurance companies and finance
companies. As a result, the Portfolio is subject to certain risks associated
with such institutions. Banking and thrift institutions are subject to extensive
governmental regulations which may limit both the amounts and types of loans and
other financial commitments which such institutions may make and the interest
rates and fees which such institutions may charge. The profitability of these
institutions is largely dependent on the availability and cost of capital funds,
and has shown significant recent fluctuation as a result of volatile interest
rate levels. In addition, general economic conditions are important to the
operations of these institutions, with exposure to credit losses resulting from
possible financial difficulties of borrowers potentially having an adverse
effect. Insurance companies are also affected by economic and financial
conditions and are subject to extensive government regulation, including rate
regulation. The property and casualty companies may be exposed to material
risks, including reserve inadequacy, latent health exposure and inability to
collect from their reinsurance carriers. The financial services area is
currently undergoing relatively rapid change as existing distinctions between
financial service segments become less clear. In this regard, recent business
combinations have included insurance, finance and securities brokerage under
single ownership. Moreover, the federal laws generally separating commercial and
investment banking are currently being studied by Congress.
In a typical Corporate Loan, the Agent Bank administers the terms of the
Corporate Loan Agreement and is responsible for the collection of principal and
interest and fee payments from the Borrower and the apportionment of these
payments to the credit of all lenders which are parties to the Corporate Loan
Agreement. The Portfolio generally will rely on the Agent Bank or an
Intermediate Participant to collect its portion of the payments on the Corporate
Loan. Furthermore, the Portfolio will rely on the Agent Bank to use appropriate
creditor remedies against the Borrower. Typically, under Corporate Loan
Agreements, the Agent Bank is given broad discretion in enforcing the Corporate
Loan Agreement, and is obligated to use only the same care it would use in the
management of its own property. The Borrower compensates the Agent Bank for
these services. Such compensation may include special fees paid on structuring
and funding Corporate Loan and other fees paid on a continuing basis.
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GT GLOBAL FLOATING RATE FUND, INC.
In the event that an Agent Bank becomes insolvent, or has a receiver,
conservator, or similar official appointed for it by the appropriate bank
regulatory authority or becomes a debtor in a bankruptcy proceeding, assets held
by the Agent Bank under the Corporate Loan Agreement should remain available to
holders of Corporate Loans. If, however, assets held by the Agent Bank for the
benefit of the Portfolio were determined by an appropriate regulatory authority
or court to be subject to the claims of the Agent Bank's general or secured
creditors, the Portfolio might incur certain costs and delays in realizing
payment on a Corporate Loan or suffer a loss of principal and/or interest. In
situations involving Intermediate Participants similar risks may arise, as
described above.
Intermediate Participants may have certain obligations pursuant to a Corporate
Loan Agreement, which may include the obligation to make future advances to the
Borrower in connection with revolving credit facilities in certain
circumstances. The Portfolio currently intends to reserve against such
contingent obligations by segregating sufficient investments in high quality,
short-term, liquid instruments. The Portfolio will not invest in Corporate Loans
that would require the Portfolio to make any additional investments in
connection with such future advances if such commitments would exceed 20% of the
Portfolio's total assets or would cause the Portfolio to fail to meet the
diversification requirements described under "Investment Objective and
Policies."
ILLIQUID SECURITIES
Corporate Loans and Corporate Debt Securities are, at present, not readily
marketable and may be subject to restrictions on resale. Although Corporate
Loans and Corporate Debt Securities are transferred among certain financial
institutions, as described above, the Corporate Loans and Corporate Debt
Securities in which the Portfolio invests do not have the liquidity of
conventional investment grade debt securities traded in the secondary market and
may be considered illiquid. As the market for Corporate Loans and Corporate Debt
Securities matures, the Manager expects that liquidity will improve. The
Portfolio has no limitation on the amount of its investments which are not
readily marketable or are subject to restrictions on resale. Such investments,
which may be considered illiquid, may affect the Fund's ability to realize the
net asset value in the event of a voluntary or involuntary liquidation of its
assets. To the extent that such investments are illiquid, the Portfolio may have
difficulty disposing of securities in order to enable the Fund to repurchase
shares of its Common Stock pursuant to tender offers, if any. The Board of
Directors of the Fund will consider the liquidity of the Portfolio's investments
in determining whether a tender offer should be made by the Fund. See "Net Asset
Value" for information with respect to the valuation of illiquid Corporate Loans
and Corporate Debt Securities.
OTHER INVESTMENT POLICIES
The Fund and the Portfolio have adopted certain other policies as set forth
below:
LEVERAGE. Each of the Fund and the Portfolio is authorized to borrow money in
amounts of up to 33 1/3% of the value of its total assets at the time of such
borrowings. Borrowings by the Fund and the Portfolio (commonly known as
"leveraging") create an opportunity for greater total return but, at the same
time, increase exposure to capital risk. In addition, borrowed funds are subject
to interest costs that may offset or exceed the return earned on the borrowed
funds. Neither the Fund nor the Portfolio has any current intention of borrowing
to finance additional investments. See "Special Considerations and Risk Factors
- -- Effects of Leverage."
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to its permitted investments but currently intends to do so only with
member banks of the Federal Reserve System or with primary dealers in U.S.
Government securities. Under a repurchase agreement the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. The Portfolio's repurchase agreements will
provide that the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement, and will be marked to market daily.
The repurchase date usually is within seven days of the original purchase date.
Repurchase agreements are deemed to be loans under the 1940 Act. In all cases,
the Manager must be satisfied with the creditworthiness of the other party to
the agreement before entering into a repurchase agreement. In the event of the
bankruptcy (or other insolvency proceeding) of the other party to a repurchase
agreement, the Portfolio might experience delays in recovering its cash. To the
extent that, in the meantime, the value of the
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GT GLOBAL FLOATING RATE FUND, INC.
securities the Portfolio purchases may have declined, the Portfolio could
experience a loss.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may from time to time lend
securities from its portfolio with a value not exceeding 33 1/3% of its total
assets to banks, brokers and other financial institutions and receive collateral
in cash or securities issued or guaranteed by the United States Government. Such
collateral will be maintained at all times in an amount equal to at least 100%
of the current market value of the loaned securities. This limitation is a
fundamental policy, and it may not be changed without the approval of the
holders of a majority of the Portfolio's outstanding voting securities, as
defined in the 1940 Act. The purpose of such loans is to permit the borrower to
use such securities for delivery to purchasers when such borrower has sold
short. If cash collateral is received by the Portfolio, it is invested in
short-term money market securities, and a portion of the yield received in
respect of such investment is retained by the Portfolio. Alternatively, if
securities are delivered to the Portfolio as collateral, the Portfolio and the
borrower negotiate a rate for the loaned premium to be received by the Portfolio
for lending its portfolio securities. In either event, the total yield on the
Portfolio is increased by loans of its securities. The Portfolio will have the
right to regain record ownership of loaned securities to exercise beneficial
rights such as voting rights, subscription rights and rights to dividends,
interest or other distributions. Such loans are terminable at any time. The
Portfolio may pay reasonable finder's, administrative and custodial fees in
connection with such loans. In the event that the borrower defaults on its
obligation to return borrowed securities, because of insolvency or otherwise,
the Portfolio could experience delays and costs in gaining access to the
collateral and could suffer a loss to the extent that the value of the
collateral falls below the market value of the borrowed securities.
"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The Portfolio may also
purchase and sell interests in Corporate Loans and Corporate Debt Securities and
other portfolio securities on a "when issued" and "delayed delivery" basis. No
income accrues to the Portfolio on such interests or securities in connection
with such transactions prior to the date the Portfolio actually takes delivery
of such interests or securities. These transactions are subject to market
fluctuation; the value of the interests in Corporate Loans and Corporate Debt
Securities and other portfolio debt securities at delivery may be more or less
than their purchase price, and yield generally available on such interests or
securities when delivery occurs may be higher than yields on the interests or
securities obtained pursuant to such transactions. Because the Portfolio relies
on the buyer or seller, as the case may be, to consummate the transaction,
failure by the other party to complete the transaction may result in the
Portfolio missing the opportunity of obtaining a price or yield considered to be
advantageous. When the Portfolio is the buyer in such a transaction, however, it
will maintain, in a segregated account with its custodian, cash or high-grade
portfolio securities having an aggregate value equal to the amount of such
purchase commitments until payment is made. The Portfolio will make commitments
to purchase such interest or securities on such basis only with the intention of
actually acquiring these interests or securities, but the Portfolio may sell
such interests or securities prior to the settlement date if such sale is
considered to be advisable. To the extent the Portfolio engaged in "when issued"
and "delayed delivery" transactions, it will do so for the purpose of acquiring
interests or securities for the Portfolio consistent with the Fund's investment
objective and policies and not for the purpose of investment leverage. No
specific limitation exists as to the percentage of the Portfolio's assets which
may be used to acquire securities on a "when issued" or delayed delivery" basis.
INTEREST RATE HEDGING TRANSACTIONS. Certain federal income tax requirements may
limit the Portfolio's ability to engage in interest rate hedging transactions.
Gains from transactions in interest rate hedges distributed to stockholders will
be taxable as ordinary income or, in certain circumstances, as long-term capital
gains. See "Taxes."
The Portfolio will enter into interest rate swaps in order to hedge all of its
fixed rate Corporate Loans and Corporate Debt Securities against fluctuations in
interest rates. Interest rate swaps involve the exchange by the Portfolio with
another party of their respective commitments to pay or receive interest, such
as an exchange of fixed rate payments for floating rate payments. For example,
if the Portfolio holds a Corporate Loan or Corporate Security with an interest
rate that is reset only once each year, it may swap the right to receive
interest at this fixed rate for the right to receive interest at a rate that is
reset every week. This would enable the Portfolio to offset a decline in the
value of the Corporate Loan or Corporate Debt Security due to rising interest
rates, but would also limit its ability to benefit from falling interest rates.
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GT GLOBAL FLOATING RATE FUND, INC.
Inasmuch as these interest rate hedging transactions are entered into for good
faith hedging purposes, the Manager believes that such obligations do not
constitute senior securities and, accordingly, will not treat them as being
subject to its borrowing restrictions. The Portfolio usually will enter into
interest rate swaps on a net basis, i.e., the two payment streams are netted
out, with the Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of the
Portfolio's obligations over its entitlements with respect to each interest rate
swap will be accrued on a daily basis, and an amount of cash or high grade
liquid debt securities having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated accounted by the Portfolio's
custodian. If the interest rate swap transaction is entered into on other than a
net basis, the full amount of the Portfolio's obligations will be accrued on a
daily basis, and the full amount of the Portfolio's obligations will be
maintained in a segregated account by the Portfolio's custodian. The Portfolio
will not enter into any interest rate hedging transaction unless the Manager
considers the credit quality of the unsecured senior debt or the claims-paying
ability of the other party thereto to be investment grade. If there is a default
by the other party to such a transaction, the Portfolio will have contractual
remedies pursuant to the agreements related to the transaction but such remedies
may be subject to bankruptcy and insolvency laws which could affect the
Portfolio's rights as a creditor. The swap market has grown substantially in
recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As a
result, many portions of the swap market has become relatively liquid in
comparison with other similar instruments traded in the interbank market. In
addition, although the terms of interest rate swaps may provide for termination,
there can be no assurance the Portfolio will be able to terminate an interest
rate swap or to sell or offset interest rate caps or floors that it has
purchased.
The use of interest rate hedges is a highly specialized activity which involves
investment techniques and risks difference from those associated with ordinary
portfolio transactions. If the Manager is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment performance
of the Fund would diminish compared with what it would have been if these
investment techniques were not used.
Except as noted above, there is no limit on the amount of interest rate hedging
transactions that may be entered into by the Portfolio. These transactions do
not involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to interest rate hedges is limited to
the net amount of interest payments that the Portfolio is contractually
obligated to make. If the Corporate Loan underlying an interest rate swap is
prepaid and the Portfolio continues to be obligated to make payments to the
other party to the swap, the Portfolio would have to make such payments from
another source. If the other party to an interest rate swap defaults, the
Portfolio's risk of loss consists of the net amount of interest payments that
the Portfolio contractually is entitled to receive. Since interest rate
transactions are individually negotiated, the Manager expects to achieve an
acceptable degree of correlation between the Portfolio's rights to receive
interest on Participation Interests and its rights and obligations to receive
and pay interest pursuant to interest rate swaps.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The following are fundamental investment restrictions of the Fund and the
Portfolio and, prior to issuance of any preferred stock, may not be changed
without the approval, respectively, of the holders of a majority of the Fund's
or the Portfolio's outstanding shares of Common Stock (which for this purpose
and under the 1940 Act means the lesser of (i) 67% of the shares of Common Stock
represented at a meeting at which more than 50% of the outstanding shares of
Common Stock are represented or (ii) more than 50% of the outstanding shares).
Subsequent to the issuance of a class of preferred stock, the following
investment restrictions may not be changed without the approval of a majority of
the outstanding shares of Common Stock and of the preferred stock, voting
Prospectus Page 21
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GT GLOBAL FLOATING RATE FUND, INC.
together as a class, and the approval of a majority of the outstanding shares of
preferred stock, voting separately by class. The Fund and the Portfolio each may
not:
1. Borrow money or issue senior securities, except as permitted by Section 18 of
the 1940 Act.
2. Purchase securities of other investment companies, except in connection with
a merger, consolidation, acquisition or reorganization, or by purchase in the
open market of securities of closed-end investment companies where no
underwriter's or dealer's commission or profit, other than customary broker's
commission, is involved and only if immediately thereafter not more than 10% of
the Fund's or the Portfolio's total assets would be invested in such securities.
3. Purchase or sell real estate; provided that the Fund and the Portfolio may
invest in securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein.
4. Underwrite securities of other issuers except insofar as the Fund or the
Portfolio may be deemed an underwriter under the Securities Act of 1933 in
selling portfolio securities.
5. Make loans to other persons, except that the Fund and the Portfolio may
invest in loans (including assignments and participations, and including secured
or unsecured corporate loans), purchase debt securities, enter into repurchase
agreements, and lend its portfolio securities.
6. Invest more than 25% of its total assets in the securities of issuers in any
on industry; provided that this limitation shall not apply with respect to
obligations issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities; and provided further that the Fund and the Portfolio may each
invest more than 25% and may invest up to 100% of its assets in securities of
issuers in the industry group consisting of financial institutions and their
holding companies, including commercial banks, thrift institutions, insurance
companies and finance companies. For purposes of this restriction, the term
"issuer" includes the Borrower, the Agent Bank and any Intermediate Participant
(as defined under "Investment Objective and Policies -- Description of
Participation Interests").
7. Purchase any securities on margin, except that the Portfolio may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities. The purchase of Corporate Loans, Corporate Debt
Securities, and other investment assets with the proceeds of a permitted
borrowing or securities offering will not be deemed to be the purchase of
securities on margin.
8. Make short sales of securities or maintain a short position or invest in put,
call, straddle or spread options.
An additional investment restriction adopted by the Fund and the Portfolio,
which may be changed by their respective Board of Directors or Board of
Trustees, provides that neither the Fund nor the Portfolio may mortgage, pledge,
hypothecate or in any manner transfer, as security for indebtedness, any
securities owned or held by the Fund or the Portfolio except as may be necessary
in connection with hedging techniques involving interest rate transactions,
foreign currency swap transactions relating to non-U.S. dollar-denominated loans
and permitted borrowings by the Fund and the Portfolio.
If a percentage restriction on investment policies or the investment or use of
assets set forth above is adhered to at the time a transaction is effected,
later changes in percentage resulting from changing values will not be
considered a violation.
- --------------------------------------------------------------------------------
SPECIAL CONSIDERATIONS AND
RISK FACTORS
- --------------------------------------------------------------------------------
EFFECTS OF LEVERAGE. Each of the Fund and the Portfolio may borrow money in
amounts up to 33 1/3% of the value of its total assets to finance tender offers,
for temporary, extraordinary or emergency purposes, or, while neither the Fund
nor the Portfolio has any current intention of doing so, for the purpose of
financing additional investments. See "Tender Offers." The Fund also may issue
one or more series of preferred shares, although it
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GT GLOBAL FLOATING RATE FUND, INC.
has no present intention to do so. The Portfolio or Fund, as the case may be,
may borrow to finance additional investments or issue a class of preferred
shares only when it believes that the return that may be earned on investments
purchased with the proceeds of such borrowings or offerings will exceed the
costs, including debt service and dividend obligations, associated therewith.
However, to the extent such costs exceed the return on the additional
investments, the return realized by the Fund's Common Stockholders will be
adversely affected.
