<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 3, 1997
SECURITIES ACT FILE NO. 333-
INVESTMENT COMPANY ACT FILE NO. 811-07957
POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT AS STATED BELOW
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 3 /X/
(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
------------------------
COPIES TO:
<TABLE>
<S> <C>
ARTHUR J. BROWN, ESQ. MICHAEL A. SILVER, ESQ.
R. CHARLES MILLER, 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 (NAME AND ADDRESS OF AGENT FOR SERVICE)
</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(1) OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Common Stock ($.001 par
value)...................... 30,000,000 $10.01 $300,300,000 $91,000.00(2)
(1)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 under
the Securities Act of 1933.
(2)The amount of the registration fee does not include $21,894.82 which has previously been paid
to the Commission for registration fees relating to 7,226,012 shares registered pursuant to
Securities Act File No. 333-17425 and unissued as of October 2, 1997.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT 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 SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT, THE PROSPECTUS IN THIS
REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND RELATES TO REGISTRATION
STATEMENT NO. 333-17425, AS AMENDED, PREVIOUSLY FILED BY THE REGISTRANT ON FORM
N-2. THIS REGISTRATION STATEMENT ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1
TO REGISTRATION STATEMENT NO. 333-17425, AND SUCH POST-EFFECTIVE AMENDMENT SHALL
HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH THE EFFECTIVENESS OF THIS
REGISTRATION STATEMENT AND IN ACCORDANCE WITH SECTION 8(c) OF THE SECURITIES
ACT. THE REGISTRATION STATEMENT AND THE REGISTRATION STATEMENT AMENDED HEREBY
ARE COLLECTIVELY REFERRED TO HEREUNDER AS THE "REGISTRATION STATEMENT."
<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>
GT GLOBAL FLOATING RATE FUND, INC.
COMMON STOCK
- --------------------------------------------------------------------------------
GT Global Floating Rate Fund, Inc. (the "Fund") is a continuously offered,
non-diversified, closed-end investment company. 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. The Portfolio's investments
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") or the
prime rate of a designated U.S. bank. There can be no assurance that the
investment objective of the Fund will be achieved.
Shares of Common Stock of the Fund are continuously offered at a price equal to
the next determined net asset value per share without a front-end sales charge.
The minimum initial purchase is $1,000, and the minimum subsequent purchase is
$100.
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
currently 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
Portfolio may invest all or substantially all of its assets in Corporate Loans,
Corporate Debt Securities or other securities that are rated below investment
grade by a nationally recognized statistical rating organization, or in
comparable unrated securities. 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 Leverage."
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 (800) 824-1580.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRE-
SENTATION 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..................................................................... $10.01 None $10.01
Total......................................................................... $300,300,000 None $300,300,000
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Common Stock is offered at a price equal to net asset value, which at
the date of this Prospectus is $10.01 per share.
(2) GT Global, Inc., the Fund's distributor, will pay all sales commissions to
selected dealers from its own assets.
(3) Assuming the sale of all shares of Common Stock registered hereby.
[LOGO]
October 3, 1997
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
Purchase of Shares........................................................................ 27
Tender Offers............................................................................. 28
Early Withdrawal Charge................................................................... 30
Management................................................................................ 31
Directors and Executive Officers.......................................................... 33
Portfolio Transactions.................................................................... 35
Dividends and Other Distributions......................................................... 36
Taxes..................................................................................... 36
Dividend Reinvestment Plan................................................................ 39
Automatic Investment Plan................................................................. 40
Exchanges................................................................................. 41
Net Asset Value........................................................................... 41
Description of Capital Stock.............................................................. 42
Yield Information......................................................................... 43
Custodian, Transfer and Dividend Disbursing Agent and Registrar........................... 44
Additional Information.................................................................... 44
Financial Statements...................................................................... 45
Appendix: Ratings of Securities........................................................... 48
</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 continuously
offered, non-diversified, closed-end management investment
company. See "The Fund."
The Portfolio: Floating Rate Portfolio (the "Portfolio") is a non-diversified,
closed-end management investment company. See "Special
Considerations and Risk Factors -- Fund/Portfolio Investment
Structure."
The Offering: The Fund offers 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 is $1,000, and the minimum
subsequent purchase is $100, except that with respect to certain
retirement accounts, 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 Portfolio's investment manager,
Chancellor LGT Senior Secured Management, Inc. (the "Manager"), a
subsidiary of Chancellor LGT Asset Management, Inc. ("Chancellor
LGT").
The Fund invests all of its investable assets in the Portfolio.
Under normal market conditions, the Portfolio in turn invests
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") 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 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 invests 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) floating rate senior loans made
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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"), (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 Chancellor LGT, (iii) fixed rate
obligations of U.S. or non-U.S. companies that meet the credit
standards established by Chancellor LGT and that the Portfolio
expects to swap to a floating rate structure, or (iv) cash or
cash equivalents. 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 invests 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 because the prevailing spreads
between LIBOR, 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
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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 invests 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 performs its own credit analysis of the
Borrower. The Portfolio invests 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 Partici-
pant 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 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, if unrated, deemed by the Manager to be of
equivalent quality. 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.
</TABLE>
Prospectus Page 5
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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. 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 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 also creates
other risks for holders of Common Stock, including the risk of
higher volatility of the net asset value of the Common Stock.
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.
</TABLE>
Prospectus Page 6
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Manager: Chancellor LGT Senior Secured Management, Inc., a subsidiary of
Chancellor LGT, is the Portfolio's 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 as of June 30,
1997 with approximately $87 billion in total assets.
The Manager determines the investment composition of the
Portfolio, places all orders for the purchase and sale of
securities and for other transactions, and oversees the
settlement of the Portfolio's securities and other transactions.
The Portfolio pays the Manager monthly investment management and
administrative fees at the annual rate of 0.95% of the
Portfolio's average net assets. See "Management."
The Manager has appointed Chancellor LGT as the investment
sub-adviser with respect to certain of the assets of the
Portfolio. The Manager pays Chancellor LGT monthly investment
sub-advisory and sub-administrative fees at the annual rate of
0.95% of the Portfolio's average assets delegated to it for
sub-advisory services. See "Management."
Administrator: Chancellor LGT will provide administrative 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 accounting services. The Fund pays
administration fees at the annual rate of 0.25% of the Fund's
average net assets.
Distributions: The Fund distributes 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, are 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, auto-
matically reinvested in additional shares of Common Stock. See
"Dividend Reinvestment Plan."