Capital raised through leverage will be subject to interest costs or dividend
payments which may or may not exceed the interest on the assets purchased. The
Fund and the Portfolio also may be required to maintain minimum average balances
in connection with borrowings or to pay a commitment or other fee to maintain a
line of credit; either of these requirements will increase the cost of borrowing
over the stated interest rate. The issuance of additional classes of preferred
shares involves offering expenses and other costs and may limit the Fund's
freedom to pay dividends on shares of Common Stock or to engage in other
activities. Borrowings and the issuance of a class of preferred stock having
priority over the Fund's Common Stock create an opportunity for greater income
per share of Common Stock, but at the same time such borrowing or issuance is a
speculative technique in that it will increase the Fund's exposure to capital
risk. Such risks may be reduced through the use of borrowings and preferred
stock that have floating rates of interest. Unless the income and appreciation,
if any, on assets acquired with borrowed funds or offering proceeds exceeds the
costs of borrowing or issuing additional classes of securities, the use of
leverage will diminish the investment performance of the Fund compared with what
it would have been without leverage.
The Fund has entered into an agreement with a financial institution providing
for an unsecured, discretionary credit facility ("Facility"), the proceeds of
which may be used to finance, in part, the payment for shares tendered in a
tender offer by the Fund. The Facility provides for the borrowing by the Fund of
up to the lesser of $100,000,000 or 33 1/3% of the Fund's total assets, on an
unsecured, uncommitted basis.
Under the 1940 Act, neither the Fund nor the Portfolio is permitted to incur
indebtedness unless immediately after such incurrence the Fund or the Portfolio,
as the case may be, has an asset coverage of 300% of the aggregate outstanding
principal balance of indebtedness. Additionally, under the 1940 Act the Fund may
not declare any dividend or other distribution upon any class of its capital
stock, or purchase any such capital stock, unless the aggregate indebtedness of
the Fund has at the time of the declaration of any such dividend or distribution
or at the time of any such purchase an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be.
The Fund's and the Portfolio's willingness to borrow money for investment
purposes, and the amount each will borrow, will depend on many factors, the most
important of which are investment outlook, market conditions and interest rates.
Successful use of a leveraging strategy depends on the Manager's ability to
predict correctly interest rates and market movements, and there is no assurance
that a leveraging strategy will be successful during any period in which it is
employed.
CREDIT RISK. Corporate Loans and Corporate Debt Securities may constitute
substantially all of the Portfolio's investments. Corporate Loans and Corporate
Debt Securities are primarily dependent upon the creditworthiness of the
Borrower for payment of interest and principal. The nonreceipt of scheduled
interest or principal on a Corporate Loan or Corporate Debt Security may
adversely affect the income of the Portfolio or the value of its investments,
which may in turn reduce the amount of dividends or the net asset value of the
shares of the Fund. The Portfolio's ability to receive payment of principal of
and interest on a Corporate Loan or a Corporate Debt Security also depends upon
the creditworthiness of any institution interposed between the Portfolio and the
Borrower. To reduce credit risk, the Manager actively manages the Portfolio as
described above.
Corporate Loans and Corporate Debt Securities made in connection with leveraged
buy-outs, recapitalizations and other highly leveraged transactions are subject
to greater credit risks than many of the other Corporate Loans and Corporate
Debt Securities in which the Portfolio may invest. These credit risks include
the possibility of a default on the Corporate Loan or Corporate Debt Security or
bankruptcy of the Borrower. The value of such Corporate Loans and Corporate Debt
Securities are subject to a greater degree of volatility in response to interest
rate fluctuations and may be less liquid than other Corporate Loans and
Corporate Debt Securities. The Corporate Loans and Corporate Debt Securities in
which the Portfolio invests generally are not rated by any NRSRO.
Prospectus Page 23
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
Although Corporate Loans and Corporate Debt Securities in which the Portfolio
invests will generally hold the most senior position in the capitalization
structure of the Borrowers, the capitalization of many Borrowers will include
non-investment grade subordinated debt. During periods of deteriorating economic
conditions, a Borrower may experience difficulty in meeting its payment
obligations under such bonds and other subordinated debt obligations. Such
difficulties may detract from the Borrower's perceived creditworthiness or its
ability to obtain financing to cover short-term cash flow needs and may force
the Borrower into bankruptcy or other forms of credit restructuring.
COLLATERAL IMPAIRMENT. Corporate Loans and Corporate Debt Securities (excluding
Unsecured Corporate Loans and Unsecured Corporate Debt Securities) will be
secured unless (i) the Portfolio's security interest in the collateral is
invalidated for any reason by a court or (ii) the collateral is fully released
under the terms of a loan agreement as the creditworthiness of the Borrower
improves. There is no assurance that the liquidation of collateral would satisfy
the Borrower's obligation in the event of nonpayment of scheduled interest or
principal, or that collateral could be readily liquidated. The value of
collateral generally will be determined by reference to financial statements of
the Borrower, an independent appraisal performed at the request of the Agent
Bank at the time the Corporate Loan was initially made, the market value of such
collateral (e.g., cash or securities) if it is readily ascertainable and/or by
other customary valuation techniques considered appropriate in the judgment of
the Manager. Collateral is generally valued on the basis of the Borrower's
status as a going concern and such valuation may exceed the immediate
liquidation value of the collateral.
Collateral may include (i) working capital assets, such as accounts receivable
and inventory; (ii) tangible fixed assets, such as real property, buildings and
equipment; (iii) intangible assets, such as trademarks and patent rights (but
excluding goodwill); and (iv) security interests in shares of stock of
subsidiaries or affiliates. To the extent that collateral consists of the stock
of the Borrower's subsidiaries or other affiliates, the Portfolio will be
subject to the risk that this stock will decline in value. Such a decline,
whether as a result of bankruptcy proceedings or otherwise, could cause the
Corporate Loan or Corporate Debt Security to be undercollateralized or
unsecured. In most credit agreements there is no formal requirement to pledge
additional collateral. In the case of Corporate Loans made to non-public
companies, the company's shareholders or owners may provide collateral in the
form of secured guarantees and/or security interests in assets that they own. In
addition, the Portfolio may invest in Corporate Loans guaranteed by, or fully
secured by assets of, such shareholders or owners, even if the Corporate Loans
are not otherwise collateralized by assets of the Borrower; provided, however,
that such guarantees are fully secured. There may be temporary periods when the
principal asset held by a Borrower is the stock of a related company, which may
not legally be pledged to secure a Corporate Loan or Corporate Debt Security. On
occasions when such stock cannot be pledged, the Corporate Loan or Corporate
Debt Security will be temporarily unsecured until the stock can be pledged or is
exchanged for or replaced by other assets, which will be pledged as security for
the Corporate Loan or Corporate Debt Security. However, the Borrower's ability
to dispose of such securities, other than in connection with such pledge or
replacement, will be strictly limited for the protection of the holders of
Corporate Loans.
If a Borrower becomes involved in bankruptcy proceedings, a court may invalidate
the Portfolio's security interest in the Corporate Loan or Corporate Debt
Security collateral or subordinate the Portfolio's rights under the Corporate
Loan or Corporate Debt Security to the interests of the Borrower's unsecured
creditors. Such action by a court could be based, for example, on a "fraudulent
conveyance" claim to the effect that the Borrower did not receive fair
consideration for granting the security interest in the Corporate Loan or
Corporate Debt Security collateral to the Portfolio. For Corporate Loans or
Corporate Debt Securities made in connection with a highly leveraged
transaction, consideration for granting a security interest may be deemed
inadequate if the proceeds of the Corporate Loan or Corporate Debt Security were
not received or retained by the Borrower, but were instead paid to other persons
(such as shareholders of the Borrower) in an amount which left the Borrower
insolvent or without sufficient working capital. There are also other events,
such as the failure to perfect a security interest due to faulty documentation
or faulty official filings, which could lead to the invalidation of the
Portfolio's security interest in Corporate Loan or Corporate Debt Security
collateral. If the Portfolio's security interest in Corporate Loan or Corporate
Debt Security collateral is invalidated or the Corporate
Prospectus Page 24
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
Loan or Corporate Debt Security is subordinated to other debt of a Borrower in
bankruptcy or other proceedings, it is unlikely that the Portfolio would be able
to recover the full amount of the principal and interest due on the Corporate
Loan or Corporate Debt Security.
PORTFOLIO MANAGEMENT AND OTHER CONSIDERATIONS. In the event of an increase in
short-term rates or other changed market conditions to the point where the
Fund's or the Portfolio's leverage could adversely affect holders of Common
Stock as noted above, or in anticipation of such changes, the Portfolio may
attempt to shorten the average maturity of its investment portfolio, which would
tend to offset the negative impact of leverage on holders of Common Stock.
FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor should be aware that the Fund,
unlike other investment companies that directly acquire and manage their own
portfolios of securities, seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, which is a separate investment
company with an identical investment objective (although the Fund may
temporarily hold a DE MINIMIS amount of cash). Therefore, the Fund's interest in
the securities owned by the Portfolio is indirect. In addition to selling an
interest to the Fund, the Portfolio may sell interests to other affiliated and
non-affiliated investment companies or institutional investors. Such investors
will invest in the Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as the Fund due to variations in sales commissions and
other operating expenses. Therefore, investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
in other funds that may invest in the Portfolio. Such differences in returns are
also present in other mutual fund structures, including funds that have multiple
classes of shares. For information regarding the investment objective, policies
and restrictions, see "Investment Objective and Policies."
The Board of Directors of the Fund has considered the advantages and
disadvantages of investing the assets of the Fund in the Portfolio, as well as
the advantages and disadvantages of the two-tier format. The Directors believe
that the structure offers opportunities for substantial growth in the assets of
the Portfolio and affords the potential for economies of scale for the Fund.
The Fund may withdraw (redeem) all or any part of its interest in the Portfolio
only pursuant to tender offers by the Portfolio. The Portfolio's Board of
Trustees presently intends each quarter to consider the making of such tender
offers. However, there can be no assurance that the Portfolio's Board of
Trustees will, in fact, decide to undertake the making of such a tender offer.
See "Tender Offers." If the Fund withdraws all of its assets from the Portfolio,
or the Board of Directors of the Fund determines that the investment objective
of the Portfolio is no longer consistent with the investment objective of the
Fund, the Directors would consider what action might be taken, including
investing the assets of the Fund in another pooled investment entity or
retaining an investment adviser to manage the Fund's assets in accordance with
its investment objective. The Fund's investment performance may be affected by a
withdrawal of all of its assets from the Portfolio. Of course, a complete
withdrawal of Fund assets could be accomplished only pursuant to a Portfolio
tender offer.
Smaller investors in the Portfolio may be adversely affected by the actions of a
larger investor in the Portfolio. For example, if a large investor withdraws a
significant amount of assets from the Portfolio, the remaining investors may
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may hold fewer securities, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured mutual funds that have
large or institutional investors.
Funds that invest all their assets in interests in a separate investment company
are a relatively new development in the investment company industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund stockholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund stockholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient
Prospectus Page 25
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
voting interests in the Portfolio to control matters relating to the operation
of the Portfolio or take other appropriate action. Any such withdrawal could
result in a distribution "in kind" of portfolio Loans and noncash assets (as
opposed to a cash distribution from the Portfolio). If Loans and noncash assets
are distributed, the Fund could incur brokerage, tax or other charges in
converting them to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments and will adversely affect the
liquidity of the Fund. Notwithstanding the above, there are other means for
meeting stockholder redemption requests, such as borrowing.
The Directors of the Fund, including a majority of the noninterested Directors,
have approved written procedures designed to identify and address any potential
conflicts of interest arising from the fact that the Directors of the Fund and
the Trustees of the Portfolio are the same. Such procedures require each Board
to take actions to resolve any conflict of interest between the Fund and the
Portfolio, and it is possible that the creation of separate Boards may be
considered.
- --------------------------------------------------------------------------------
COMPOSITE PERFORMANCE
- --------------------------------------------------------------------------------
The Manager has been managing separate accounts for institutional clients in the
United States since 1990. The performance illustrated in the table that follows
is based on the return achieved on the Manager's composite of accounts
("Composite") having investment objectives, policies, strategies and risks
substantially similar to those of the Fund. As of , 1996, the
Composite consisted of three private investment accounts totalling approximately
$ , which comprised approximately % of the Manager's assets under
management as of , 1996. The Composite represents a size weighted
average of each individual account in the Composite based on the beginning of
period market values. Composite returns are calculated monthly and linked
geometrically to obtain annualized and calendar year results.
The private accounts that are included in the Composite are not subject to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the Fund and Portfolio by the 1940 Act and Subchapter M
of the Code. Consequently, the performance results for the Composite could have
been adversely affected if the private accounts included in the Composite had
been regulated as investment companies under the federal securities and tax
laws. The private accounts included in the Composite were run essentially on a
fully invested basis, i.e., without holding any cash. The Portfolio, by
contrast, is expected to have a cash component generally invested in money
market instruments, reflecting, among other things, cash awaiting investment,
interest and principal payments awaiting reinvestment and cash held in
anticipation of tender offers and other cash flow requirements. Consequently,
the Composite may reflect better total return than if it were an investment
company operating as the Fund and Portfolio are expected to do. In addition,
other factors may impact the Fund and Portfolio differently than such factors
would impact private accounts included in the Composite.
Prospectus Page 26
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
The investment results of the Composite presented below are not intended to
serve as an indicator of future performance of the Fund or Portfolio. Investors
should also be aware that the use of a methodology different from that used
below to calculate performance could result in different performance data.
<TABLE>
<CAPTION>
YEAR ANNUAL TOTAL RETURN (1)
- -------------------------------------------------------------------- -----------------------
<S> <C> <C>
1992 (2)
Composite (Gross).................................................
Composite (Net) (3)...............................................
1993
Composite (Gross).................................................
Composite (Net) (3)...............................................
1994
Composite (Gross).................................................
Composite (Net) (3)...............................................
1995
Composite (Gross).................................................
Composite (Net) (3)...............................................
1996
Composite (Gross).................................................
Composite (Net) (3)...............................................
Since inception (4)
Composite (Gross).................................................
Composite (Net) (3)...............................................
</TABLE>
- ------------------
(1) Individual account performance is calculated monthly using the internal rate
of return methodology. Cash flows are accounted for on the day they occur.
Securities transactions are accounted for on a trade date basis, and accrual
accounting is used for both dividends and interest. Returns presented are
calculated on a total return basis which include all realized and unrealized
gains and losses, as well as dividends and interest earned during the
period.
(2) Commencement of investment operations was July 1, 1992. Until January 1,
1996, the Composite represented a single account. The second and third
accounts included in the Composite were added on January 1, 1996 and May 1,
1996, respectively.
(3) The annual total return of the Composite is shown after reduction by the
Fund's estimated total operating expenses (1.45% per year).
(4) Through December 31, 1996.
Prospectus Page 27
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
SUBSCRIPTION OFFERING
GT Global, Inc. (the "Distributor") acts as the distributor of shares of Common
Stock of the Fund. The Distributor, and other securities dealers which have
entered into selected dealer agreements with the Distributor, will solicit
subscriptions for shares of the Fund for a 60-day period expected to end on
, 1997. The subscription period may be extended for up to an
additional [30] days upon agreement between the Fund and the Distributor. On the
third business day after the conclusion of the subscription period, the
subscriptions will be payable, the shares will be issued and the Fund will
commence operations. The subscription offering may be terminated by the Fund or
the Distributor at any time, in which event no shares will be issued (and,
therefore, the Fund will not commence operations, no amounts will be payable by
subscribers, any payments by subscribers will be refunded in full without
interest) or a limited number of shares will be issued.
The public offering price of the shares during the subscription offering is $10
without front-end sales charge. The proceeds per share to the Fund from the sale
of all shares sold during the subscription period will be $10. As set forth
below, the Distributor may make payments to selected dealers from its own
assets.
CONTINUOUS OFFERING
After completion of the offering, the Fund will engage in a continuous offering
of its shares of Common Stock through the Distributor and other securities
dealers that have entered into selected dealer agreements with the Distributor.
During any continuous offering of the Fund's Common Stock, shares of the Fund
may be purchased from the Distributor or selected dealers, or by mailing a
purchase order directly to GT Global Investor Services, Inc. (the "Transfer
Agent"). The Fund may, from time to time, suspend the sale of its shares of
Common Stock.
The Fund will offer its shares at a price equal to the next determined net asset
value per share without a front-end sales charge. The applicable offering price
for purchase orders is based on the net asset value of the Fund next determined
after receipt of the purchase order by the Distributor. As to purchase orders
received by securities dealers prior to the close of business on the New York
Stock Exchange (the "NYSE") (generally, 4:00 p.m., New York time), which
includes orders received after the close of business on the previous day, the
applicable offering price will be based on the net asset value determined as of
15 minutes after the close of business on the NYSE on that day provided the
Distributor in turn receives the order from the securities dealer prior to 30
minutes after the close of business on the NYSE on that day. If the purchase
orders are not received by the Distributor prior to 30 minutes after the close
of business on the NYSE, such orders shall be deemed received on the next
business day. Any order may be rejected by the Distributor or the Fund. The Fund
or the Distributor may suspend the continuous offering of the Fund's shares at
any time in response to conditions in the securities markets or otherwise and
may thereafter resume such offering from time to time. Neither the Distributor
nor the dealers are permitted to withhold placing orders to benefit themselves
by a price change. The Distributor is required to advise the Fund promptly of
all purchase orders and cause payments for shares of Common Stock to be
delivered promptly to the Fund.
Due to the administrative complexities associated with a continuous offering,
administrative errors may result in the Distributor or an affiliate
inadvertently acquiring nominal numbers (in no event in excess of 5% of the
shares of Common Stock) of shares of Common Stock which it may wish to resell.
Such shares of Common Stock will not be subject to any investment restriction
and may be resold pursuant to this Prospectus.
The Distributor compensates selected dealers at a rate of % of amounts
purchased. If the shares remain outstanding after thirteen months from the date
of their original purchase, the Distributor will compensate such dealers
quarterly at an annual rate equal to % of the value of Fund shares sold by
such dealers and remaining outstanding. The compensation paid to selected
dealers and the Distributor, including the compensation paid at the time of
purchase, the quarterly payments mentioned above and the early withdrawal
charge, if any, will not in the aggregate exceed the applicable limit, as
determined from time to time by the National Association of Securities Dealers,
Inc. ("NASD").
Prospectus Page 28
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
TENDER OFFERS
- --------------------------------------------------------------------------------
In recognition of the possibility that a secondary market for the Fund's shares
will not exist, the Fund may take actions that will provide liquidity to
stockholders. The Fund may from time to time make Tender Offers, i.e., offers to
repurchase all or a portion of its shares of Common Stock from stockholders at a
price per share equal to the net asset value per share of the Common Stock
determined at the close of business on the day an offer terminates. Commencing
with the second quarter of Fund operations, the Board of Directors will consider
each quarter the making of Tender Offers. There can be no assurance that the
Board will decide to undertake the making of a Tender Offer in any particular
quarter. In addition, any partial Tender Offer by the Fund may result in a
proration of the shares repurchased from the Fund's Common Stockholders who
participate in the Tender Offer. Subject to the Fund's investment restriction
with respect to borrowings, the Fund may borrow money to finance the repurchase
of shares pursuant to any Tender Offers. See "Special Considerations and Risk
Factors -- Effects of Leverage" and "Investment Restrictions."
The Fund's assets consist primarily of its interest in the Portfolio. Therefore,
in order to finance the repurchase of Fund shares pursuant to Tender Offers, the
Fund will find it necessary to liquidate all or a portion of its interest in the
Portfolio. Because interests in the Portfolio may not be transferred, the Fund
may withdraw a portion of its interest only pursuant to tender offers by the
Portfolio. The Fund will not conduct a Tender Offer for Fund shares unless the
Portfolio simultaneously conducts a tender offer for Portfolio interests. The
Portfolio's Trustees presently intend each quarter to consider the making of
such tender offers. However, there are no assurances that the Portfolio's Board
of Trustees will, in fact, decide to undertake the making of such a tender
offer. The Fund cannot make a Tender Offer larger than a tender offer made by
the Portfolio. The Portfolio will make tender offers, if any, to all of its
investors, including the Fund, on the same terms, which practice may affect the
size of the Portfolio's offers. Subject to the Portfolio's investment
restriction with respect to borrowings, the Portfolio may borrow money or issue
debt obligations to finance its repurchase obligations pursuant to any such
tender offer.
The Fund expects that ordinarily there will be no secondary market for the
Fund's Common Stock and that periodic Tender Offers will be the only source of
liquidity for Fund stockholders. Nevertheless, if a secondary market develops
for the Common Stock of the Fund, the market price of the shares may vary from
net asset value from time to time. Such variance may be affected by, among other
factors, relative demand and supply of shares and the performance of the Fund,
especially as it affects the yield on and net asset value of the Common Stock of
the Fund. A Tender Offer for shares of Common Stock of the Fund at net asset
value is expected to reduce any spread between net asset value and market price
that may otherwise develop. However, there can be no assurance that such action
would result in the Fund's Common Stock trading at a price that equals or
approximates net asset value.
Although the Board of Directors believes that the Tender Offers generally would
be beneficial to holders of the Fund's Common Stock, the acquisition of shares
of Common Stock by the Fund will decrease the total assets of the Fund and
therefore have the likely effect of increasing the Fund's expense ratio
(assuming such acquisition is not offset by the issuance of additional shares of
Common Stock). Furthermore, to the extent the Fund borrows to finance the making
of Tender Offers, interest on such borrowings reduce the Fund's net investment
income.
It is the Board of Directors' announced policy, which may be changed by the
Board, not to repurchase shares pursuant to a Tender Offer if (1) such
repurchases would terminate the Fund's status as a RIC under the Code (which
would make the Fund a taxable entity, causing its income to be taxed at the
corporate level in addition to the taxation of stockholders who receive
dividends from the Fund); (2) the Portfolio would not be able to liquidate
portfolio securities in a manner that is orderly and consistent with the Fund's
investment objective and policies in order to repurchase Common Stock tendered
pursuant to the Tender Offer; or (3) there is, in the Board's judgment, any (a)
legal
Prospectus Page 29
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
action or proceeding instituted or threatened challenging the Tender Offer or
otherwise materially adversely affecting the Fund, (b) declaration of a banking
moratorium by federal or state authorities or any suspension of payment by banks
in the United States or New York State, which is material to the Fund, (c)
limitation imposed by federal or state authorities on the extension of credit by
lending institutions, (d) commencement of war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States which is material to the Fund, or (e) other event or condition which
would have a material adverse effect on the Fund or its stockholders if shares
of Common Stock tendered pursuant to the Tender Offer were purchased. Thus,
there can be no assurance that the Board will proceed with any Tender Offer. The
Board of Directors may modify these conditions in light of circumstances
existing at the time. If the Board of Directors determines to repurchase the
shares of Common Stock pursuant to a Tender Offer, such repurchases could
significantly reduce the asset coverage of any borrowing or outstanding senior
securities. The Fund may not repurchase shares of Common Stock to the extent
such repurchases would result in the asset coverage with respect to such
borrowing or senior securities being reduced below the asset coverage
requirement set forth in the 1940 Act. Accordingly, in order to repurchase all
shares of Common Stock tendered, the Fund may have to repay all or part of any
then outstanding borrowing or redeem all or part of any then outstanding senior
securities to maintain the required asset coverage. See "Special Considerations
and Risk Factors -- Effects of Leverage." In addition, the amount of shares of
Common Stock for which the Fund makes any particular Tender Offer may be limited
for the reasons set forth above or in respect of other concerns related to
liquidity of the Portfolio.
The Fund expects to obtain an exemption from the Securities and Exchange
Commission relating to Tender Offers that includes representations by the Fund
that no secondary market for shares of the Fund's Common Stock is expected to
develop. The exemption is conditioned on the absence of a secondary market. In
the event that circumstances arise under which the Fund does not conduct the
Tender Offers regularly, the Board of Directors would consider alternative means
of providing liquidity for holders of Common Stock. Such action would include an
evaluation of any secondary market that then existed and a determination of
whether such market provided liquidity for holders of Common Stock. If the Board
of Directors determines that such market, if any, fails to provide liquidity for
the holders of Common Stock, the Board expects that it will consider all then
available alternatives to provide such liquidity. Among the alternatives that
the Board of Directors may consider is the listing of the Fund's Common Stock on
a major domestic stock exchange or on the Nasdaq Stock Market in order to
provide such liquidity. The Board of Directors also may consider causing the
Fund to repurchase its shares from time to time in open-market or private
transactions when it can do so on terms that represent a favorable investment
opportunity. In any event, the Board of Directors expects that it will cause the
Fund to take whatever action it deems necessary or appropriate to provide
liquidity for the holders of Common Stock in light of the facts and
circumstances existing at such time.
To consummate a tender offer for the repurchase of interests in the Portfolio
(which is necessary for the Fund to complete a Tender Offer), the Portfolio may
be required to liquidate portfolio securities, and realize gains or losses, at a
time when the Manager would otherwise consider it disadvantageous to do so. In
such event gains may be realized on securities held for less than three months.
In order for the Fund to qualify as a RIC under the Code, the Portfolio must
limit such gains; and, accordingly, the amount of gain that the Portfolio could
realize in the ordinary course of its portfolio management from sales of other
securities held for less than three months would be reduced. This may adversely
affect the Fund's yield. See "Taxes."
Each Tender Offer will be made and stockholders notified in accordance with the
requirements of the Securities Exchange Act of 1934 and the 1940 Act, either by
publication or mailing or both. The offering documents will contain such
information as is prescribed by such laws and the rules and regulations
promulgated thereunder. The repurchase of tendered shares by the Fund is a
taxable event. See "Taxes." The Fund will pay all costs and expenses associated
with the making of any Tender Offer. An Early Withdrawal Charge will be imposed
on most shares accepted for tender that have been held for less than four years.
See "Early Withdrawal Charge."
Prospectus Page 30
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
EARLY WITHDRAWAL CHARGE
- --------------------------------------------------------------------------------
An Early Withdrawal Charge to recover distribution expenses incurred by the
Distributor will be charged against the stockholder's investment account and
paid to the Distributor in connection with most shares of Common Stock held for
less than four years which are accepted by the Fund for repurchase pursuant to a
Tender Offer in the manner described below. The Early Withdrawal Charge will be
imposed on those shares of Common Stock accepted for tender based on an amount
equal to the lesser of the then current net asset value of the shares of Common
Stock or the original purchase price of the shares of Common Stock being
tendered. Accordingly, the Early Withdrawal Charge is not imposed on increases
in the net asset value above the initial purchase price. In addition, the Early
Withdrawal Charge is not imposed on shares derived from reinvestments of
dividends or capital gains distributions. In determining whether an Early
Withdrawal Charge is payable, it is assumed that the acceptance of an offer to
repurchase pursuant to a Tender Offer would be made from the earliest purchase
of shares of Common Stock. The Early Withdrawal Charge imposed will vary
depending on the length of time the Common Stock has been owned since purchase
(separate purchases shall not be aggregated for these purposes), as set forth in
the following table:
<TABLE>
<CAPTION>
EARLY
YEAR OF REPURCHASE WITHDRAWAL
AFTER PURCHASE CHARGE
---------------------- ---------------
<S> <C>
First....................................... 3.0%
Second...................................... 2.5%
Third....................................... 2.0%
Fourth...................................... 1.0%
Fifth and following......................... 0.0%
</TABLE>
In determining whether an Early Withdrawal Charge is applicable to a tender of
shares of Common Stock, the calculation will be determined in the manner that
results in the lowest possible amount being charged. Therefore, it will be
assumed that the tender is first of shares of Common Stock held for over four
years and shares of Common Stock acquired pursuant to reinvestment of dividends
or distributions and then of shares of Common Stock held longest during the
three-year period. The Early Withdrawal Charge will not be applied to dollar
amounts representing an increase in the net asset value since the time of
purchase.
EXAMPLE:
Assume an investor purchased 1,000 shares of Common Stock (at a cost of $10,000)
and in the second year after purchase, the net asset value per share is $10.15
and, during such time, the investor has acquired 100 additional shares of Common
Stock upon dividend reinvestment. If at such time the investor makes his first
redemption of 500 shares of Common Stock (proceeds of $5,075), 100 shares will
not be subject to the Early Withdrawal Charge because of dividend reinvestment.
With respect to the remaining 400 shares of Common Stock, the Early Withdrawal
Charge is applied only to the original cost of $10 per share and not to the
increase in net asset value of $0.15 per share. Therefore, $4,000 of the $5,075
redemption proceeds will be charged at a rate of 2.5% (the applicable rate in
the second year after purchase).
Prospectus Page 31
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
MANAGEMENT
- --------------------------------------------------------------------------------
Each of the Fund's Board of Directors and the Portfolio's Board of Trustees has
overall responsibility for the operation of the Fund and the Portfolio,
respectively. Pursuant to such responsibility, each Board has approved contracts
with various financial organizations to provide, among other things, day to day
management services required by the Fund and the Portfolio.
INVESTMENT MANAGEMENT
The Investment Advisory Agreement provides that, subject to the direction of the
Board of Trustees of the Portfolio, Chancellor LGT Senior Secured Management,
Inc. (the "Manager") is responsible for the actual management of the Portfolio.
The responsibility for making decisions to buy, sell or hold a particular
security rests with the Manager, subject to review by the Board of Trustees of
the Portfolio.
In providing investment management for the Portfolio, the Manager will consider
analyses from various sources, make the necessary investment decisions, and
place orders for transactions accordingly. For the services provided by the
Manager under the Investment Advisory Agreement, the Portfolio pays a monthly
fee at an annual rate of 0.95% of the Portfolio's average net assets (i.e., the
average daily value of the total assets of the Portfolio, minus the sum of
accrued liabilities of the Portfolio). For purposes of this calculation, average
daily net assets is determined at the end of each month on the basis of the
average net assets of the Portfolio for each day during the month.
The Portfolio will be managed by the following investment professionals who
comprise the Manager's Senior Secured team. While Mr. Alfieri will have primary
responsibility for the day-to-day management of the Portfolio, all of the
individuals listed below will have significant input into the Portfolio's
investments.
<TABLE>
<CAPTION>
NAME TITLE BUSINESS EXPERIENCE - LAST FIVE YEARS
- --------------------------- ---------------------- ------------------------------------------------------------------
<S> <C> <C>
Stephen M. Alfieri Managing Director Portfolio Manager and Research Analyst for the Manager since 1992.
Prior thererto, Mr. Alfieri was associated with Manufacturers
Hanover Trust Company (now Chase Manhattan Bank), where he served
in a variety of capacities in the Acquisition Finance Group.
Christopher E. Jansen Managing Director Portfolio Manager and Research Analyst for the Manager since 1990.
Christopher A. Bondy Vice President Senior Secured Loan Research Analyst for the Manager since 1993.
Prior thereto, Mr. Bondy held a variety of positions with The
Bank of Tokyo Trust Company.
Gregory L. Smith Vice President Senior Secured Loan Research Analyst for the Manager since 1995.
Prior thereto, Mr. Smith was a Vice President for Continental
Bank/Bank of America from 1993 to 1995 and he held a variety of
positions with Chemical Bank (now Chase Manhattan Bank) from 1986
to 1993.
</TABLE>
The Manager is a subsidiary of Chancellor LGT Asset Management, Inc. As of
October 31, 1996, the Manager had assets under management totaling approximately
$3.2 billion and the Manager ranked as the largest institutional investment
manager of the senior secured asset class. Chancellor LGT 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 the Manager are located at 1166
Avenue of the Americas, New York, New York 10036.
Chancellor LGT and its worldwide affiliates, including LGT Bank in
Liechtenstein, formerly bank in Liechtenstein, comprise Liechtenstein Global
Trust, formerly BIL GT Group Limited. Liechtenstein Global Trust is a provider
of global asset management and private banking products and services to
institutional and individual investors.
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GT GLOBAL FLOATING RATE FUND, INC.
Liechtenstein Global Trust in controlled by the Prince of Liechtenstein
Foundation, which serves as a 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 October 31, 1996, Chancellor LGT and its worldwide asset management
affiliates managed approximately $59 billion. In the United States, as of
October 31, 1996, Chancellor LGT managed or administered approximately $10
billion of GT Global Mutual Funds. As of October 31, 1996, assets entrusted to
Liechtenstein Global Trust totaled approximately $80 billion.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. to form Chancellor LGT. As of September
30, 1996, Chancellor Capital and its affiliates, including the Manager, were the
15th largest independent investment manager in the United States with
approximately $33 billion in assets under management. Chancellor Capital
specialized in public and private U.S. equity and fixed income portfolio
management for over 300 U.S. institutional clients.
The Administration Agreement provides that, subject to the direction of the
Board of Directors of the Fund, the Administrator will perform certain
administrative service for the Fund. The Administrator will furnish corporate
offers and clerical staff, provide office space, services and equipment, prepare
or assist in the preparation of reports and proxy materials to stockholders and
filings with the SEC and other regulatory bodies, and supervise the provision of
custodial, accounting and other services by third party service providers. The
Fund will pay administration fees at the annualized rate of % of the Fund's
average weekly net assets.
Unless earlier terminated as described below, the Investment Advisory and
Administration Agreements will remain in effect from year to year if approved
annually (a) by the Board of Directors/ Trustees of the Fund and the Portfolio
or by a majority of the outstanding shares of the Fund and the Portfolio, and
(b) by a majority of the Directors/ Trustees who are not parties to such
contract or interested persons (as defined in the 1940 Act) of any such party.
Such contracts are not assignable and may be terminated without penalty on 60
days' written notice at the option of either party thereto or by the vote of the
stockholders of the Fund.