Tender Offers: The Fund's Common Stock is not listed on any exchange and it is
not 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 the 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
</TABLE>
Prospectus Page 7
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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: There is no secondary market for the Fund's Common Stock, and the
Fund does not expect a secondary market to develop. Moreover, GT
Global, Inc. ("GT Global" or the "Distributor") 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 shares of closed-end
funds frequently trade in the secondary market at a discount from
their net asset values. 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.
The Fund seeks to achieve its objective by investing all of its
investable assets in 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.
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 (and which the Portfolio
intends to satisfy). 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 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,
</TABLE>
Prospectus Page 8
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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 Re-
strictions."
The Portfolio may invest all or substantially all of its assets
in Corporate Loans, Corporate Debt Securities or other securities
that are rated below investment grade by Moody's, comparably
rated by another NRSRO, or, if unrated, deemed by the Manager to
be of equivalent quality. However, the Manager does not expect to
invest in any securities rated lower than B3 by Moody's at the
time of investment. Instruments rated below investment grade by
Moody's are regarded as predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. Lower quality
instruments are also generally considered to be subject to
greater risk than higher quality instruments with regard to a de-
terioration of general economic conditions.
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 Cor-
porate 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 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, Corporate Debt
Securities, Unsecured Corporate Loans, Unsecured Corporate Debt
Securities, and short-term instruments will experience less
significant fluctuations in value as a result of interest rate
</TABLE>
Prospectus Page 9
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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 of 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 and Administrative Fee................................................................... 0.95%
Administrative Fee (3)......................................................................................... 0.25%
Other Expenses (after reimbursement) (4)....................................................................... 0.30%
---------
Total Annual Operating Expenses (after reimbursement).......................................................... 1.50%
---------
---------
</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 "Management" for additional information.
(4) Because the Fund has only been in operation since May 1, 1997, "Other
Expenses," which include transfer agency, custodial, audit and legal fees,
are estimated, and reflect the commitment of the Manager and Chancellor LGT
during the first year of operations to reimburse Fund expenses (exclusive of
brokerage commissions, faxes, interest, and extraordinary expenses) over
1.50% annually. Without such reimbursement, "Other Expenses" and "Total
Annual Operating Expenses" would be estimated to be 0.45% and 1.65%,
respectively, for the first year of operations. 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> <C>
Assuming no tender of Common Stock.................................... $ 16 $ 50 $ 87 $ 198
Assuming tender and repurchase of Common Stock on last day of period
and imposition of maximum applicable Early Withdrawal Charge......... $ 47 $ 73 $ 100 $ 198
</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 over a five
year period. 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 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
- --------------------------------------------------------------------------------
The net proceeds from the sale of the Common Stock offered hereby will be
invested on an ongoing basis 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 on an ongoing
basis, 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 a 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 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) floating rate 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, 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), money market 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
Prospectus Page 12
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
counterparties associated therewith will be) investment grade (i.e., 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 Chancellor
LGT); (c) fixed rate obligations of U.S. or non-U.S. companies that meet the
credit standards established by Chancellor LGT and that the Portfolio expects to
swap for a floating rate structure; or (d) cash or cash equivalents. 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
invests 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 expected average 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 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
Prospectus Page 13
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 U.S. 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 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
Prospectus Page 14
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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. The Manager generally expects the
value of the collateral securing a Corporate Loan or Corporate Debt Security to
be greater than the value of such Corporate Loan or Corporate Debt Security.
However, the value of such collateral may be equal to or less than the value of
the Corporate Loan or Corporate Debt Security that it secures. Accordingly, in
the event of a default, the Fund may incur a loss. The ability of the Lender to
have access to the collateral may be limited by bankruptcy and other insolvency
laws. 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, 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 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, in order to permit
lenders to obtain generally consistent yields on Corporate Loans and Corporate
Debt Securities, regardless of whether Borrowers select the LIBOR option, or the
Prime-based option. In recent years, however, the differential between the lower
LIBOR 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 pricing options do not currently compensate for the
differential between the Prime Rate and the LIBOR 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 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
Prospectus Page 15
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 invests in a Corporate Loan or Corporate Debt Security only if, in
the Manager's judgment, the Borrower can meet debt service on such loan or
security. In addition, the Manager considers 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 by the Portfolio's Board of Trustees.
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 performs its own independent
credit analysis of the Borrower, and of the collateral structure for the loan or
security. In making this analysis, the Manager utilizes 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 may also occur in the case of the breach of a covenant in a
Corporate Debt Security Document.
Prospectus Page 16
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 Borrower, together with Agent Banks, are
referred to herein as "Intermediate Participants."
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GT GLOBAL FLOATING RATE FUND, INC.
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 the Corporate Loan and other fees paid on a continuing basis.
In the event that an Agent Bank becomes insolvent, or has a receiver,
conservator, or similar official
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GT GLOBAL FLOATING RATE FUND, INC.
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 securities the Portfolio
purchases may have declined, the Portfolio could experience a loss.
Prospectus Page 19
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GT GLOBAL FLOATING RATE FUND, INC.
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 U.S. 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 other liquid
assets 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.
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
Prospectus Page 20
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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
other liquid assets 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 have 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 different 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 any issuance of a class of preferred stock, the following
investment restrictions could not be changed without the approval of a majority
of the outstanding shares of Common Stock and of the preferred stock, voting
together as a class, and the approval of a majority of the outstanding shares of
preferred
Prospectus Page 21
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GT GLOBAL FLOATING RATE FUND, INC.
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 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.
3. 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.
4. 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.
5. Invest more than 25% of its total assets in the securities of issuers in any
one 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% 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 and
Assignments").
6. 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.
7. 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 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
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GT GLOBAL FLOATING RATE FUND, INC.
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 ("Bank")
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. Loans made under the Facility bear
interest at one of three rates, to be selected at the option of the Fund: (i) an
Adjusted Eurodollar Rate, which is based on LIBOR plus a reserve percentage
established by the Federal Reserve; (ii) a Base Rate, which is the greater of
(a) the annual rate of interest announced from time to time by the Bank and (b)
the federal funds effective rate, as established by the Federal Reserve, plus
1/2 of 1% per annum; and (iii) a Money Market Rate, which is quoted by the Bank
as the fixed rate of interest at which it is willing to make a "money market"
loan.
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.
Although Corporate Loans and Corporate Debt Securities in which the Portfolio
invests will generally hold the most senior position in the
Prospectus Page 23
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 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
Prospectus Page 24
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
able to recover the full amount of the principal and interest due on the
Corporate Loan or Corporate Debt Security.