DIRECTORS AND OFFICERS
The Directors and executive officers of the Fund, their ages and their principal
occupations during the last five years are set forth below. Unless otherwise
noted, the address of each Director and executive officer is 50 California
Street, San Francisco, California 94111.
DAVID J. THELANDER, DIRECTOR AND PRESIDENT
WILLIAM J. GUILFOYLE, VICE PRESIDENT
JAMES R. TUFTS, VICE PRESIDENT, SECRETARY AND TREASURER
[TO BE COMPLETED BY AMENDMENT.]
The Board of Directors of the Fund has an Audit Committee, comprised of Miss
, and Messrs. , and , which is responsible for reviewing
and evaluating the audit function, including recommending firms to serve as
independent auditors of the Fund. Each of the officers of the Fund is also an
officer of each of the other investment companies registered under the 1940 Act
that are managed by the Manager. The Fund pays each Director who is not a
director, officer or employee of the Manager or any affiliated company $5,000 a
year, plus $300 for each meeting of the Board attended by the Director, and
reimburses travel and other expenses incurred in connection with attending Board
meetings. Other Directors and officers receive no compensation or expense
reimbursement from the Fund. Because the Fund has not yet commenced operations,
no Director or officer of the Fund owns any shares of the Fund. The Fund
requires no employees since the Manager and other third-party service providers
perform substantially all of the services necessary for the Fund's operations.
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GT GLOBAL FLOATING RATE FUND, INC.
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PORTFOLIO TRANSACTIONS
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Subject to policies established by the Portfolio's Board of Trustees, the
Manager is responsible for the execution of the Portfolio's transactions and the
selection of brokers and dealers who execute such transactions on behalf of the
Fund. In executing transactions for the Portfolio, the Manager seeks the best
net results for the 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.
Although the Manager generally seeks reasonable competitive commission rates and
spreads, payment of the lowest commission or spread is not necessarily
consistent with the best net results. The Portfolio has no obligation to deal
with any broker or dealer or group of brokers in the execution of portfolio
transactions.
Consistent with the interests of the Portfolio and subject to the supervision of
the Portfolio's Board of Trustees, the Manager may select brokers and dealers on
the basis of the research, statistical and pricing services they provide to the
Manager for its use in managing the Portfolio and its other advisory accounts.
Information and research received from such brokers and dealers is in addition
to, and not in lieu of, the services required to be performed by the Manager
under the Investment Advisory Agreement (defined above). A commission or spread
paid to such brokers and dealers may be higher than that which another qualified
broker or dealer would have charged for effecting the same transaction, provided
that the Manager determines in good faith that such commission or spread is
reasonable in terms either of that particular transaction or the overall
responsibility of the Manager to the Portfolio and its other clients and that
the total commissions and spreads paid by the Portfolio will be reasonable in
relation to the benefits received by the Portfolio over the long term.
Investment decisions for the Portfolio and for other investment accounts managed
by the Manager 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 the Portfolio. In such cases, purchases
or sales are 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 the
Portfolio is concerned, in other cases the Manager believes that coordination
and the ability to participate in volume transactions will be beneficial to the
Portfolio.
The Portfolio does not have any obligation to deal with any broker or group of
brokers in the execution of portfolio transactions. The Portfolio contemplates
that, consistent with the policy of obtaining the best net results, brokerage
transactions may be conducted through certain companies that are members of the
Liechtenstein Global Trust. The 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.
The Portfolio engages in trading when the Manager has concluded that the sale of
a security owned by the Portfolio and/or the purchase of another security 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 the Portfolio's investment
objectives, a security also may 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.
The Portfolio's portfolio turnover rate is not expected to exceed 100%, but may
vary greatly from year to year and will not be a limiting factor when the
Manager deems portfolio changes appropriate. Although the Portfolio generally
does not intend to trade for short-term profits, the securities held by the
Portfolio will be sold whenever the Manager believes it is appropriate to do so,
without regard to the length of time a particular security may have been held. A
100% portfolio turnover rate would occur if the lesser of the value of
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GT GLOBAL FLOATING RATE FUND, INC.
purchases or sales of the Portfolio's securities for a year (excluding purchases
of U.S. Treasury and other securities with a maturity at the date of purchase of
one year or less) were equal to 100% of the average monthly value of the
securities, excluding short-term investments, held by the Portfolio during such
year. Higher portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs that the Portfolio will bear directly.
DIVIDENDS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund intends to distribute substantially all of its net investment income,
which consists generally of its share of the Portfolio's net investment income,
reduced by interest on the Fund's borrowings and dividends or interest on its
senior securities, if any. Dividends from such income are declared daily and
paid monthly to holders of Common Stock. Substantially all of the Fund's share
of the Portfolio's net realized long- and short-term capital gains, if any, are
distributed at least annually to Common Stockholders. Shares of Common Stock
accrue dividends as long as they are issued and outstanding (i.e., from the
settlement date of a purchase order to the settlement date of a tender offer).
Under the 1940 Act, the Fund is not permitted to incur indebtedness unless
immediately after such incurrence it has an asset coverage of at least 300% of
the aggregate outstanding principal balance of the indebtedness. Additionally,
under the 1940 Act, the Fund may not declare any dividend or other distribution
on any class of its capital stock or purchase any such capital stock unless it
has, at the time of the declaration of any such distribution or at the time of
any such purchase, asset coverage of at least 300% of the aggregate indebtedness
after deducting the amount of such distribution, or purchase price, as the case
may be. This latter limitation -- and a limitation on the Fund's ability to
declare any cash dividends or other distributions on the Common Stock while any
shares of preferred stock are outstanding -- could under certain circumstances
impair its ability to maintain its qualification for taxation as a RIC. See
"Special Considerations and Risk Factors -- Effects of Leverage" and "Taxes."
Dividends and other distributions to Common Stockholders may be automatically
reinvested in shares of Common Stock pursuant to the Fund's Dividend
Reinvestment Plan. See "Dividend Reinvestment Plan." Dividends and other
distributions will be taxable to stockholders whether they are so reinvested in
shares of the Fund or received in cash. See "Taxes."
TAXES
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TAXATION OF THE FUND
The Fund intends to qualify for the special tax treatment afforded RICs under
Subchapter M of the Code. To qualify for that treatment, the Fund must
distribute to its stockholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gains, and net gains from certain foreign
currency transactions) and must meet several additional requirements. Among
these requirements are the following: (1) the Fund must derive at least 90% of
its gross income each taxable year from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income derived with respect to its
business of investing in securities or those currencies; (2) the Fund must
derive less than 30% of its gross income each taxable year from the sale or
other disposition of securities, or foreign currencies that are not directly
related to its principal business of investing in securities, held for less than
three months; and (3) at the close of each quarter of the Fund's taxable year,
(i) at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. Government securities, and
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GT GLOBAL FLOATING RATE FUND, INC.
other securities limited, in respect of any one issuer, to an amount that does
not exceed 5% of the value of the Fund's total assets and that does not
represent more than 10% of the issuer's voting securities, and (ii) not more
than 25% of the value of its total assets may be invested in securities (other
than U.S. Government securities) of any one issuer.
The Fund, as an investor in the Portfolio, will be deemed to own a proportionate
share of the Portfolio's assets, and to earn a proportionate share of the
Portfolio's income, for purposes of determining whether the Fund satisfies all
the requirements described above to qualify as a RIC. In each taxable year that
it so qualifies, the Fund (but not its stockholders) will not be subject to
federal income tax on that part of its investment company taxable income and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss derived from the sale of securities or from certain transactions in
interest rate swaps) that it distributes to its stockholders.
The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the
extent it fails to distribute by the end of any calendar year substantially all
of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
See the next section for a discussion of the tax consequences to the Fund of
certain transactions engaged in by the Portfolio.
TAXATION OF THE PORTFOLIO
The Portfolio will be treated as a partnership for federal income tax purposes
and will not be a "publicly traded partnership." As a result, the Portfolio will
not be subject to federal income tax; instead, the Fund, as an investor in the
Portfolio, will be 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. The Portfolio also will not be subject to
state income or franchise tax.
Because, as noted above, the Fund will be deemed to own a proportionate share of
the Portfolio's assets, and to earn a proportionate share of the Portfolio's
income, for purposes of determining whether the Fund satisfies the requirements
to qualify as a RIC, the Portfolio intends to conduct its operations so that the
Fund will be able to satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a partial or
complete withdrawal in connection with a tender offer by the Portfolio 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 the
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. The Fund's
basis for its interest in the Portfolio generally will equal the amount of cash
the Fund invests in the Portfolio, increased by the Fund's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash and the
basis of any property the Portfolio distributes to the Fund and (b) the Fund's
share of the Portfolio's losses.
Interest received by the Portfolio may be subject to income, withholding, or
other taxes imposed by foreign countries and U.S. possessions that would reduce
the yield on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.
Gains or losses (1) from the disposition of foreign currencies, (2) on the
disposition of a debt security denominated in a foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time
the Portfolio accrues interest or other receivables or expenses or other
liabilities denominated in a foreign currency and the time it actually collects
the receivables or pays the liabilities, generally are treated as ordinary
income or loss. These gains or losses, referred to under the Code as "section
988" gains or losses, may increase or decrease the amount of investment company
taxable income available to the Fund for distribution to its stockholders.
The federal income tax rules governing the taxation of interest rate swaps are
not entirely clear and may require the Portfolio to treat payments received
under such arrangements as ordinary income and to amortize payments under
certain circumstances. The Portfolio will limit its activity in this
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GT GLOBAL FLOATING RATE FUND, INC.
regard in order to enable the Fund to maintain its qualification as a RIC.
TAXATION OF THE STOCKHOLDERS
Dividends paid by the Fund from its investment company taxable income, whether
received in cash or reinvested in Fund shares pursuant to the Plan, are taxable
to its stockholders as ordinary income to the extent of its earnings and
profits. (Any distributions in excess of the Fund's earnings and profits first
will reduce the adjusted tax basis of a holder's Common Stock and, after that
basis is reduced to zero, will constitute capital gains to the stockholder,
assuming the Common Stock is held as a capital asset). Distributions, if any,
from the Fund's net capital gain, when designated as such, are taxable to its
stockholders as long-term capital gains, regardless of the length of time they
have owned their Fund shares and whether received by them in cash or reinvested
in Fund shares pursuant to the Plan. The Fund annually will provide its
stockholders with a written notice designating the amounts of any capital gain
distributions.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Distributions
by the Fund generally will not be eligible for the dividends-received deduction
allowed to corporations. Dividends and other distributions declared by the Fund
in, and payable to stockholders of record as of a date in, October, November, or
December of any year will be deemed to have been paid by the Fund and received
by the stockholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to stockholders for the year in which that December 31 falls.
The Fund must withhold 31% from dividends, capital gain distributions, and
proceeds from sales of Common Stock pursuant to a Tender Offer, if any, payable
to any individuals and certain other noncorporate stockholders who have not
furnished to the Fund a correct taxpayer identification number ("TIN") or a
properly completed claim for exemption on Form W-8 or W-9 ("backup
withholding"). Withholding at that rate also is required from dividends and
capital gain distributions payable to such stockholders who otherwise are
subject to backup withholding. When establishing an account, an investor must
certify under penalty of perjury that the investor's TIN is correct and that the
investor is not otherwise subject to backup withholding.
A loss realized on a sale or exchange of shares of the Fund will be disallowed
if other Fund shares are acquired (whether through the reinvestment of
distributions under the Plan or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
Dividends paid by the Fund to a stockholder who, as to the United States, is a
nonresident alien individual or nonresident alien fiduciary of a trust or
estate, foreign corporation, or foreign partnership ("foreign stockholder") will
be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply if a dividend paid by the Fund to a foreign
stockholder is "effectively connected with the conduct of a U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic stockholders will apply. Distributions of net capital gain are not
subject to withholding, but in the case of a foreign stockholder who is a
nonresident alien individual, those distributions ordinarily will be subject to
U.S. income tax at a rate of 30% (or lower treaty rate) if the individual is
physically present in the United States for more than 182 days during the
taxable year and the distributions are attributable to a fixed place of business
maintained by the individual in the United States. Foreign stockholders are
urged to consult their own tax advisers concerning the applicability of this
withholding tax.
TENDER OFFERS
A holder of Common Stock who, pursuant to any Tender Offer, tenders all shares
of Common Stock owned by such stockholder and any shares considered owned
thereby under attribution rules contained in the Code will realize a taxable
gain or loss depending upon such stockholder's basis for the shares. Such gain
or loss will be treated as capital gain or loss if the shares are held as
capital assets and will be long-term or short-term depending on the
stockholder's holding period for the shares.
Different tax consequences may apply to tendering and non-tendering holders of
Common Stock in connection with a Tender Offer, and these consequences will be
disclosed in the related offering documents. For example, if a tendering holder
of Common Stock tenders less than all shares owned by or attributed to such
stockholder, and if the
Prospectus Page 37
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GT GLOBAL FLOATING RATE FUND, INC.
payment to such stockholder does not otherwise qualify as a sale or exchange,
the proceeds received will be treated as a taxable dividend, a return of
capital, or capital gain depending on the Fund's earnings and profits and the
stockholder's basis for the tendered shares. Also, there is a risk that non-
tendering holders of Common Stock may be considered to have received a deemed
distribution that may be a taxable dividend in whole or in part. Holders of
Common Stock may wish to consult their tax advisers prior to tendering.
* * * * *
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its stockholders. For further information,
reference should be made to the pertinent Code sections and the regulations
promulgated thereunder, which are subject to change by legislative, judicial, or
administrative action either prospectively or retroactively. Investors are urged
to consult their tax advisers regarding specific questions as to federal, state,
local, or foreign taxes. Foreign investors should consider applicable foreign
taxes in their evaluation of an investment in the Fund.
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DIVIDEND REINVESTMENT PLAN
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Pursuant to the Plan, each stockholder will be deemed to have elected to have
all dividends and other distributions, net of any applicable withholding taxes,
automatically reinvested in additional shares of Common Stock, unless GT Global
Investor Services, Inc., the Fund's transfer agent, as the Plan Agent (the "Plan
Agent"), is otherwise instructed by the stockholder in writing. Stockholders who
do not participate in the Plan will receive all dividends and other
distributions in cash, net of any applicable withholding taxes, paid in U.S.
dollars by check mailed directly to the stockholder by GT Global Investor
Services, Inc., as dividend-paying agent. Stockholders who do not wish to have
dividends and other distributions automatically reinvested should notify the
Plan Agent at California Plaza, 2121 N. California Boulevard, Suite 450, Walnut
Creek, California 94596. Dividends and other distributions with respect to
shares of Common Stock registered in the name of a broker-dealer or other
nominee (i.e., in "street name") will be reinvested under the Plan unless such
service is not provided by the broker-dealer or nominee or the stockholder
elects to receive dividends and other distributions in cash. A stockholder whose
shares of Common Stock are held by a broker-dealer or nominee that does not
provide a dividend reinvestment service may be required to have his shares of
Common Stock registered in his own name to participate in the Plan. Similarly, a
stockholder may be unable to transfer his account to certain broker-dealers and
continue to participate in the Plan. Investors who own shares of Common Stock
registered in street name should contact the broker or nominee for details
concerning participation in the Plan.
The Plan Agent will maintain all participant accounts in the Plan and furnish
written confirmations of all transactions in the accounts, including information
needed by participants for personal and tax records. Shares of Common Stock in
the account of each participant may be held by the Plan Agent in
non-certificated form in the name of the Plan Agent or the Plan Agent's nominee,
and each stockholder's proxy will include those shares of Common Stock purchased
pursuant to the Plan. Participants in the Plan may withdraw from the Plan upon
written notice to the Plan Agent.
In the case of a stockholder of record, such as a bank, broker-dealer or
nominee, that holds shares of Common Stock for others who are the beneficial
owners, the Plan Agent will administer the Plan on the basis of the number of
shares of Common Stock certified from time to time by the record stockholder as
representing the total amount registered in the stockholder's name and held for
the account of beneficial owners who participate in the Plan.
There will be no charge to participants for reinvesting dividends or other
distributions. The Plan Agent's fees for the handling of reinvestment of
distributions will be paid by the Fund.
All registered holders of shares of Common Stock (other than brokers and
nominees) will be mailed information regarding the Plan, including a form
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GT GLOBAL FLOATING RATE FUND, INC.
with which they may elect to terminate a participation in the Plan and receive
further dividends and other distributions in cash. An election to terminate
participation in the Plan must be made in writing to the Plan Agent and should
include the stockholder's name and address as they appear on the share
certificate. An election to terminate, until such election is changed, will be
deemed to be an election by a stockholder to take all subsequent distributions
in cash. An election will be effective only for distributions declared and
having a record date at least ten days after the date on which the election is
received.
The receipt of dividends and other distributions in shares of Common Stock under
the Plan will not relieve participants of any income tax (including withholding
taxes) that may be payable on such distributions. See "Taxes."
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any dividend or other distribution paid subsequent to notice of
the termination sent to the participants in the Plan at least 30 days before the
record date for the distribution. The Plan also may be amended by the Fund or
the Plan Agent, but (except when necessary or appropriate to comply with
applicable law, rules or policies of a regulatory authority) only by at least 30
days' written notice to participants in the Plan. All correspondence concerning
the Plan should be directed to the Plan Agent, California Plaza, 2121 N.
California Boulevard, Suite 450, Walnut Creek, California 94596.
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AUTOMATIC INVESTMENT PLAN
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Investors may purchase shares of the Fund's Common Stock through the GT Global
Automatic Investment Plan. Under this Plan, an amount specified by the
stockholder of $100 or more (or $25 for Individual Retirement Accounts, Code
Section 403(b)(7) custodial accounts and other tax-qualified employer-sponsored
retirement accounts) on a monthly or quarterly basis will be sent to GT Global
Investor Services, Inc. from the investor's bank for investment in the Fund.
Participants in the Automatic Investment Plan should not elect to receive
dividends or other distributions from the Fund in cash. Investors should contact
their brokers or GT Global Investor Services, Inc. for more information.
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EXCHANGES
- --------------------------------------------------------------------------------
The Fund may make available to stockholders who tender shares of the Fund's
Common Stock pursuant to a Tender Offer the privilege of exchanging Fund shares
at net asset value for Class B shares of certain open-end investment companies
managed by the Administrator that are subject to a contingent deferred sales
charge. Any such exchange must be effected in connection with a stockholder's
tender of Fund shares in a Tender Offer. No Early Withdrawal Charge will be
imposed on stockholders choosing to exchange their Fund shares for shares of any
such fund; however, the exchanging stockholders will be subject to the
applicable contingent deferred sales charge imposed by such fund. For the
purpose of calculating the applicable contingent deferred sales charge, the
purchase of shares of such fund will be deemed to have occurred at the time of
the repurchase of the Fund shares and the exchange into Class B shares. Subject
to any applicable contingent deferred sales charges, Class B shares of certain
open-end investment companies managed by the Administrator may also be exchanged
for shares of the Fund's Common Stock. Any such exchange will be made on the
basis of the relative net asset value per share of each fund at the time of
exchange, provided that such exchange offers are available only in states where
shares of the fund acquired may legally be sold.
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GT GLOBAL FLOATING RATE FUND, INC.
NET ASSET VALUE
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The net asset value per share of Common Stock is determined Monday through
Friday as of 15 minutes after the close of regular trading on the NYSE
(generally, 4:00 p.m., New York time), on each day during which the NYSE is
open. The NYSE is not open on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
For purposes of determining the net asset value of a share of Common Stock, the
Fund's uninvested assets plus its share of the value of the securities and any
cash or other assets (including interest accumulated but not yet received) held
by the Portfolio minus all liabilities (including accrued expenses) of the Fund
and its share of all liabilities (including accrued expenses) of the Portfolio
is divided by the total number of shares of Common Stock outstanding at such
time. Expenses, including the fees payable to the Manager, are accrued daily.
The Manager, subject to guidelines adopted and periodically reviewed by the
Portfolio's Board of Trustees, values the Corporate Loans and Corporate Debt
Securities at fair value, which approximates market value. In valuing a
Corporate Loan or Corporate Debt Security, the Manager considers, among other
factors, (i) the creditworthiness of the Borrower and any Intermediate
Participants, (ii) the current interest rate, period until next interest rate
reset and maturity of the Corporate Loan or Corporate Debt Security, (iii)
recent prices in the market for instruments of similar quality, rate, period
until next prices in the market for instruments of similar quality, rate, period
until next interest rate reset and maturity. The Manager believes that
Intermediate Participants selling Corporate Loans or otherwise involved in a
Corporate Loan transaction may tend, in valuing Corporate Loans for their own
accounts, to be less sensitive to interest rate and credit quality changes and,
accordingly, the Manager may not rely solely on such valuations in valuing the
Corporate Loans for the Fund's account. In addition, because a secondary trading
market in Corporate Loans and Corporate Debt Securities has not yet fully
developed, in valuing Corporate Loans and Corporate Debt Securities, the Manager
may not rely solely on but may consider prices or quotations provided by banks,
dealers or pricing services with respect to secondary market transactions in
Corporate Loans and Corporate Debt Securities. To the extent that an active
secondary market in Corporate Loans and Corporate Debt Securities develops to a
reliable degree, or exists in respect of other loans or instruments deemed to be
similar to Corporate Loans and Corporate Debt Securities, the Manager may rely
to an increasing extent on such market prices and quotations in valuing the
Corporate Loans and Corporate Debt Securities held by the Portfolio.
Other portfolio securities (other than short-term obligations but including
listed issues) may be valued on the basis of prices furnished by one or more
pricing services which determine prices for normal, institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. In certain circumstances, portfolio
securities are valued at the last sale price on the exchange that is the primary
market for such securities, or the last quoted bid price for those securities
for which the over-the-counter market is the primary market or for listed
securities in which there were no sales during the day. The value of interest
rate swaps, caps and floors is determined in accordance with a formula and then
confirmed periodically by obtaining a bank quotation. Positions in options are
valued at the last sale price on the market where any such option is principally
traded. Obligations with remaining maturities of 60 days or less are valued at
amortized cost unless this method no longer produces fair valuations. Repurchase
agreements are valued at cost plus accrued interest. Rights or warrants to
acquire stock or stock acquired pursuant to the exercise of a right or warrant,
may be valued taking into account various factors such as original cost to the
Portfolio, earnings and net worth of the issuer, market prices for securities of
similar issuers, assessment of the issuer's future prosperity, liquidation value
or third party transactions involving the issuer's securities. Securities for
which there exist no price quotations or valuations and all other assets are
valued at fair value as determined in good faith by or on behalf of the Board of
Trustees of the Portfolio.
Prospectus Page 40
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
The Fund is authorized to issue 1 billion shares of capital stock, $.001 par
value, all of which is classified as Common Stock. Although it has no current
intention of doing so, the Board of Directors of the Fund is authorized to
classify and reclassify any unissued shares of capital stock from time to time
by setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or terms and conditions of
redemption of such shares by the Fund. The description of the capital stock and
the description under "Description of Capital Stock -- Certain Anti-Takeover
Provisions of the Articles of Incorporation" are subject to the provisions
contained in the Fund's Articles of Incorporation and Bylaws.
COMMON STOCK
Shares of the Common Stock have no preemptive, conversion, exchange or
redemption rights. Each share has equal voting, dividend, distribution and
liquidation rights. The outstanding shares of Common Stock are, and those
offered hereby, when issued, will be, fully paid and nonassessable. Stockholders
are entitled to one vote per share. All voting rights for the election of
directors are noncumulative, which means that the holders of more than 50% of
the shares can elect 100% of the directors then nominated for election if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any directors.
As of the date of this Prospectus, the Manager owns 100% of the issued and
outstanding shares of Common Stock of the Fund and, until such time as the Fund
completes the public offering of its Common Stock, the Manager will be deemed to
control the Fund under the 1940 Act.
Any additional offerings of the Fund's Common Stock, if made, will require
approval of its Board of Directors and will be subject to the requirement of the
1940 Act that shares may not be sold at a price below the then-current net asset
value, exclusive of underwriting discounts and commissions, except, among other
things, in connection with an offering to existing stockholders or with the
consent of a majority of the holders of the Fund's outstanding voting
securities. Shares of the Common Stock will be held in book-entry form unless
physical certificates are requested in writing by a Common Stockholder.
CERTAIN ANTI-TAKEOVER PROVISIONS OF THE ARTICLES OF INCORPORATION
The Fund presently has provisions in its Articles of Incorporation that have the
effect of limiting (i) the ability of other entities or persons to acquire
control of the Fund, (ii) the Fund's freedom to engage in certain transactions,
and (iii) the ability of the Fund's directors or stockholders to amend the
Articles of Incorporation. These provisions of the Articles of Incorporation may
be regarded as "anti-takeover" provisions. Under Maryland law and the Fund's
Articles of Incorporation, the affirmative vote of the holders of at least a
majority of the votes entitled to be cast is required for the consolidation of
the Fund with another corporation, a merger of the Fund with or into another
corporation (except for certain mergers in which the Fund is the successor), a
statutory share exchange in which the Fund is not the successor, a sale or
transfer of all or substantially all of the Fund's assets, the dissolution of
the Fund and any amendment to the Fund's Articles of Incorporation. In addition,
the affirmative vote of the holders of at least 66 2/3% (which is higher than
that required under Maryland law or the 1940 Act) of the outstanding shares of
the Fund's capital stock is required generally to authorize any of the following
transactions or to amend the provisions of the Articles of Incorporation
relating to such transactions:
(i) merger, consolidation or statutory share exchange of the Fund with or into
any other corporation;
(ii) issuance of any securities of the Fund to any person or entity for cash;
(iii) sale, lease or exchange of all or any substantial part of the assets of
the Fund to any entity or person (except assets having an aggregate market value
of less than $1,000,000); or
(iv) sale, lease or exchange to the Fund, in exchange for securities of the
Fund, of any assets of any entity or person (except assets having an aggregate
fair market value of less than $1,000,000) if such corporation, person or entity
is directly, or indirectly
Prospectus Page 41
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
through affiliates, the beneficial owner of more than 5% of the outstanding
shares of the Fund (a "Principal Stockholder"). A similar vote also would be
required for any amendment of the Articles of Incorporation to convert the Fund
to an open-end investment company by making any class of the Fund's capital
stock a "redeemable security," as that term is defined in the 1940 Act. Such
vote would not be required with respect to any of the foregoing transactions,
however, when, under certain conditions, the Board of Directors approves the
transaction, although in certain cases involving merger, consolidation or
statutory share exchange or sale of all or substantially all of the Fund's
assets or the conversion of the Fund to an open-end investment company, the
affirmative vote of the holders of a majority of the outstanding shares of the
Fund's capital stock would nevertheless be required. Reference is made to the
Articles of Incorporation of the Fund, on file with the SEC, for the full text
of these provisions.
The provisions of the Articles of Incorporation described above and the Fund's
right to make a tender offer for its shares could have the effect of depriving
the stockholders of opportunities to sell their shares at a premium over net
asset value by discouraging a third party from seeking to obtain control of the
Fund in a tender offer or similar transaction. The overall effect of these
provisions is to render more difficult the accomplishment of a merger or the
assumption of control by a Principal Stockholder. They provide, however, the
advantage of potentially requiring persons seeking control of the Fund to
negotiate with its management regarding the price to be paid and facilitating
the continuity of the Fund's management, investment objectives and policies. The
Board of Directors of the Fund has considered the foregoing anti-takeover
provisions and concluded that they are in the best interest of the Fund and its
stockholders.
- --------------------------------------------------------------------------------
YIELD INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may include its yield and/or total return for various
specified time periods in advertisements or information furnished to present or
prospective stockholders.
The yield of the Fund refers to the income generated by an investment in the
Fund over a stated period. Yield is calculated by annualizing the most recent
monthly distribution and dividing the product by the average maximum offering
price.
The Fund also may quote annual total return and aggregate total return
performance data. Total return quotations for the specified periods will be
computed by finding the rate of return (based on net investment income and any
capital gains or losses on portfolio investments over such periods) that would
equate the initial amount invested to the redeemable value of such investment at
the end of the period.
The calculation of yield and total return does not reflect the imposition of any
Early Withdrawal Charges or the amount of any stockholder's tax liability.
Yield and total return figures are based on the Fund's historical performance
and are not intended to indicate future performance. The Fund's yield is
expected to fluctuate, and its total return will vary depending on market
conditions, the Corporate Loans, Corporate Debt Securities and other securities
comprising the Portfolio's investments, the Fund's and the Portfolio's operating
expenses and the amount of net realized and unrealized capital gains or losses
during the period.
On occasion, the Fund may compare its yield to (1) LIBOR, quoted daily in The
Wall Street Journal, (2) the Prime Rate, quoted daily in The Wall Street Journal
as the base rate on corporate loans at large U.S. money center commercial banks,
(3) the CD rate, quoted daily in The Wall Street Journal as the average of top
rates paid by major New York banks on primary new issues of negotiable CDs,
usually on amounts of $1 million and more, (4) one or more averages compiled by
Donoghue's Money Fund Report, a widely recognized independent publication that
monitors the performance of money market mutual funds, (5) the average yield
reported by the Bank Rate Monitor National Index-TM- for money market deposit
accounts offered by the 100 leading banks and thrift institutions in the ten
largest standard metropolitan statistical areas, (6) yield data published by
Lipper Analytical
Prospectus Page 42
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
Services, Inc., or (7) the yield on an investment in 90-day Treasury bills on a
rolling basis, assuming quarterly compounding. In addition, the Fund may compare
the Prime rate, the CD rate, the Donoghue's averages and the other yield data
described above to each other. As with yield quotations, yield comparisons
should not be considered indicative of the Fund's yield or relative performance
for any future period.
- --------------------------------------------------------------------------------
CUSTODIAN, TRANSFER AND DIVIDEND
DISBURSING AGENT AND REGISTRAR
- --------------------------------------------------------------------------------
State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts 02171, will serve as custodian of the Fund's assets held in the
United States. Rules adopted under the 1940 Act permit the Fund to maintain its
securities and cash in the custody of certain eligible banks and securities
depositories. GT Global Investor Services, Inc. will serve as the Fund's
transfer and dividend disbursing agent and registrar.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby will be
passed on for the Fund by Kirkpatrick & Lockhart LLP, Washington, D.C.
INDEPENDENT ACCOUNTANTS
The Fund's independent accountants are Coopers & Lybrand LLP, One Post Office
Square, Boston, Massachusetts 02109. Coopers & Lybrand LLP will conduct an
annual audit of the Fund, assist in the preparation of the Fund's federal and
state income tax returns and consult with the Fund as to matters of accounting,
regulatory filings, and federal and state income taxation.
FURTHER INFORMATION
Further information concerning the Common Stock and the Fund may be found in the
Registration Statement, on file with the SEC.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Fund will send unaudited semiannual and audited annual financial statements
of the Fund to stockholders, including a list of the portfolio of investments
held by the Fund.
The financial statement included in this Prospectus has been included in
reliance on the report of Coopers & Lybrand LLP, independent accountants, given
on the authority of that firm as experts in auditing and accounting.
The audited Statement of Assets and Liabilities of the Fund as of
, 1996 appears on the following pages.
Prospectus Page 43
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PART C -- OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
Report of Independent Accountants [to be supplied]
Statement of Assets and Liabilities [to be supplied]
(2) EXHIBITS:
<TABLE>
<S> <C>
(a) Articles of Incorporation [filed herewith]
(b) Bylaws [filed herewith]
(c) None
(d) Specimen Certificate for Shares [to be supplied]
(e) Dividend Reinvestment Plan [to be supplied]
(f) None
(g)(1) Form of Investment Management Contract [to be supplied]
(2) Form of Administration Contract [to be supplied]
(h)(1) Form of Distribution Agreement [to be supplied]
(2) Master Selected Dealer Agreement [to be supplied]
(i) None
(j) Form of Custodian Agreement [to be supplied]
(k) Form of Transfer Agency Agreement [to be supplied]
(l) Opinion and Consent of Counsel [to be supplied]
(m) None
(n) Consent of Independent Accountants [to be supplied]
(o) None
(p) Letter of investment intent [to be supplied]
(q) None
</TABLE>
ITEM 25. MARKETING ARRANGEMENTS
See Section of the Distribution Agreement to be filed as Exhibit (h)(1) to
this Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses to be incurred in connection
with the offering described in this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Fees............................... $
National Association of Securities Dealers, Inc. Fees.................
Printing and Engraving Expenses.......................................
Legal Fees............................................................
Accounting Expenses...................................................
Blue Sky Filing Fees and Expenses.....................................
Miscellaneous Expenses................................................
-----------
Total............................................................. $
-----------
-----------
</TABLE>
II-1
<PAGE>
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Until such time as the Registrant completes the public offering of its
Shares, Chancellor LGT Asset Management, Inc. ("Chancellor LGT") will be a
control person of the Registrant. Chancellor LGT is a subsidiary of
Liechtenstein Global Trust, a financial services holding company. Liechtenstein
Global Trust in turn 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. Information as to Chancellor LGT, and
affiliated companies in the LGT Group, is included in Chancellor LGT's Form ADV
filed on November 1, 1996 with the SEC (Registration number 801-10254) and is
incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF RECORD
SHAREHOLDERS AS OF
TITLE OF CLASS OCTOBER 9, 1996
- --------------------------------------------------------------------------------------------- -------------------
<S> <C>
Shares of Common Stock, par value $0.001 per share........................................... None
</TABLE>
ITEM 29. INDEMNIFICATION
Article Twelfth of the Fund's Articles of Incorporation, filed as Exhibit 1
to this Registration Statement, and Article IX of the Fund's Bylaws, filed as
Exhibit 2, provide that the Fund shall indemnify its present and past directors,
officers, employees and agents, and persons who are serving or have served at
the Fund's request in similar capacities for other entities to the maximum
extent permitted by applicable law (including Maryland law and the 1940 Act).