INVESTMENTS IN LOWER QUALITY SECURITIES. The Portfolio may invest all or
substantially all of its assets in Corporate Loans, Corporate Debt Securities or
other securities that are rated below investment grade by Moody's, comparably
rated by another NRSRO, or, if unrated, deemed by the Manager to be of
equivalent quality. Debt rated Baa by Moody's is considered by Moody's to have
speculative characteristics. Debt rated Ba or B by Moody's is regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
While such lower quality debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Securities rated Ba and lower are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds," and
involve a high degree of risk. The Manager does not expect to invest in any
securities rated lower than B3 at the time of investment. In the event of a
downgrade in Corporate Loans or Corpoate Debt Securities, the Manager will
consider whether it will dispose of such Corporate Loan or Corporate Debt
Security.
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit quality in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates. See
"Appendix -- Ratings of Securities" for a full discussion of Moody's ratings.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. During an economic downturn or a sustained period of
rising interest rates, issuers of lower quality debt securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing.
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.
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
Prospectus Page 25
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 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.
Prospectus Page 26
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The Fund continuously offers its shares of Common Stock through GT Global, Inc.
("GT Global" or 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 offers 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, Inc. (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 3.0% of amounts sold.
If the shares remain outstanding after thirteen months from the date of their
original purchase, the Distributor will additionally compensate such dealers
quarterly at an annual rate based on a percentage of the value of such shares
sold by such dealers and remaining outstanding, in accordance with the following
schedule:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AS A
YEAR AFTER DATE PERCENTAGE OF VALUE OF
OF ORIGINAL PURCHASE SHARES OUTSTANDING
- ------------------------------- ---------------------------
<S> <C>
First.......................... 0.00%
Second......................... 0.10%
Third.......................... 0.15%
Fourth......................... 0.20%
Fifth and following............ 0.25%
</TABLE>
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 27
<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. The Board of
Directors considers 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 action or proceeding instituted or threatened challenging the Tender Offer
or otherwise materially adversely affecting the Fund, (b) declaration of a
Prospectus Page 28
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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.
In conducting any Tender Offers, the Fund expects to rely on a rule promulgated
by the Securities and Exchange Commission that requires, among other things,
that there not be a widely available secondary market for the Fund's Common
Stock. 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 may be 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. Because of a requirement the Fund must satisfy for its current taxable
year, in order to qualify as a RIC under the Code, the Portfolio must limit such
gains for that year; 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 29
<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 30
<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 Management and Administration Contract provides that, subject to
the direction of the Board of Trustees of the Portfolio, the Manager is
responsible for the management and administration 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 Management and Administration Contract, the
Portfolio pays a monthly fee at an annual rate of 0.95% of the Portfolio's
average daily 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 Stephen 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
- --------------------------- ---------------------- ------------------------------------------------------------------
<S> <C> <C>
Stephen M. Alfieri Managing Director Portfolio Manager and Research Analyst for the Manager since 1992.
Mr. Alfieri was associated with Manufacturers Hanover Trust
Company (now Chase Manhattan Bank) from 1986 to 1992, 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.
From 1983 to 1990, Mr. Jansen worked in the Acquisition Finance
Group at Manufacturers Hanover Trust Company (now Chase Manhattan
Bank), where he specialized in the structuring and negotiation of
highly leveraged financings.
Christopher A. Bondy Vice President Senior Secured Loan Research Analyst for the Manager since 1993.
From 1988 to 1993, Mr. Bondy held a variety of positions with The
Bank of Tokyo Trust Company. From 1986 to 1988, Mr. Bondy was a
Statistical Analyst with Moody's Investors Service, Inc.
Gregory L. Smith Vice President Senior Secured Loan Research Analyst for the Manager since 1995.
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>
Pursuant to a Sub-Advisory and Sub-Administration Agreement between the Manager
and Chancellor LGT, the latter acts as the investment sub-adviser and
administrator of the Portfolio. Chancellor LGT, located at 50 California Street,
San Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036, is
the investment sub-adviser with respect to certain of the Portfolio's assets, as
determined by the Manager (the "Sub-Advised Assets"). The Sub-Advised Assets
consist of the Portfolio's cash and cash equivalents and short-term investment
grade debt obligations, but may also include other asset classes. With respect
to the Sub-Advised Assets, Chancellor LGT has responsibility
Prospectus Page 31
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
for making decisions to buy, sell or hold a particular security, subject to
review by the Board of Trustees of the Portfolio. In providing investment
sub-advisory services for the Portfolio, Chancellor LGT will consider analyses
from various sources, make the necessary investment decisions, and place orders
for transactions accordingly. Chancellor LGT will also provide all
administrative services to the Portfolio, including assistance in the
preparation of filings with the SEC and other regulatory bodies and supervision
of custodial, accounting and other services by third party service providers.
The Manager (and not the Fund or the Portfolio) pays Chancellor LGT a monthly
fee for investment sub-advisory and sub-administration services at the annual
rate of 0.95% of the Portfolio's average daily net assets delegated to it.
Daniel S. Baldwin, Jr. will provide day-to-day management of the Sub-Advised
Assets of the Portfolio. Mr. Baldwin has been a Managing Director of Chancellor
LGT since November 1, 1996, and was a Managing Director of Chancellor Capital
Management, Inc. from 1985 through October 31, 1996. From 1982 to 1984, Mr.
Baldwin was Chief Investment Officer at First Pyramid Life. Prior thereto, Mr.
Baldwin was a Portfolio Manager at First Variable Life from 1977 to 1982, and a
Portfolio Manager with Union Planters National Bank from 1974 to 1977. Mr.
Baldwin is also a member of the board of directors of the Manager.
The Manager is a subsidiary of Chancellor LGT. As of June 30, 1997, the Manager
had assets under management totaling approximately $3.75 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, NY 10036.
Chancellor LGT and its worldwide affiliates, including LGT Bank in
Liechtenstein, compose Liechtenstein Global Trust. Liechtenstein Global Trust is
a provider of global asset management and private banking products and services
to individual and institutional investors. Liechtenstein Global Trust is
controlled by the Prince of Liechtenstein Foundation, which serves as the parent
organization for the various business enterprises of the Princely Family of
Liechtenstein. The principal business address of the Prince of Liechtenstein
Foundation is Herrengasse 12, FL-9490, Vaduz, Liechtenstein. As of June 30,
1997, Chancellor LGT and its worldwide asset management affiliates managed or
administered approximately $63 billion worldwide. In addition to the investment
resources of its San Francisco and New York offices, Chancellor LGT draws upon
the expertise, personnel, data and systems of Liechtenstein Global Trust
including investment offices in London, Hong Kong, Tokyo, Singapore, Toronto,
Sydney and Frankfurt.