Section 2-418(b) of the Maryland General Corporation Law ("Maryland Code")
permits the Fund to indemnify its directors unless it is established that the
act or omission of the director was material to the matter giving rise to the
proceeding, and (a) the act or omission was committed in bad faith or was the
result of active and deliberate dishonesty; or (b) the director actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director had reasonable cause to
believe the act or omission was unlawful. Indemnification may be made against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
director in connection with a proceeding, in accordance with the Maryland Code.
Pursuant to Section 2-418(j)(1) and Section 2-418(j)(2) of the Maryland Code,
the Fund is permitted to indemnify its officers, employees and agents to the
same extent as its directors. The provisions set forth above apply insofar as
consistent with Section 17(h) of the 1940 Act, which prohibits indemnification
of any director or officer of the Fund against any liability to the Fund or its
shareholders to which such director or officer otherwise would be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
Insofar as indemnification for liability arising under the Securities Act of
1933 ("1933 Act") may be permitted to directors, officers and controlling
persons of the Fund, pursuant to the foregoing provisions, or otherwise, the
Fund has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for a director, officer or controlling
person of the Fund in the successful defense of any action, suit or proceeding
or payment pursuant to any insurance policy) is asserted against the Fund by
such director, officer or controlling person in connection with the securities
being registered, the Fund will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management".
Chancellor LGT, a California corporation, is a registered investment adviser
and is a subsidiary of Liechtenstein Global Trust, a financial services holding
company. Liechtenstein Global Trust in turn 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. Chancellor
LGT is primarily engaged in the investment advisory business. Information as to
officers and directors of Chancellor LGT is included in its Form ADV filed on
November 1, 1996 with the SEC (Registration number 801-10254) and is
incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Fund will be maintained at the office of the
Fund's custodian at 1776 Heritage Drive, North Quincy, Massachusetts 02171,
except that the Fund's corporate records (its articles of incorporation, by-laws
and minutes of the meetings of its Board of Directors and shareholders) will be
maintained at the offices of Chancellor LGT at 50 California Street, 27th Floor,
San Francisco, California 94111.
ITEM 32. MANAGEMENT SERVICES
None.
ITEM 33. UNDERTAKINGS
(1) Registrant undertakes to suspend the offering of its shares until it
amends its Prospectus if:
(a) subsequent to the effective date of this Registration Statement, the
net asset value per share declines more than 10% from its net asset value
per share as of the effective date of the Registration Statement; or
(b) The net asset value increases to an amount greater than its net
proceeds as stated in the Prospectus.
(2) Registrant hereby undertakes that:
(a) For the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant under Rule 497(h) under the
Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of San Francisco, and the State of California, on the
6th day of December, 1996.
GT GLOBAL FLOATING RATE FUND, INC.
By /s/ DAVID J. THELANDER
-----------------------------------
David J. Thelander
Pursuant to the requirements of the Securities Act of 1933 this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ---------------------------------------- ----------------------
<S> <C> <C>
/s/ DAVID J. THELANDER President (Chief Executive Officer) and
- ------------------------------- Director
David J. Thelander December 6, 1996
/s/ JAMES R. TUFTS Vice President and Treasurer (Principal
- ------------------------------- Financial and Accounting Officer)
James R. Tufts December 6, 1996
</TABLE>
II-4
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
- ----------- ------------------------------------------------------------------------------------- -------------------
<S> <C> <C>
(a) Articles of Incorporation (filed herewith)...........................................
(b) Bylaws (filed herewith)..............................................................
(c) None.................................................................................
(d) Specimen Certificate for Shares [to be supplied].....................................
(e) Dividend Reinvestment Plan [to be supplied]..........................................
(f) None.................................................................................
(g)(1) Form of Investment Management Contract [to be supplied]..............................
(2) Form of Administration Contract [to be supplied].....................................
(h)(1) Form of Distribution Agreement [to be supplied]......................................
(2) Master Selected Dealer Agreement [to be supplied]....................................
(i) None.................................................................................
(j) Form of Custodian Agreement [to be supplied].........................................
(k) Form of Transfer Agency Agreement [to be supplied]...................................
(l) Opinion and consent of counsel [to be supplied]......................................
(m) None.................................................................................
(n) Consent of Independent Accountants [to be supplied]..................................
(o) None.................................................................................
(p) Letter of investment intent [to be supplied].........................................
(q) None.................................................................................
</TABLE>
<PAGE>
ARTICLES OF INCORPORATION
OF
GT GLOBAL FLOATING RATE FUND, INC.
FIRST: INCORPORATION: The undersigned, R. Charles Miller, whose address is
1800 Massachusetts Avenue, N.W., Washington, D.C. 20036, being at least eighteen
years of age, does hereby form a corporation under the general laws of the State
of Maryland.
SECOND: NAME OF CORPORATION: The name of the corporation is GT GLOBAL
FLOATING RATE FUND, INC. ("Corporation").
THIRD: CORPORATE PURPOSES: The Corporation is formed for the following
purpose or purposes:
A. To conduct, operate, and carry on the business of a closed-end
management investment company, registered as such with the Securities and
Exchange Commission pursuant to the Investment Company Act of 1940, as amended
("1940 Act"); and
B. To exercise and enjoy all powers, rights, and privileges granted to and
conferred upon corporations by the Maryland General Corporation Law now or
hereafter in force, including, without limitation:
1. To hold, invest, and reinvest the funds of the Corporation, and to
purchase, subscribe for or otherwise acquire, hold for investment, trade
and deal in, sell, assign, negotiate, transfer, exchange, lend, pledge or
otherwise dispose of, or turn to account or realize upon securities of
any corporation, company, association, trust, firm, partnership, or other
organization however or whenever established or organized, as well as
securities issued by the United States Government, the government of any
state, municipality, or other political subdivision, foreign governments,
supranational entities, or any other governmental or quasi-governmental
agency, instrumentality, or entity. For the purposes of these Articles of
Incorporation, as the same may be supplemented or amended ("Articles"),
without limiting the generality thereof, the term "securities" includes
stocks, shares, units of beneficial interest, partnership interests,
leases, bonds, debentures, time notes and deposits, notes, mortgages, and
any other obligations or evidence of indebtedness; any certificates,
receipts, warrants, options, futures or forward contracts, or other
instruments representing rights or obligations to receive, purchase,
subscribe for or sell the same, or evidencing or representing any other
direct or indirect right or interest, including all rights of equitable
ownership, in any property or assets; and any negotiable or
non-negotiable instruments including money market instruments, bank
certificates of deposit, finance paper, commercial paper, bankers'
acceptances, and all types of repurchase and reverse repurchase
agreements; interest rate protection instruments; and derivative or
synthetic securities;
2. To enjoy all rights, powers, and privileges of ownership or interest in
all securities held by the Corporation, including the right to vote and
otherwise act with respect to the preservation, protection, improvement,
and enhancement in value of all such securities;
3. To issue and sell shares of its own capital stock, including shares in
fractional denominations, and securities which are convertible or
exchangeable, with or without the payment of additional consideration,
into such capital stock in such amounts and on such terms and for such
amount or kind of consideration (including securities) now or hereafter
permitted by the laws of the State of Maryland and by these Articles as
its Board of Directors may, and which is hereby authorized to, determine;
4. To purchase, repurchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue, or cancel shares of its own capital stock in any
manner and to the extent now or hereafter permitted by the laws of the
State of Maryland and by these Articles;
5. To transact its business, carry on its operations, have one or more
offices, and exercise all of its corporate powers and rights in any
state, territory, district, and possession of the United States, and in
any foreign country;
<PAGE>
6. To aid by further investment any issuer of which the Corporation holds
any obligation or in which it has a direct or indirect interest, to
perform any act designed to protect, preserve, improve, or enhance the
value of such obligation or interest, and to guarantee or become a surety
on any or all of the contracts, stocks, bonds, notes, debentures, and
obligations of any corporation, company, trust, association, partnership,
or firm; and
7. To generally transact any business in connection with or incidental to
its corporate purposes, and to do everything necessary, suitable, or
proper for the accomplishment of such purposes or for the attainment of
any object or furtherance of any purpose set forth in these Articles,
either alone or in association with others.
C. The foregoing clauses shall be construed both as purposes and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the purposes and powers of the Corporation.
D. Incident to meeting the purposes specified above, the Corporation shall
also have the power, without limitation:
1. To make contracts and guarantees, incur liabilities and borrow money;
2. To sell, lease, exchange, transfer, convey, mortgage, pledge, and
otherwise dispose of any or all of its assets;
3. To acquire by purchase, lease or otherwise, and take, receive, own,
hold, use, employ, improve, dispose of and otherwise deal with any
interest in real or personal property, wherever located; and
4. To buy, sell, and otherwise deal in and with commodities, indices of
commodities or securities, and foreign exchange, including the purchase
and sale of forward contracts, futures contracts and options on futures
contracts related thereto, subject to any applicable provisions of law.
FOURTH: ADDRESS OF PRINCIPAL OFFICE. The post office address of the
principal office of the Corporation in the State of Maryland is CSC Lawyers
Incorporating Company, 11 Chase Street, Baltimore, Maryland 21202-3242.
FIFTH: NAME AND ADDRESS OF RESIDENT AGENT. The name and address of the
resident agent of the Corporation in the State of Maryland is CSC Lawyers
Incorporating Company, 11 Chase Street, Baltimore, Maryland 21202-3242.
SIXTH: CAPITAL STOCK.
A. The total number of shares of all classes of capital stock which the
Corporation has authority to issue is 1,000,000,000 shares of Common Stock,
$.001 par value, having an aggregate par value of $1,000,000.
B. Stockholders shall not have preemptive or preferential rights to acquire
any shares of the capital stock of the Corporation, and any or all of such
shares, whenever authorized, may be issued, or may be reissued and transferred
if such shares have been reacquired and have treasury status, to any person,
firm, corporation, trust, partnership, or association or other entity for such
lawful consideration and on such terms as the Board of Directors determines in
its discretion without first offering the shares to any such holder.
C. All shares of the Corporation's authorized capital stock, when issued
for such consideration as the Board of Directors may determine, shall be fully
paid and nonassessable.
D. The Board of Directors of the Corporation may, by articles supplementary
to these Articles adopted pursuant to Section 2-208 of the Maryland General
Corporation Law or a successor provision thereto, classify or reclassify any
unissued capital stock from time to time by setting or changing any preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or (subject to the purposes of the Corporation) terms
or conditions of redemption of the stock by the Corporation.
<PAGE>
E. No shares of the Corporation's capital stock shall have any conversion
or exchange rights or privileges or have cumulative voting rights.
F. Voting power for the election of directors and for all other purposes
shall be vested exclusively in the holders of the Common Stock. Each holder of a
share of Common Stock shall be entitled to one vote for each share registered in
such holder's name on the books of the Corporation.
G. In the event of the liquidation or dissolution of the Corporation, the
holders of the Common Stock shall be entitled to receive all the net assets of
the Corporation. The assets so distributed to the stockholders shall be
distributed among such stockholders in proportion to the number of shares of the
class held by them and recorded on the books of the Corporation.
SEVENTH: BOARD OF DIRECTORS: The Corporation shall have at least three
directors; provided that if there is no stock outstanding, the number of
directors may be less than three but not less than one. David J. Thelander shall
act as sole director of the Corporation until the first annual meeting or until
his successor is duly chosen and qualified.
EIGHTH: MANAGEMENT OF THE AFFAIRS OF THE CORPORATION.
A. All corporate powers and authority of the Corporation shall be vested in
and exercised by the Board of Directors except as otherwise provided by statute,
these Articles or the Bylaws of the Corporation.
B. The Board of Directors shall have the power to adopt, alter, or repeal
the Bylaws of the Corporation, unless the Bylaws otherwise provide.
C. The Board of Directors shall have the power to determine whether and to
what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Corporation (other than the stock
ledger) shall be open to inspection by stockholders. No stockholder shall have
any right to inspect any account, book, or document of the Corporation except to
the extent permitted by statute or the Bylaws.
D. The Board of Directors shall have the power to determine, in accordance
with generally accepted accounting principles, the Corporation's net income, its
total assets and liabilities, and the net asset value of the shares of Common
Stock of the Corporation. The Board of Directors may delegate such power to any
one or more of the directors or officers of the Corporation, its investment
adviser, administrator, custodian, or depositary of the Corporation's assets, or
another agent of the Corporation appointed for such purposes.
E. The Board of Directors shall have the power to make distributions,
including dividends, from any legally available funds in such amounts, and in a
manner and to the stockholders of record of such a date, as the Board of
Directors may determine.
NINTH: STOCKHOLDER LIABILITY. The stockholders shall not be liable to any
extent for the payment of any debt of the Corporation.
TENTH: MAJORITY OF VOTES. Except as otherwise provided in these Articles,
and notwithstanding any provision of Maryland law requiring a greater proportion
than a majority of the votes entitled to be cast in order to take or authorize
any action, any action may be taken or authorized by the Corporation upon the
affirmative vote of a majority of the votes entitled to be cast thereon (or by a
majority of the votes entitled to be cast thereon as a separate class).
ELEVENTH: CERTAIN TRANSACTIONS.
A. Notwithstanding any other provision of these Articles and subject to the
exception provided in Paragraph D of this Article, the transactions described in
Paragraph C of this Article shall require the affirmative vote or consent of the
holders of sixty-six and two-thirds percent (66 2/3%) of the outstanding shares
of the capital stock of the Corporation. Notwithstanding any other provision in
these Articles, such affirmative vote shall be in addition to, and not in lieu
of, the vote or consent of the holders of the capital stock of the Corporation
otherwise required by law (including without limitation, any separate vote by
class of capital stock that may be required by the 1940 Act or by the Maryland
General Corporation Law), by the terms of any class or series of capital stock
that is now or hereafter authorized, or by any agreement between the Corporation
and any national securities exchange.
<PAGE>
B. For purposes of this Article, the term "Principal Stockholder" shall
mean any corporation, person, or group (within the meaning of Rule 13d-5 under
the Securities Exchange Act of 1934), which is the beneficial owner, directly or
indirectly, of more than five percent (5%) of the outstanding shares of the
stock of the Corporation and shall include any affiliate or associate, as such
terms are defined in clause (2) below, of a Principal Stockholder. For the
purposes of this Article, in addition to the shares of stock which a
corporation, person, entity, or group beneficially owns directly, any
corporation, person, entity, or group shall be deemed to be the beneficial owner
of any shares of stock of the Corporation (1) which it has the right to acquire
pursuant to any agreement or upon exercise of conversion rights or warrants, or
otherwise or (2) which are beneficially owned, directly or indirectly (including
shares deemed owned through application of clause (1) above), by any other
corporation, person, entity, or group with which it or its "affiliate" or
"associate," as those terms are defined in Rule 12b-2 under the Securities
Exchange Act of 1934, has any agreement, arrangement, or understanding for the
purpose of acquiring, holding, voting, or disposing of stock of the Corporation,
or which is its "affiliate" or "associate" as so defined. For purposes of this
Article, calculation of the outstanding shares of stock of the Corporation shall
not include shares deemed owned through application of clause (1) above.
C. This Article shall apply to the following transactions:
1. Merger, consolidation or statutory share exchange of the Corporation
with or into any other corporation;
2. Issuance of any securities of the Corporation to any person or entity
for cash;
3. Sale, lease, or exchange of all or any substantial part of the assets of
the Corporation to any person or entity (except assets having an
aggregate fair market value of less than $1,000,000); or
4. Sale, lease, or exchange to the Corporation, in exchange for securities
of the Corporation, of any assets of any person or entity (except assets
having an aggregate fair market value of less than $1,000,000).
D. The provisions of this Article shall not apply to any transaction
described in Paragraph C of this Article if the Board of Directors authorizes
such transaction by an affirmative vote of a majority of the directors,
including a majority of the directors who are not "interested persons" of the
Corporation, as that term is defined in the 1940 Act.
TWELFTH: LIMITATION ON LIABILITY.
A. To the maximum extent permitted by applicable law (including Maryland
law and the 1940 Act) as currently in effect or as may hereafter be amended:
1. No director or officer of the Corporation shall be liable to the
Corporation or its stockholders for money damages; and
2. The Corporation shall indemnify and advance expenses as provided in the
Bylaws of the Corporation to its present and past directors, officers,
employees and agents, and persons who are serving or have served at the
request of the Corporation in similar capacities for other entities.
B. No amendment, alteration, or repeal of this Article or the adoption,
alteration, or amendment of any other provision of these Articles or the Bylaws
of the Corporation inconsistent with this Article shall adversely affect any
limitation on liability or indemnification of any person under this Article with
respect to any act or failure to act which occurred prior to such amendment,
alteration, repeal, or adoption.
THIRTEENTH: RIGHT OF AMENDMENT. Except as set forth below and subject to
the authority granted to the Board of Directors to adopt articles supplementary
pursuant to Article SIXTH hereof, any provision of these Articles may be
amended, altered, or repealed upon the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation. Any amendment,
alteration, or repeal of Article ELEVENTH, TWELFTH, or THIRTEENTH shall require
the affirmative vote or consent of the holders of sixty-six and two-thirds
percent (66 2/3%) of the outstanding shares of the Corporation.
<PAGE>
IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledge the same to be my act on this 4th day of December, 1996.
/s/ R. CHARLES MILLER
--------------------------------------
R. Charles Miller
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
A MARYLAND CORPORATION
BYLAWS
DECEMBER 4, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL........................................................ 1
Section 1. Name.......................................................................................... 1
Section 2. Principal Offices............................................................................. 1
Section 3. Seal.......................................................................................... 1
ARTICLE II
STOCKHOLDERS............................................................................................. 1
Section 1. Annual Meetings............................................................................... 1
Section 2. Special Meetings.............................................................................. 1
Section 3. Notice of Meetings............................................................................ 1
Section 4. Quorum and Adjournment of Meetings............................................................ 2
Section 5. Voting and Inspectors......................................................................... 2
Section 6. Validity of Proxies........................................................................... 2
Section 7. Stock Ledger and List of Stockholders......................................................... 2
Section 8. Action Without Meeting........................................................................ 3
ARTICLE III
BOARD OF DIRECTORS....................................................................................... 3
Section 1. Powers........................................................................................ 3
Section 2. Number and Term of Directors.................................................................. 3
Section 3. Election...................................................................................... 3
Section 4. Vacancies and Newly Created Directorships..................................................... 3
Section 5. Removal....................................................................................... 4
Section 6. Chairman of the Board......................................................................... 4
Section 7. Annual and Regular Meetings................................................................... 4
Section 8. Special Meetings.............................................................................. 4
Section 9. Waiver of Notice.............................................................................. 4
Section 10. Quorum and Voting............................................................................ 4
Section 11. Action Without a Meeting..................................................................... 4
Section 12. Compensation of Directors.................................................................... 5
ARTICLE IV
COMMITTEES............................................................................................... 5
Section 1. Organization.................................................................................. 5
Section 2. Executive Committee........................................................................... 5
Section 3. Proceedings and Quorum........................................................................ 5
Section 4. Other Committees.............................................................................. 5
ARTICLE V
OFFICERS................................................................................................. 5
Section 1. General....................................................................................... 5
Section 2. Election, Tenure and Qualifications........................................................... 5
Section 3. Vacancies and Newly Created Officers.......................................................... 6
Section 4. Removal and Resignation....................................................................... 6
Section 5. President..................................................................................... 6
Section 6. Vice President................................................................................ 6
Section 7. Treasurer and Assistant Treasurers............................................................ 6
Section 8. Secretary and Assistant Secretaries........................................................... 6
Section 9. Subordinate Officers.......................................................................... 7
Section 10. Remuneration................................................................................. 7
Section 11. Surety Bond.................................................................................. 7
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI
CAPITAL STOCK............................................................................................ 7
Section 1. Certificates of Stock......................................................................... 7
Section 2. Transfer of Shares............................................................................ 7
Section 3. Stock Ledgers................................................................................. 8
Section 4. Transfer Agents and Registrars................................................................ 8
Section 5. Fixing of Record Date......................................................................... 8
Section 6. Lost, Stolen or Destroyed Certificates........................................................ 8
ARTICLE VII
FISCAL YEAR AND ACCOUNTANT............................................................................... 8
Section 1. Fiscal Year................................................................................... 8
Section 2. Accountant.................................................................................... 8
ARTICLE VIII
CUSTODY OF SECURITIES.................................................................................... 9
Section 1. Employment of a Custodian..................................................................... 9
Section 2. Termination of Custodian Agreement............................................................ 9
Section 3. Other Arrangements............................................................................ 9
ARTICLE IX
INDEMNIFICATION AND INSURANCE............................................................................ 9
Section 1. Indemnification of Officers, Directors, Employees and Agents.................................. 9
Section 2. Insurance of Officers, Directors, Employees and Agents........................................ 9
Section 3. Amendment..................................................................................... 10
ARTICLE X
AMENDMENTS............................................................................................... 10
Section 1. General....................................................................................... 10
Section 2. By Stockholders Only.......................................................................... 10
</TABLE>
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<PAGE>
BYLAWS
OF
GT GLOBAL FLOATING RATE FUND, INC.
(A MARYLAND CORPORATION)
ARTICLE I
NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL
SECTION 1. NAME. The name of the Corporation is GT Global Floating Rate
Fund, Inc.
SECTION 2. PRINCIPAL OFFICES. The principal office of the Corporation in
the State of Maryland shall be located in the City of Baltimore. The Corporation
may, in addition, establish and maintain such other offices and places of
business as the Board of Directors may, from time to time, determine.
SECTION 3. SEAL. The corporate seal of the Corporation shall be circular in
form and shall bear the name of the Corporation, the year of its incorporation,
and the word "Maryland." The form of the seal shall be subject to alteration by
the Board of Directors and the seal may be used by causing it or a facsimile to
be impressed or affixed or printed or otherwise reproduced. Any officer or
director of the Corporation shall have authority to affix the corporate seal of
the Corporation to any document requiring the same.
ARTICLE II
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. An annual meeting of stockholders shall be held
as required and for the purposes prescribed by the Investment Company Act of
1940, as amended ("1940 Act"), and the laws of the State of Maryland and for the
election of directors and the transaction of such other business as may properly
come before the meeting, except that no annual meeting is required to be held in
any year in which the election of directors is not required to be acted upon
under the 1940 Act. Except for the first fiscal year of the Corporation, the
meeting shall be held annually at a time set by the Board of Directors at the
Corporation's principal offices or at such other place within the United States
as the Board of Directors shall select.
SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders may be called
at any time by the Chairman of the Board, President, any Vice President or by a
majority of the Board of Directors, and shall be held at such time and place as
may be stated in the notice of the meeting.
Special meetings of the stockholders may be called by the Secretary upon the
written request of the holders of shares entitled to vote not less than 25
percent of all the votes entitled to be cast at such meeting, provided that (1)
such request shall state the purposes of such meeting and the matters proposed
to be acted on, and (2) the stockholders requesting such meeting shall have paid
to the Corporation the reasonably estimated cost of preparing and mailing the
notice thereof, which the Secretary shall determine and specify to such
stockholders. No special meeting shall be called upon the request of
stockholders to consider any matter which is substantially the same as a matter
voted upon at any special meeting of the stockholders held during the preceding
twelve months, unless requested by the holders of a majority of all shares
entitled to be voted at such meeting.
SECTION 3. NOTICE OF MEETINGS. The Secretary shall cause notice of the
place, date and hour, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, to be mailed, postage prepaid, not
less than ten nor more than ninety days before the date of the meeting, to each
stockholder entitled to vote at such meeting at his or her address as it appears
on the records of the Corporation at the time of such mailing. Notice shall be
deemed to be given when deposited in the United States mail addressed to the
stockholders as aforesaid. Notice of any stockholders' meeting need not be given
to any stockholder who shall sign a written waiver of such notice whether before
or
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<PAGE>
after the time of such meeting, or to any stockholder who is present at such
meeting in person or by proxy. Notice of adjournment of a stockholders' meeting
to another time or place need not be given if such time and place are announced
at the meeting. Irregularities in the notice of any meeting to, or the
nonreceipt of any such notice by, any of the stockholders shall not invalidate
any action otherwise properly taken by or at any such meeting.
SECTION 4. QUORUM AND ADJOURNMENT OF MEETINGS. The presence at any
stockholders' meeting, in person or by proxy, of stockholders entitled to cast a
majority of the votes shall be necessary and sufficient to constitute a quorum
for the transaction of business. In the absence of a quorum, the holders of a
majority of shares entitled to vote at the meeting and present in person or by
proxy, or, if no stockholder entitled to vote is present in person or by proxy,
any officer present entitled to preside or act as secretary of such meeting may
adjourn the meeting without determining the date of the new meeting or from time
to time without further notice to a date not more than 120 days after the
original record date. Any business that might have been transacted at the
meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present.
SECTION 5. VOTING AND INSPECTORS. Except as otherwise provided in the
Articles of Incorporation or by applicable law, at each stockholders' meeting,
each stockholder shall be entitled to one vote for each share of stock of the
Corporation validly issued and outstanding and registered in his or her name on
the books of the Corporation on the record date fixed in accordance with Section
5 of the Article VI hereof, either in person or by proxy appointed by instrument
in writing subscribed by such stockholder or his or her duly authorized
attorney, except that no shares held by the Corporation shall be entitled to a
vote. If no record date has been fixed, the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be the later of the close of business on the day on which notice of the meeting
is mailed or the thirtieth day before the meeting, or, if notice is waived by
all stockholders, at the close of business on the tenth day next preceding the
day on which the meeting is held.
Except as otherwise provided in the Articles of Incorporation or these
Bylaws or as required by provisions of the 1940 Act, all matters shall be
decided by a vote of the majority of the votes validly cast. The vote upon any
question shall be by ballot whenever requested by any person entitled to vote,
but, unless such a request is made, voting may be conducted in any way approved
by the meeting.
At any meeting at which there is an election of Directors, the chairman of
the meeting may, and upon the request of the holders of ten percent of the
shares entitled to vote at such election shall, appoint two inspectors of
election who shall first subscribe an oath or affirmation to execute faithfully
the duties of inspectors at such election with strict impartiality and according
to the best of their ability, and shall, after the election, make a certificate
of the result of the vote taken. No candidate for the office of Director shall
be appointed as an inspector.
SECTION 6. VALIDITY OF PROXIES. The right to vote by proxy shall exist only
if the instrument authorizing such proxy to act shall have been signed by the
stockholder or by his or her duly authorized attorney. Unless a proxy provides
otherwise, it shall not be valid more than eleven months after its date. All
proxies shall be delivered to the Secretary of the Corporation or to the person
acting as Secretary of the meeting before being voted, who shall decide all
questions concerning qualification of voters, the validity of proxies, and the
acceptance or rejection of votes. If inspectors of election have been appointed
by the chairman of the meeting, such inspectors shall decide all such questions.
A proxy with respect to stock held in the name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of such proxy
the Corporation receives a specific written notice to the contrary from any one
of them. A proxy purporting to be executed by or on behalf of a stockholder
shall be deemed valid unless challenged at or prior to its exercise.
SECTION 7. STOCK LEDGER AND LIST OF STOCKHOLDERS. It shall be the duty of
the Secretary or Assistant Secretary of the Corporation to cause an original or
duplicate stock ledger to be maintained at the office of the Corporation's
transfer agent. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for visual
inspection. Any one or
2
<PAGE>
more persons, each of whom has been a stockholder of record of the Corporation
for more than six months next preceding such request, who owns in the aggregate
5% or more of the outstanding capital stock of the Corporation, may submit
(unless the Corporation at the time of the request maintains a duplicate stock
ledger at its principal office in Maryland) a written request to any officer of
the Corporation or its resident agent in Maryland for a list of the stockholders
of the Corporation. Within 20 days after such a request, there shall be prepared
and filed at the Corporation's principal office in Maryland a list containing
the names and addresses of all stockholders of the Corporation and the number of
shares of each class held by each stockholder, certified as correct by an
officer of the Corporation, by its stock transfer agent, or by its registrar.
SECTION 8. ACTION WITHOUT MEETING. Any action required or permitted to be
taken by stockholders at a meeting of stockholders may be taken without a
meeting if (1) all stockholders entitled to vote on the matter consent to the
action in writing, (2) all stockholders entitled to notice of the meeting but
not entitled to vote at it sign a written waiver of any right to dissent, and
(3) the consents and waivers are filed with the records of the meetings of
stockholders. Such consent shall be treated for all purposes as a vote at the
meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. POWERS. Except as otherwise provided by operation of law, by the
Articles of Incorporation, or by these Bylaws, the business and affairs of the
Corporation shall be managed under the direction of, and all the powers of the
Corporation shall be exercised by or under authority of, its Board of Directors.
SECTION 2. NUMBER AND TERM OF DIRECTORS. Except for the initial Board of
Directors, the Board of Directors shall consist of not fewer than three nor more
than fifteen Directors, as specified by a resolution of a majority of the entire
Board of Directors and at least one member of the Board of Directors shall be a
person who is not an "interested person" of the Corporation, as that term is
defined in the 1940 Act. All other Directors may be interested persons of the
Corporation if the requirements of Section 10(d) of the 1940 Act are met by the
Corporation and its investment adviser. All acts done at any meeting of the
Directors or by any person acting as a Director, so long as his or her successor
shall not have been duly elected or appointed, shall, notwithstanding that it be
afterwards discovered that there was some defect in the election of the
Directors or of such person acting as a Director or that they or any of them
were disqualified, be as valid as if the Directors or such other person, as the
case may be, had been duly elected and were or was qualified to be Directors or
a Director of the Corporation. Each Director shall hold office until his or her
successor is elected and qualified or until his or her earlier death,
resignation or removal.
SECTION 3. ELECTION. At the first annual meeting of stockholders, Directors
shall be elected by vote of the holders of a majority of the shares present in
person or by proxy and entitled to vote thereon. Thereafter, except as otherwise
provided in these Bylaws, the Directors shall be elected by the stockholders at
a meeting held on a date fixed by the Board of Directors. A plurality of all the
votes cast at a meeting at which a quorum is present is sufficient to elect a
Director.
SECTION 4. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. If any vacancies
shall occur in the Board of Directors by reason of death, resignation, removal
or otherwise, or if the authorized number of Directors shall be increased, the
Directors then in office shall continue to act, and such vacancies (if not
previously filled by the stockholders) may be filled by a majority of the
Directors then in office, although less than a quorum, except that a newly
created Directorship may be filled only by a majority vote of the entire Board
of Directors, provided, however, that if the stockholders of any class of the
Corporation's capital stock are entitled separately to elect one or more
Directors, a majority of the remaining Directors, elected by that class (if any)
may fill any vacancy among the number of Directors elected by that class;
provided further, however, that, at any time that there are stockholders of the
Corporation, immediately after filling such vacancy, at least two-thirds (2/3)
of the Directors then holding office shall have been
3
<PAGE>
elected to such office by the stockholders of the Corporation. In the event that
at any time, other than the time preceding the first annual stockholders'
meeting, less than a majority of the Directors of the Corporation holding office
at that time were elected by the stockholders, a meeting of the stockholders
shall be held promptly and in any event within sixty days for the purpose of
electing Directors to fill any existing vacancies in the Board of Directors,
unless the Securities and Exchange Commission shall by order extend such period.
SECTION 5. REMOVAL. At any stockholders' meeting duly called, provided a
quorum is present, the stockholders may remove any Director from office (either
with or without cause) and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of the removed Director or
Directors. A majority of all votes represented at a meeting is sufficient to
remove a Director for cause.
SECTION 6. CHAIRMAN OF THE BOARD. The Board of Directors may, but shall not
be required to, elect a Chairman of the Board. Any Chairman of the Board shall
be elected from among the Directors of the Corporation and may hold such office
only so long as he or she continues to be a Director. The Chairman, if any,
shall preside at all stockholders' meetings and at all meetings of the Board of
Directors, and may be EX OFFICIO a member of all committees of the Board of
Directors. The Chairman, if any, shall have such powers and perform such duties
as may be assigned from time to time by the Board of Directors.
SECTION 7. ANNUAL AND REGULAR MEETINGS. The annual meeting of the Board of
Directors for choosing officers and transacting other proper business shall be
held at such other time and place as the Board may determine. The Board of
Directors from time to time may provide by resolution for the holding of regular
meetings and fix their time and place within or outside the State of Maryland.
Except as otherwise provided in the 1940 Act, notice of such annual and regular
meetings need not be given, provided that notice of any change in the time or
place of such meetings shall be sent promptly to each Director not present at
the meeting at which such change was made, in the manner provided for notice of
special meetings. Except as otherwise provided under the 1940 Act, members of
the Board of Directors or any committee designated thereby may participate in a
meeting of such Board or committee by means of a conference telephone or similar
communications equipment that allows all persons participating in the meeting to
hear each other at the same time.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, the President (or,
in the absence or disability of the President, by any Vice President), the
Treasurer or by two or more Directors, at the time and place (within or without
the State of Maryland) specified in the respective notice or waivers of notice
of such meetings. Notice of special meetings, stating the time and place, shall
be (1) mailed to each Director at his or her residence or regular place of
business at least three days before the day on which a special meeting is to be
held or (2) delivered to him or her personally or transmitted to him or her by
telegraph, telefax, telex, cable or wireless at least one day before the
meeting.