The Administration Agreement provides that, subject to the direction of the
Board of Directors of the Fund, Chancellor LGT will perform certain
administrative services for the Fund. Chancellor LGT will furnish corporate
officers 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 0.25%
of the Fund's average daily net assets.
Unless earlier terminated as described below, the Portfolio's Investment
Management and Administration Contract, the Portfolio's Sub-Advisory and
Sub-Administration Agreement, and the Fund's Administration Agreement will
remain in effect for two years from the date of this Prospectus and from year to
year thereafter 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.
Chancellor LGT also serves as the Fund's and the Portfolio's pricing and
accounting agent. Each of the Fund and the Portfolio will pay a monthly fee to
Chancellor LGT for these services at the annualized rate, respectively, of .02%
and .01% of their average daily net assets.
Prospectus Page 32
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Directors and executive officers of the Fund, their ages and their principal
occupations during the last five years are set forth below.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
FUND AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global
Director, Chairman of the Board and since 1991; Senior Vice President and Director of Sales and Marketing, GT
President Global from May 1992 to April 1995; Vice President and Director of Marketing,
50 California Street GT Global from 1987 to 1992; Director, Liechtenstein Global Trust AG (holding
San Francisco, CA 94111 company of the various international LGT companies) Advisory Board since
January 1996; Director, G.T. Global Insurance Agency ("G.T. Insurance") since
1996; President and Chief Executive Officer, G.T. Insurance since 1995; Senior
Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, GT Insurance
from 1992 to 1993. Mr. Guilfoyle is also a director or trustee of each of the
other investment companies registered under the 1940 Act that is managed or
administered by Chancellor LGT.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an
220 Sansome Street investment banking firm); Director, Anderson Capital Management, Inc. since
Suite 400 1988; Director, PremiumWear, Inc. (formerly Munsingwear, Inc.)(a casual
San Francisco, CA 94104 apparel company) and Director, "R" Homes, Inc. and various other companies.
Mr. Anderson is also a director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), that is managed or administered by Chancellor LGT.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a
Director Director and Chairman of C.D. Stimson Company (a private investment company).
Two Embarcadero Center Mr. Bayley also is a director or trustee of each of the other investment
Suite 2400 companies registered under the 1940 Act that is managed or administered by
San Francisco, CA 94111 Chancellor LGT.
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm).
Director He also serves as a director of Viasoft and PageMart, Inc. (both public
One Embarcadero Center software companies), as well as several other privately held software and
Suite 3820 communications companies. Mr. Patterson also is a director or trustee of each
San Francisco, CA 94111 of the other investment companies registered under the 1940 Act that is
managed or administered by Chancellor LGT.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of
Director Quigley Friedlander & Co., Inc. (a financial advisory services firm). Miss
1055 California Street Quigley also is a director or trustee of each of the other investment
San Francisco, CA 94108 companies registered under the 1940 Act that is managed or administered by
Chancellor LGT.
</TABLE>
Prospectus Page 33
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
FUND AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------
<S> <C>
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board
Director of Chancellor Capital Management, Inc. from January 1995 to
1166 Avenue of the Americas October 1996; President, Chief Executive Officer and Chairman
New York, NY 10036 of the Board of Chancellor Capital Management, Inc. from 1988
to January 1995. Mr. Wade also is a director or trustee of each
of the other investment companies registered under the 1940 Act
that is managed or administered by Chancellor LGT.
Kenneth W. Chancey, 52 Vice President -- Mutual Fund Accounting, Chancellor LGT since
Vice President and 1992; and Vice President, Putnam Fiduciary Trust Company from
Principal Accounting Officer 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 51 Executive Vice President of the Asset Management Division of
Vice President Liechtenstein Global Trust since October 1996; Senior Vice
1166 Avenue of the Americas President, General Counsel and Secretary of Chancellor LGT, GT
New York, NY 10036 Global, GT Services and G.T. Insurance from February 1996 to
October 1996; Vice President, General Counsel and Secretary of
LGT Asset Management, Inc., Chancellor LGT, GT Global, GT
Services and G.T. Insurance from May 1994 to February 1996;
Senior Vice President, General Counsel and Secretary of Strong/
Corneliuson Management, Inc. and Secretary of each of the
Strong Funds from October 1991 through May 1994.
</TABLE>
- ------------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Fund as defined by
the 1940 Act due to their affiliation with the LGT companies.
------------------------------
The Board of Directors of the Fund has an Audit Committee, comprised of Miss
Quigley, and Messrs. Anderson, Bayley and Patterson, 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 or administered by Chancellor LGT. 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.
Prospectus Page 34
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
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, the Manager may select brokers
to execute the Portfolio's portfolio transactions on the basis of the research
and brokerage services they provide to the Manager for its use in managing the
Portfolio and its other advisory accounts. Such services may include furnishing
analyses, reports and information concerning issuers, industries, securities,
geographic regions, economic factors and trends, portfolio strategy, and
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement). Research and
brokerage services received from such brokers are in addition to, and not in
lieu of, the services required to be performed by the Manager under the
Investment Management Contract (defined above). A commission paid to such
brokers may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that the Manager determines
in good faith that such commission 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 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 contemplates that, consistent with the policy of obtaining the
best net results, brokerage transactions may be conducted through certain
companies that are members of Liechtenstein Global Trust. The 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
objective, 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
Prospectus Page 35
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 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 distributes 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
- --------------------------------------------------------------------------------
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 for its current taxable year from the
sale or other disposition of securities, or
Prospectus Page 36
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 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, 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.
Prospectus Page 37
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 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. Under the Taxpayer Relief Act of 1997 ("Act"), different maximum
tax rates apply to net capital gain depending on the taxpayer's holding period
and marginal rate of federal income tax -- generally, 28% for gain on capital
assets held for more than one year but not more than 18 months and 20% (10% for
taxpayers in the 15% marginal tax bracket) on capital assets held for more than
18 months. The Act, however, does not address the application of these rules to
distributions by RICs, including whether a RIC's holding period can be "passed
through" to its stockholders. Instead, the Act authorizes the issuance of
regulations to do so. Accordingly, stockholders should consult their tax
advisers as to the effect of the Act on distributions by the Fund to them of net
capital gain.
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 generally
are not subject to that withholding tax, except in the case of a foreign
stockholder who is a nonresident alien individual physically present in the
United States for more than 182 days during the taxable year and with respect to
whom the distributions are "effectively connected." Foreign stockholders are
urged to consult their own tax advisers concerning the applicability of this
withholding tax.
Prospectus Page 38
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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; capital gain on shares held for
more than one year will be subject to federal income tax at the rates indicated
above.
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 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.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
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, newly issued by
the Fund, 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. Such dividends and distributions will be reinvested in shares of
Common Stock at the net asset value per share next determined on the payable
date of such dividend or distribution. Each stockholder may also elect to have
all dividends and/or other distributions automatically reinvested in Class B
shares of certain open-end investment companies managed by Chancellor LGT ("GT
Global Funds"). Automatic reinvestment in shares of a GT Global Fund are made at
net asset value without imposition of a sales charge. Reinvestments in a GT
Global Fund may only be directed to an account with the identical shareholder
registration and account number. These elections may be changed by a shareholder
at any time; to be effective with respect to a distribution, the shareholder or
the shareholder's broker must contact the Plan Agent by mail or telephone at
least 15 business days prior to the payment date.
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
Prospectus Page 39
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 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.
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN
- --------------------------------------------------------------------------------
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.
Prospectus Page 40
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 Chancellor LGT ("GT Global Funds") 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 GT Global Fund; however, the exchanging stockholders will
be subject to a contingent deferred sales charge on any such GT Global Fund
equivalent to the Early Withdrawal Charge on Common Stock of the Fund. Thus,
shares of such GT Global Fund may be subject to a contingent deferred sales
charge upon a subsequent redemption from the GT Global Fund. The purchase of
shares of such GT Global Fund will be deemed to have occurred at the time of the
initial purchase of the Fund's Common Stock. Holders of Class B GT Global Fund
shares will not be permitted to exchange those shares for shares of the Fund's
Common Stock.
The prospectus for each GT Global Fund describes its investment objectives and
policies. Shareholders can obtain, without charge, a prospectus by calling (800)
824-1580 and should consider these objectives and policies carefully before
requesting an exchange. Each exchange must involve proceeds from Common Stock of
the Fund that have a net asset value of at least $500. An exchange is a taxable
event and may result in a taxable gain or loss.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
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
Prospectus Page 41
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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.
- --------------------------------------------------------------------------------
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, LGT Asset Management, Inc. ("LGTAM"), GT
Global and their affiliates own approximately 20% of the Fund's outstanding
shares of Common Stock.
Shares of the Common Stock will be held in book-entry form unless physical
certificates are requested in writing by a Common Stockholder.
Prospectus Page 42
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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).
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.
Prospectus Page 43
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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) 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, (4) 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,
(5) yield data published by Lipper Analytical Services, Inc., or (6) 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 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 L.L.P., One Post Office
Square, Boston, Massachusetts 02109. Coopers & Lybrand L.L.P. 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.
Prospectus Page 44
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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 L.L.P., 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 March 14, 1997
appears on the following pages.
Prospectus Page 45
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANT
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholders of
GT Global Floating Rate Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Floating Rate Fund, Inc. (the "Fund") as of March 14, 1997. This
financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of cash held by the custodian as of March 14, 1997. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the net assets of the Fund as of March 14, 1997, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
MARCH 21, 1997
Prospectus Page 46
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 14, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash.............................................................................. $ 100,000
----------
Deferred organization expenses (Note 2)........................................... $ 116,345
----------
LIABILITIES
Payable for deferred organization expenses (Note 2)............................... $ 116,345
----------
Commitments (Notes 2 and 3)....................................................... $ 0
----------
NET ASSETS, applicable to 10,000 shares of Common Stock, $.001 par value, issued and
outstanding; 1,000,000,000 shares authorized....................................... $ 100,000
----------
NET ASSET VALUE PER SHARE........................................................... $ 10.00
----------
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO STATEMENT OF
ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
NOTE 1
GT Global Floating Rate Fund, Inc. (the "Fund") was incorporated under the laws
of the State of Maryland on December 4, 1996, and is registered under the
Investment Company Act of 1940, as amended, as a closed-end, non-diversified
management investment company. The Fund has had no operations to date other than
those relating to organization and registration.
NOTE 2
Costs incurred by the Fund in connection with its organization, estimated at
$116,345, will be deferred and amortized on a straight-line basis for a
five-year period beginning at the commencement of operations of the Fund.
Chancellor LGT Asset Management, Inc. ("Chancellor LGT"), the Fund's
administrator, has advanced certain of the Fund's organization costs incurred to
date; the Fund will reimburse Chancellor LGT for the amount of these advances at
the conclusion of the public offering.
NOTE 3
Chancellor LGT serves as the Fund's administrator under an Administration
Contract between the Fund and Chancellor LGT ("Administration Contract"). The
Administration Contract has an initial two-year term from the date of the
commencement of Fund operations and provides for administrative fees to be paid
to Chancellor LGT at the annualized rate of .25% of the Fund's average net
assets.
The Fund will invest 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. Chancellor LGT Senior
Secured Management, Inc. (the "Manager") serves as the Portfolio's investment
manager and administrator under an Investment Management and Administration
Contract between the Manager and the Portfolio ("Management and Administration
Contract"). The Management and Administration Contract has an initial two-year
term from the date of commencement of Fund and Portfolio operations and provides
for investment management fees to be paid to the Manager at the annualized rate
of 0.95% of the Portfolio's average net assets.
NOTE 4
The Fund intends to meet the requirements for qualification as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended
("Code"). It is also the intention of the Fund to make distributions sufficient
to avoid imposition of any excise tax under Section 4982 of the Code.
Prospectus Page 47
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
APPENDIX: RATINGS OF SECURITIES
- --------------------------------------------------------------------------------
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
("MOODY'S") SECURITIES RATINGS
Aaa -- Securities which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Securities which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade securities. They are rated lower than the best securities because
margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Securities which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Securities which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such securities lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba -- Securities which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes securities in this class.
B -- Securities which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payment or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Securities which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Securities which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Securities which are rated C are the lowest rated class of securities, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
ranking category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the Company ranks in the lower end of its generic rating
category.
Prospectus Page 48
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
PART C -- OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
Report of Independent Accountants [filed herewith]
Statement of Assets and Liabilities [filed herewith]
(2) EXHIBITS:
<TABLE>
<S> <C>
(a) Articles of Incorporation [previously filed]
(b) Bylaws [previously filed]
(c) None
(d) Instruments Defining Rights of Shareholders [previously filed]
(e) Dividend Reinvestment Plan [previously filed]
(f) None
(g)(1) Form of Investment Management and Administration Contract [previously
filed]
(2) Form of Administration Contract [previously filed]
(3) Form of Sub-Advisory and Sub-Administration Contract [previously filed]
(h)(1) Form of Distribution Agreement [previously filed]
(2) Selected Dealer Agreement [previously filed]
(i) None
(j) Form of Custodian Agreement [previously filed]
(k)(1) Form of Transfer Agency Agreement [previously filed]
(2) Form of Fund Accounting and Pricing Agent Agreement [previously filed]
(l) Opinion and Consent of Counsel [filed herewith]
(m) None
(n) Consent of Independent Accountants [filed herewith]
(o) Unaudited Financial Statements dated June 30, 1997 [filed herewith]
(p) None
(q) None
</TABLE>
ITEM 25. MARKETING ARRANGEMENTS
See the Distribution Agreement previously filed as Exhibit (h)(1) to
Registration Statement No. 333-17425, as amended, previously filed by this
Registrant.