SECTION 9. WAIVER OF NOTICE. No notice of any meeting need be given to any
Director who is present at the meeting or who waives notice of such meeting in
writing (which waiver shall be filed with the records of such meeting), either
before or after the time of the meeting.
SECTION 10. QUORUM AND VOTING. At all meetings of the Board of Directors,
the presence of one half or more of the number of Directors then in office shall
constitute a quorum for the transaction of business, provided that there shall
be present at least two Directors. In the absence of a quorum, a majority of the
Directors present may adjourn the meeting, from time to time, until a quorum
shall be present. The action of a majority of the Directors present at a meeting
at which a quorum is present shall be the action of the Board of Directors,
unless concurrence of a greater proportion is required for such action by law,
by the Articles of Incorporation or by these Bylaws.
SECTION 11. ACTION WITHOUT A MEETING. Except as otherwise provided under
the 1940 Act, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee
4
<PAGE>
thereof may be taken without a meeting if a written consent to such action is
signed by all members of the Board or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board or
committee.
SECTION 12. COMPENSATION OF DIRECTORS. Directors shall be entitled to
receive such compensation from the Corporation for their services as may from
time to time be determined by resolution of the Board of Directors.
ARTICLE IV
COMMITTEES
SECTION 1. ORGANIZATION. By resolution adopted by the Board of Directors,
the Board may designate one or more committees of the Board of Directors,
including an Executive Committee. The Chairmen of such committees shall be
elected by the Board of Directors. Each committee must be comprised of two or
more members, each of whom must be a Director and shall hold committee
membership at the pleasure of the Board. The Board of Directors shall have the
power at any time to change the members of such committees and to fill vacancies
in the committees. The Board may delegate to these committees any of its powers,
except the power to declare a dividend or distribution on stock, authorize the
issuance of stock, recommend to stockholders any action requiring stockholders'
approval, amend these Bylaws, approve any merger or share exchange which does
not require stockholder approval, approve or terminate any contract with an
"investment adviser" or "principal underwriter," as those terms are defined in
the 1940 Act, or to take any other action required by the 1940 Act to be taken
by the Board of Directors.
SECTION 2. EXECUTIVE COMMITTEE. Unless otherwise provided by resolution of
the Board of Directors, when the Board of Directors is not in session, the
Executive Committee, if one is designated by the Board, shall have and may
exercise all powers of the Board of Directors in the management of the business
and affairs of the Corporation that may lawfully be exercised by an Executive
Committee. The President shall automatically be a member of the Executive
Committee.
SECTION 3. PROCEEDINGS AND QUORUM. In the absence of an appropriate
resolution of the Board of Directors, each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable. In the event any member of any committee is absent
from any meeting, the members thereof present at the meeting, whether or not
they constitute a quorum, may appoint a member of the Board of Directors to act
in the place of such absent member.
SECTION 4. OTHER COMMITTEES. The Board of Directors may appoint other
committees, each consisting of one or more persons, who need not be Directors.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the Board of Directors, but shall not
exercise any power which may lawfully be exercised only by the Board of
Directors or a committee thereof.
ARTICLE V
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall be a President, a
Secretary, and a Treasurer, and may include one or more Vice Presidents,
Assistant Secretaries or Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 9 of this Article.
SECTION 2. ELECTION, TENURE AND QUALIFICATIONS. The officers of the
Corporation, except those appointed as provided in Section 9 of this Article V,
shall be elected by the Board of Directors at its first meeting or such
subsequent meetings as shall be held prior to its first annual meeting, and
thereafter annually at its annual meeting. If any officers are not elected at
any annual meeting, such officers may be elected at any subsequent regular or
special meeting of the Board. Except as otherwise provided in this
5
<PAGE>
Article V, each officer elected by the Board of Directors shall hold office
until the next annual meeting of the Board of Directors and until his or her
successor shall have been elected and qualified. Any person may hold one or more
offices of the Corporation except that no one person may serve concurrently as
both President and Vice President. A person who holds more than one office in
the Corporation may not act in more than one capacity to execute, acknowledge,
or verify an instrument required by law to be executed, acknowledged, or
verified by more than one officer. No officer need be a Director.
SECTION 3. VACANCIES AND NEWLY CREATED OFFICERS. If any vacancy shall occur
in any office by reason of death, resignation, removal, disqualification or
other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Board of Directors at any regular or
special meeting or, in the case of any office created pursuant to Section 9
hereof, by any officer upon whom such power shall have been conferred by the
Board of Directors.
SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed from office
by the vote of a majority of the members of the Board of Directors given at a
regular meeting or any special meeting called for such purpose, if the Board has
determined the best interests of the Corporation will be served by removal of
that officer. Any officer may resign from office at any time by delivering a
written resignation to the Board of Directors, the President, the Secretary, or
any Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
SECTION 5. PRESIDENT. The President shall be the chief executive officer of
the Corporation and, in the absence of the Chairman of the Board or if no
Chairman of the Board has been elected, shall preside at all stockholders'
meetings and at all meetings of the Board of Directors and shall in general
exercise the powers and perform the duties of the Chairman of the Board. Subject
to the supervision of the Board of Directors, the President shall have general
charge of the business, affairs and property of the Corporation and general
supervision over its officers, employees and agents. Except as the Board of
Directors may otherwise order, the President may sign in the name and on behalf
of the Corporation all deeds, bonds, contracts, or agreements. The President
shall exercise such other powers and perform such other duties as from time to
time may be assigned by the Board of Directors.
SECTION 6. VICE PRESIDENT. The Board of Directors may from time to time
elect one or more Vice Presidents who shall have such powers and perform such
duties as from time to time may be assigned to them by the Board of Directors or
the President. At the request of, or in the absence or in the event of the
disability of, the President, the Vice President (or, if there are two or more
Vice Presidents, then the senior of the Vice Presidents present and able to act)
may perform all the duties of the President and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the President.
SECTION 7. TREASURER AND ASSISTANT TREASURERS. The Treasurer shall be the
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, the Treasurer shall have
general supervision of the funds and property of the Corporation and of the
performance by the Custodian of its duties with respect thereto. The Treasurer
shall render to the Board of Directors, whenever directed by the Board, an
account of the financial condition of the Corporation and of all transactions as
Treasurer; and as soon as possible after the close of each financial year, the
Treasurer shall make and submit to the Board of Directors a like report for such
financial year. The Treasurer shall perform all acts incidental to the office of
Treasurer, subject to the control of the Board of Directors.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, may perform all the duties of the Treasurer.
SECTION 8. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall attend
to the giving and serving of all notices of the Corporation and shall record all
proceedings of the meetings of the stockholders and Directors in books to be
kept for that purpose. The Secretary shall keep in safe custody the seal of the
Corporation, and shall have responsibility for the records of the Corporation,
including the stock books and such other books and papers as the Board of
Directors may direct and
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such books, reports, certificates and other documents required by law to be
kept, all of which shall at all reasonable times be open to inspection by any
Director. The Secretary shall perform such other duties which appertain to this
office or as may be required by the Board of Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Board of Directors may assign, and, in the absence of the
Secretary, may perform all the duties of the Secretary.
SECTION 9. SUBORDINATE OFFICERS. The Board of Directors from time to time
may appoint such other officers and agents as it may deem advisable, each of
whom shall have such title, hold office for such period, have such authority and
perform such duties as the Board of Directors may determine. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties. Any officer or agent
appointed in accordance with the provisions of this Section 9 may be removed,
either with or without cause, by any officer upon whom such power of removal
shall have been conferred by the Board of Directors.
SECTION 10. REMUNERATION. The salaries or other compensation of the
officers of the Corporation shall be fixed from time to time by resolution of
the Board of Directors in the manner provided by Section 10 of Article III,
except that the Board of Directors may by resolution delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
Section 9 of this Article V.
SECTION 11. SURETY BOND. The Board of Directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the 1940 Act and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder) to the Corporation in such sum
and with such surety or sureties as the Board of Directors may determine,
conditioned upon the faithful performance of his or her duties to the
Corporation, including responsibility for negligence and for the accounting of
any of the Corporation's property, funds or securities that may come into his or
her hands.
ARTICLE VI
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK. The interest of each stockholder of the
Corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may from time to time authorize, provided, however,
the Board of Directors may, in its discretion, authorize the issuance of non-
certificated shares. No certificate shall be valid unless it is signed by the
President or a Vice President and countersigned by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer of the Corporation and
sealed with the seal of the Corporation, or bears the facsimile signatures of
such officers and a facsimile of such seal. In case any officer who shall have
signed any such certificate, or whose facsimile signature has been placed
thereon, shall cease to be such an officer (because of death, resignation or
otherwise) before such certificate is issued, such certificate may be issued and
delivered by the Corporation with the same effect as if he or she were such
officer at the date of issue.
In the event the Board of Directors authorizes the issuance of
non-certificated shares of stock, the Board of Directors may, in its discretion
and at any time, discontinue the issuance of share certificates and may, by
written notice to the registered owners of each certificated share, require the
surrender of share certificates to the Corporation for cancellation. Such
surrender and cancellation shall not affect the ownership of shares of the
Corporation.
SECTION 2. TRANSFER OF SHARES. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder of record thereof in
person or by his or her duly authorized attorney or legal representative (i)
upon surrender and cancellation of a certificate or certificates for the same
number of shares of the same class, duly endorsed or accompanied by proper
instruments of assignment and transfer, with such proof of the authenticity of
the signature as the Corporation or its agents may reasonably require, or (ii)
as otherwise prescribed by the Board of Directors. The shares of stock of
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the Corporation may be freely transferred, and the Board of Directors may, from
time to time, adopt rules and regulations with reference to the method of
transfer of the shares of stock of the Corporation. The Corporation shall be
entitled to treat the holder of record of any share of stock as the absolute
owner thereof for all purposes, and accordingly shall not be bound to recognize
any legal, equitable or other claim or interest in such share on the part of any
other person, whether or not it shall have express or other notice thereof,
except as otherwise expressly provided by law or the statutes of the State of
Maryland.
SECTION 3. STOCK LEDGERS. The stock ledgers of the Corporation, containing
the names and addresses of the stockholders and the number of shares held by
them respectively, shall be kept at the principal offices of the Corporation or,
if the Corporation employs a transfer agent, at the offices of the transfer
agent of the Corporation.
SECTION 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may from
time to time appoint or remove transfer agents and registrars of transfers for
shares of stock of the Corporation, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment being made, all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.
SECTION 5. FIXING OF RECORD DATE. The Board of Directors may fix in advance
a date as a record date for the determination of the stockholders entitled to
notice of or to vote at any stockholders' meeting or any adjournment thereof, or
to express consent to corporate action in writing without a meeting, or to
receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights with respect to any change, conversion or
exchange of stock, or for the purpose of any other lawful action, provided that
(1) such record date shall be within ninety days prior to the date on which the
particular action requiring such determination will be taken; (2) the transfer
books shall not be closed for a period longer than twenty days; and (3) in the
case of a meeting of stockholders, the record date shall be at least ten days
before the date of the meeting.
SECTION 6. LOST, STOLEN OR DESTROYED CERTIFICATES. Before issuing a new
certificate for stock of the Corporation alleged to have been lost, stolen or
destroyed, the Board of Directors or any officer authorized by the Board may, in
its discretion, require the owner of the lost, stolen or destroyed certificate
(or his legal representative) to give the Corporation a bond or other indemnity,
in such form and in such amount as the Board or any such officer may direct and
with such surety or sureties as may be satisfactory to the Board or any such
officer, sufficient to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VII
FISCAL YEAR AND ACCOUNTANT
SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall be twelve
calendar months ending on December 31, except as otherwise established by the
Board of Directors.
SECTION 2. ACCOUNTANT.
A. The Corporation shall employ an independent public accountant or a firm
of independent public accountants as its Accountant to examine the
accounts of the Corporation and to sign and certify financial statements
filed by the Corporation. The Accountant's certificates and reports shall
be addressed both to the Board of Directors and to the stockholders. The
employment of the Accountant shall be conditioned upon the right of the
Corporation to terminate the employment forthwith without any penalty by
vote of a majority of the outstanding voting securities at any
stockholders' meeting called for that purpose.
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B. A majority of the members of the Board of Directors who are not
"interested persons" (as defined in the 1940 Act) of the Corporation
shall select the Accountant at any meeting held within thirty days before
or after the beginning of the fiscal year of the Corporation or before
the annual stockholders' meeting in that year. The selection shall be
submitted for ratification or rejection at the next succeeding annual
stockholders' meeting. If the selection is rejected at that meeting, the
Accountant shall be selected by majority vote of the Corporation's
outstanding voting securities, either at the meeting at which the
rejection occurred or at a subsequent meeting of stockholders called for
the purpose of selecting an Accountant.
C. Any vacancy occurring between annual meetings due to the resignation of
the Accountant may be filled by the vote of a majority of the members of
the Board of Directors who are not interested persons.
ARTICLE VIII
CUSTODY OF SECURITIES
SECTION 1. EMPLOYMENT OF A CUSTODIAN. The Corporation shall place and at
all times maintain in the custody of a Custodian (including any sub-custodian
for the Custodian) all funds, securities and similar investments owned by the
Corporation. The Custodian (and any sub-custodian) shall be a bank or trust
company of good standing that satisfies all applicable standards, financial or
otherwise, pursuant to the 1940 Act, or such other financial institution as
shall be permitted by rule or order of the Securities and Exchange Commission.
The Custodian shall be appointed from time to time by the Board of Directors,
which shall fix its remuneration.
SECTION 2. TERMINATION OF CUSTODIAN AGREEMENT. Upon termination of the
agreement for services with the Custodian or inability of the Custodian to
continue to serve, the Board of Directors shall promptly appoint a successor
Custodian, but in the event that no successor Custodian can be found who has the
required qualifications and is willing to serve, the Board of Directors shall
call as promptly as possible a special meeting of the stockholders to determine
whether the Corporation shall function without a Custodian or shall be
liquidated. If so directed by resolution of the Board of Directors or by vote of
the holders of a majority of the outstanding shares of stock of the Corporation,
the Custodian shall deliver and pay over all property of the Corporation held by
it as specified in such vote.
SECTION 3. OTHER ARRANGEMENTS. The Corporation may make such other
arrangements for the custody of its assets (including deposit arrangements) as
may be required by any applicable law, rule or regulation.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS. The Corporation shall indemnify its present and past directors,
officers, employees and agents, and any persons who are serving or have served
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, or enterprise, to the
full extent provided and allowed by Section 2-418 of the Annotated Corporations
and Associations Code of Maryland concerning corporations, as amended from time
to time or any other applicable provisions of law. Notwithstanding anything
herein to the contrary, no director, officer, investment adviser or principal
underwriter of the Corporation shall be indemnified in violation of Sections
17(h) and (i) of the 1940 Act. Expenses incurred by any such person in defending
any proceeding to which he is a party by reason of service in the above-
referenced capacities shall be paid in advance or reimbursed by the Corporation
to the full extent permitted by law, including Sections 17(h) and (i) of the
1940 Act.
SECTION 2. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS. The
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
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employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against that person and
incurred by that person in or arising out of his or her position, whether or not
the Corporation would have the power to indemnify him or her against such
liability.
SECTION 3. AMENDMENT. No amendment, alteration or repeal of this Article or
the adoption, alteration or amendment of any other provision of the Articles of
Incorporation or Bylaws inconsistent with this Article shall adversely affect
any right or protection of any person under this Article with respect to any act
or failure to act which occurred prior to such amendment, alteration, repeal or
adoption.
ARTICLE X
AMENDMENTS
SECTION 1. GENERAL. Except as provided in Section 2 of this Article X, all
Bylaws of the Corporation, whether adopted by the Board of Directors or the
stockholders, shall be subject to amendment, alteration or repeal, and new
Bylaws may be made by the affirmative vote of either: (1) the holders of record
of a majority of the outstanding shares of stock of the Corporation entitled to
vote, at any annual or special meeting, the notice or waiver of notice of which
shall have specified or summarized the proposed amendment, alteration, repeal or
new Bylaw; or (2) a majority of the Directors, at any regular or special meeting
the notice or waiver of notice of which shall have specified or summarized the
proposed amendment, alteration, repeal or new Bylaw.
SECTION 2. BY STOCKHOLDERS ONLY. No amendment of any section of these
Bylaws shall be made except by the stockholders of the Corporation if the Bylaws
provide that such section may not be amended, altered or repealed except by the
stockholders. From and after the issue of any shares of the capital stock of the
Corporation no amendment, alteration or repeal of Article X shall be made except
by the affirmative vote of the holders of either: (a) more than two-thirds of
the Corporation's outstanding shares present at a meeting at which the holders
of more than fifty percent of the outstanding shares are present in person or by
proxy, or (b) more than fifty percent of the Corporation's outstanding shares.
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