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.................................. $ 90,990.90
National Association of Securities Dealers, Inc. Fees.................... 30,500.00
Printing and Engraving Expenses.......................................... 36,000.00
Legal Fees............................................................... 20,000.00
Accounting Expenses...................................................... 1,500.00
Blue Sky Filing Fees and Expenses........................................ 0.00
Miscellaneous Expenses................................................... 0.00
-------------
Total................................................................ $ 178,990.90
-------------
-------------
</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, LGT Asset Management, Inc. ("LGT AM") will be a control person of the
Registrant. LGT AM is an indirect parent of Chancellor LGT Senior Secured
Management, Inc. ("Chancellor LGT Senior Secured"), 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. Information as to LGT AM, and affiliated
companies in the LGT Group, is included in Chancellor LGT Asset Management,
Inc.'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 2, 1997
- --------------------------------------------------------------------------------------------- -------------------
<S> <C>
Shares of Common Stock, par value $0.001 per share........................................... 3,397
</TABLE>
ITEM 29. INDEMNIFICATION
Article Twelfth of the Fund's Articles of Incorporation, previously filed as
Exhibit 1 to Registration Statement No. 333-17425, and Article IX of the Fund's
Bylaws, previously filed as Exhibit 2 to Registration Statement No. 333-17425,
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
II-2
<PAGE>
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.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management".
Chancellor LGT Senior Secured, a New York corporation, is a registered
investment adviser and is a subsidiary of Chancellor LGT. 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 and
Chancellor LGT Senior Secured are primarily engaged in the investment advisory
business. Information as to officers and directors of Chancellor LGT Senior
Secured and Chancellor LGT 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 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:
(a) to file, during any period in which offers or sales are being made,
a post-effective amendment to the registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the 1933 Act; (ii) to reflect in
the prospectus any facts or events after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement; and (iii) to
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement;
II-3
<PAGE>
(b) that, for the purposes of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of those securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(c) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(3) 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, and the State of California, on this
day of , 1997.
GT GLOBAL FLOATING RATE FUND, INC.
By /S/ WILLIAM J. GUILFOYLE
------------------------------------
William J. Guilfoyle
President
Each of the undersigned directors and officers of GT Global Floating Rate
Fund, Inc. ("Fund") hereby severally constitutes and appoints Michael A. Silver
and Arthur J. Brown, and each of them singly, our true and lawful attorneys,
with full power to them to sign for each of us, and in each of our names and in
the capacities indicated below, any and all amendments to the Registration
Statement of the Fund, and all instruments necessary or desirable in connection
therewith, filed with the Securities and Exchange Commission, hereby ratifying
and confirming our signatures as they may be signed by said attorney to any and
all amendments to said Registration Statement.
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/ WILLIAM J. GUILFOYLE Director, Chairman of the Board of October 3, 1997
- --------------------------------- Directors and President (Chief Executive
William J. Guilfoyle Officer)
/S/ C. DEREK ANDERSON Director October 3, 1997
- ---------------------------------
C. Derek Anderson
/S/ FRANK S. BAYLEY Director October 3, 1997
- ---------------------------------
Frank S. Bayley
Director
- ---------------------------------
Arthur C. Patterson
/S/ RUTH H. QUIGLEY Director October 3, 1997
- ---------------------------------
Ruth H. Quigley
Director
- ---------------------------------
Robert G. Wade, Jr.
/S/ KENNETH W. CHANCEY Vice President (Principal Accounting October 3, 1997
- --------------------------------- Officer)
Kenneth W. Chancey
</TABLE>
II-5
<PAGE>
SIGNATURES
Floating Rate Portfolio has duly caused this Registration Statement of GT
Global Floating Rate Fund, Inc. to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, and the State of
California, on this day of , 1997.
FLOATING RATE PORTFOLIO
By /S/ WILLIAM J. GUILFOYLE
------------------------------------
William J. Guilfoyle
President
Each of the undersigned directors and officers of Floating Rate Portfolio
("Portfolio") hereby severally constitutes and appoints Michael A. Silver and
Arthur J. Brown, and each of them singly, our true and lawful attorneys, with
full power to them to sign for each of us, and in each of our names and in the
capacities indicated below, any and all amendments to the Registration Statement
of GT Global Floating Rate Fund, Inc., and all instruments necessary or
desirable in connection therewith, filed with the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by said attorney to any and all amendments to said Registration Statement.
This Registration Statement of GT Global Floating Rate Fund, Inc. 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/ WILLIAM J. GUILFOYLE Trustee, Chairman of the Board of Trustees
- --------------------------------- and President (Chief Executive Officer)
William J. Guilfoyle October 3, 1997
/S/ C. DEREK ANDERSON Trustee
- ---------------------------------
C. Derek Anderson October 3, 1997
/S/ FRANK S. BAYLEY Trustee
- ---------------------------------
Frank S. Bayley October 3, 1997
Trustee
- ---------------------------------
Arthur C. Patterson
/S/ RUTH H. QUIGLEY Trustee
- ---------------------------------
Ruth H. Quigley October 3, 1997
Trustee
- ---------------------------------
Robert G. Wade, Jr.
/S/ KENNETH W. CHANCEY Vice President (Principal Accounting
- --------------------------------- Officer)
Kenneth W. Chancey October 3, 1997
</TABLE>
II-6
<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 (previously filed).........................................
(b) Bylaws (previously filed)............................................................
(c) None.................................................................................
(d) Instruments Defining Rights of Shareholders (previously filed).......................
(e) Dividend Reinvestment Plan (previously filed)........................................
(f) None.................................................................................
(g)(1) Form of Investment Management and Administration Contract (previously filed).........
(2) Form of Administration Contract (previously filed)...................................
(3) Form of Sub-Advisory and Sub-Administration Contract (previously filed)..............
(h)(1) Form of Distribution Agreement (previously filed)....................................
(2) Master Selected Dealer Agreement (previously filed)..................................
(i) None.................................................................................
(j) Form of Custodian Agreement (previously filed).......................................
(k)(1) Form of Transfer Agency Agreement (previously filed).................................
(2) Form of Fund Accounting and Pricing Agent Agreement (previously filed)...............
(l) Opinion and consent of counsel [filed herewith]......................................
(m) None.................................................................................
(n) Consent of Independent Accountants [filed herewith]..................................
(o) Unaudited Financial Statements dated June 30, 1997 [filed herewith]..................
(p) None.................................................................................
(q) None.................................................................................
</TABLE>
<PAGE>
[LETTERHEAD]
October 3, 1997
GT Global Floating Rate Fund, Inc.
50 California Street, 27th Floor
San Francisco, California 94111
Dear Sir or Madam:
You have requested our opinion regarding certain matters in connection
with the issuance by GT Global Floating Rate Fund, Inc. ("Fund") of shares of
the Fund's common stock. We have examined the Fund's Articles of
Incorporation and other corporate documents relating to the authorization and
issuance of the common stock of the Fund. Based upon this examination, we
are of the opinion that:
1. All legal requirements for the organization of the Fund under the
laws of the State of Maryland have been satisfied, and the Fund is
now validly existing corporation in good standing under the laws of
the State of Maryland.
2. The authorization capitalization of the Fund consists of
1,000,000,000 shares of common stock having a par value of $0.001
each.
3. The issuance of 30,000,000 additional shares of the Fund's common
stock, which currently are being registered under the Securities Act
of 1933, has been duly authorized by the Fund, subject to compliance
with the Securities Act of 1933 and the Investment Company Act of
1940.
4. When so issued, the Fund's shares will be legally issued, fully paid
and nonassessable.
We hereby consent to the filing of this opinion in connection with the
Registration Statement of Form N-2, dated October 3, 1997, which you are
about to file with the Securities and Exchange Commission. We also consent
to reference to our firm under the caption "Additional Information--Legal
Matters" in the Registration Statement.
Very truly yours,
/s/ KIRKPATRICK & LOCKHART LLP
KIRKPATRICK & LOCKHART LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
GT Global Floating Rate Fund, Inc.
We consent to the inclusion in the Registration Statement on Form N-2 of our
report dated March 21, 1997 on our audit of the statement of assets and
liabilities of GT Global Floating Rate Fund, Inc. as of March 14, 1997. We
also consent to the reference to our firm under the captions "Independent
Accountants" and as "Experts" under the caption "Financial Statements."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
September 29, 1997
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
SENIOR SECURED FLOATING RATE INTERESTS * *{/\} AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Services (27.4%)
Star Markets, Inc.: ................................................ -- -- 7.4
RETAILERS-FOOD
Term Loan C due 12/31/02 ......................................... 6,000,000 $ 6,000,000 --
Omni Services, Inc.: ............................................... -- -- 6.2
BUSINESS & PUBLIC SERVICES
Axel due 10/30/05 ................................................ 5,000,000 5,006,250 --
KSL Recreation Group, Inc.: ........................................ -- -- 5.6
LEISURE & TOURISM
Term loan A due 4/30/05 .......................................... 1,964,286 1,964,286 --
Term loan B due 4/30/06 .......................................... 1,964,286 1,964,286 --
Revolving credit due 4/30/03 ..................................... 661,225 661,225 --
Atlas Freighter Leasing, Inc.: ..................................... -- -- 3.7
TRANSPORTATION - AIRLINES
Term loan due 5/29/04 ............................................ 3,000,000 2,992,500 --
SC International Services, Inc.: ................................... -- -- 3.0
CARGO - AIRLINES
Term loan A-2 due 9/15/00 ........................................ 2,368,405 2,371,366 --
Term loan A due 9/15/00 .......................................... 20,835 20,862 --
Affinity Group: .................................................... -- -- 1.5
LEISURE & TOURISM
Revolving credit due 3/31/02 ..................................... 1,187,500 1,181,563 --
------------
22,162,338
------------
Capital Goods (18.0%)
L-3 Communications Corp.: .......................................... -- -- 6.8
AEROSPACE/DEFENSE
Term loan B due 3/31/05 .......................................... 2,500,000 2,495,000 --
Term loan C due 3/31/06 .......................................... 1,650,000 1,646,700 --
Term loan A due 3/31/04 .......................................... 1,375,000 1,372,250 --
Telex Communications, Inc.: ........................................ -- -- 4.3
ELECTRICAL PLANT/EQUIPMENT
Term loan B due 11/6/04 .......................................... 3,500,000 3,500,000 --
Laidlaw Chemical Waste, Inc.: ...................................... -- -- 3.7
ENVIRONMENTAL
Term loan B due 5/15/04 .......................................... 1,500,000 1,496,250 --
Term loan C due 5/15/05 .......................................... 1,500,000 1,496,250 --
Amphenol Corp.: .................................................... -- -- 3.2
ELECTRICAL PLANT/EQUIPMENT
Term loan B due 5/19/05 .......................................... 1,275,000 1,275,000 --
Term loan C due 5/19/06 .......................................... 1,275,000 1,275,000 --
------------
14,556,450
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F1
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
SENIOR SECURED FLOATING RATE INTERESTS * *{/\} AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Materials/Basic Industry (17.9%)
Huntsman Specialty Chemicals Corp.: ................................ -- -- 6.2
CHEMICALS
Term loan due 3/15/07 ............................................ 2,727,273 $ 2,727,273 --
Term loan C due 3/15/05 .......................................... 2,272,727 2,272,727 --
ACME Metals, Inc.: ................................................. -- -- 4.3
METALS - STEEL
Term loan A due 8/1/01 ........................................... 3,500,000 3,508,750 --
Stone Container International Services, Inc.: ...................... -- -- 4.3
PAPER/PACKAGING
Term loan E due 10/1/03 .......................................... 3,500,000 3,494,750 --
Interlake Corp.: ................................................... -- -- 3.1
METALS - NON-FERROUS
Term loan due 6/30/99 ............................................ 2,500,000 2,496,875 --
------------
14,500,375
------------
Technology (10.4%)
Bridge Information Systems, Inc.: .................................. -- -- 6.1
NETWORKING
Term loan C due 2/15/02 .......................................... 3,167,677 3,165,302 --
Term loan B due 12/31/01 ......................................... 1,755,738 1,754,421 --
Sprint Spectrum L.P.: .............................................. -- -- 4.3
WIRELESS COMMUNICATIONS
Term loan due 6/30/01 ............................................ 3,500,000 3,482,500 --
------------
8,402,223
------------
Consumer Non-Durables (6.3%)
Del Monte Corp.: ................................................... -- -- 6.3
FOOD
Term loan B due 3/31/05 .......................................... 5,100,000 5,119,125 --
------------
Health Care (6.2%)
Dade International, Inc.: .......................................... -- -- 3.7
MEDICAL TECHNOLOGY & SUPPLIES
Term loan C due 12/31/03 ......................................... 1,861,159 1,863,485 --
Term loan B due 12/31/02 ......................................... 1,129,427 1,130,836 --
Leiner Health Products Group: ...................................... -- -- 2.5
PHARMACEUTICALS
Term loan C due 12/30/05 ......................................... 2,000,000 2,000,000 --
------------
4,994,321
------------
Finance - Other (4.3%)
WCI Communities L.P., Inc.: ........................................ -- -- 4.3
REAL ESTATE
Term loan due 2/18/00 ............................................ 3,500,000 3,482,500 --
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
SENIOR SECURED FLOATING RATE INTERESTS * *{/\} AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Energy (3.6%)
Centennial Resoures, Inc.: ......................................... -- -- 3.6
COAL
Term loan B due 3/31/04 .......................................... 1,988,889 $ 1,983,916 --
Term loan A due 3/31/02 .......................................... 950,000 947,625 --
------------
2,931,541
------------
Consumer Durables (3.1%)
Manchester Tank & Equipment Co.: ................................... -- -- 3.1
APPLIANCES & HOUSEHOLD
Term loan due 7/30/97 ............................................ 2,493,725 2,487,491 --
------------ -----
TOTAL SENIOR SECURED FLOATING RATE INTERESTS (cost $78,649,107) ...... 78,636,364 97.2
------------ -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ---------------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C>
Dated June 30, 1997, with State Street Bank & Trust Co., due July 1,
1997, for an effective yield of 5.75%, collateralized by $135,000
U.S. Treasury Note, 6.125% due 3/31/98 (market value of collateral
is $137,385, including accrued interest). (cost $130,021) ........ 130,021 0.2
------------ -----
TOTAL INVESTMENTS (cost $78,779,128) * .............................. 78,766,385 97.4
Other Assets and Liabilities ......................................... 2,098,760 2.6
------------ -----
NET ASSETS ........................................................... $ 80,865,145 100.0
------------ -----
------------ -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $78,779,128 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 72,119
Unrealized depreciation: (84,862)
-------------
Net unrealized depreciation: $ (12,743)
-------------
-------------
</TABLE>
** Senior secured corporate loans and senior secured debt securities
in the Fund's portfolio generally have variable rates which adjust
to a base, such as the London Inter-Bank Offered Rate ("LIBOR"), on
set dates, typically every 30 days but not greater than one year;
and/or have interest rates that float at a margin above a widely
recognized base lending rate such as the Prime Rate of a designated
U.S. bank. Senior secured floating rate interests are, at present,
not readily marketable and may be subject to restrictions on
resale.
{/\} Senior secured floating rate interests often require prepayments
from excess cash flow or permit the borrower to prepay at its
election. The degree to which borrowers repay, whether as a
contractual requirement or at their election, cannot be predicted
with accuracy. As a result, the actual remaining maturity may be
substantially less than the stated maturities shown. However, it is
anticipated that the senior secured floating rate interests will
have an expected average life ofthree to five years.
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments, at value (cost $78,779,128)
(Note 1)................................ $ 78,766,385
U.S. currency............................ 844
Receivable for Fund shares sold.......... 1,542,138
Interest receivable...................... 739,776
Receivable for investments sold.......... 206,472
Unamortized organizational costs (Note
1)...................................... 205,252
Receivable from Chancellor LGT Asset
Management, Inc......................... 78,544
-------------
Total assets........................... 81,539,411
-------------
Liabilities:
Payable for distribution................. 278,813
Payable for organization expenses (Note
1)...................................... 212,350
Payable for investment management and
administration fees (Note 2)............ 92,500
Payable for transfer agent fees.......... 31,671
Deferred facility fees (Note 1).......... 28,308
Payable for printing and postage
expenses................................ 13,725
Payable for professional fees............ 10,069
Payable for custodian fees............... 3,050
Payable for fund accounting fees (Note
2)...................................... 1,772
Payable for Directors' and Trustees' fees
and expenses (Note 2)................... 570
Payable for registration and filing
fees.................................... 280
Other accrued expenses................... 1,058
-------------
Total liabilities...................... 674,166
-------------
Minority interest (Note 1)............... 100
-------------
Net assets................................. $ 80,865,145
-------------
-------------
Net asset value per share ($80,865,145
DIVIDED BY 8,087,189 shares
outstanding).............................. $ 10.00
-------------
-------------
Net assets consist of:
Paid in capital (Note 4)................. $ 80,871,571
Undistributed net investment income...... 5,707
Accumulated net realized gain on
investments............................. 610
Net unrealized depreciation of
investments............................. (12,743)
-------------
Total -- representing net assets applicable
to capital shares outstanding............. $ 80,865,145
-------------
-------------
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
STATEMENT OF OPERATIONS
May 1, 1997 (commencement of operations) to June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income:
Interest income........................................................................ $ 965,931
Interest expense (Note 1).............................................................. (8,177)
Facility fees earned (Note 1).......................................................... 428
---------
Total investment income.............................................................. 958,182
---------
Expenses:
Investment management and administration fees (Note 2)................................. 127,069
Transfer agent fees.................................................................... 39,650
Professional fees...................................................................... 34,455
Printing and postage expenses.......................................................... 13,725
Amortization of organization costs (Note 1)............................................ 7,098
Directors' and Trustees' fees and expenses (Note 2).................................... 6,770
Fund accounting fees (Note 2).......................................................... 3,226
Custodian fees......................................................................... 3,050
Registration and filing fees........................................................... 1,305
Other expenses......................................................................... 5,305
---------
Total expenses before reimbursement.................................................. 241,653
Expenses reimbursed by Chancellor LGT Asset Management, Inc........................ (78,544)
---------
Total net expenses................................................................... 163,109
---------
Net investment income.................................................................... 795,073
---------
Net realized and unrealized loss on investments: (Note 1)
Net realized gain on investments....................................................... 610
Net unrealized depreciation during the period.......................................... (12,743)
---------
Net realized and unrealized loss on investments.......................................... (12,133)
---------
Net increase in net assets resulting from operations..................................... $ 782,940
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAY 1, 1997
(COMMENCEMENT
OF OPERATIONS)
TO
JUNE 30, 1997
(UNAUDITED)
--------------
<S> <C>
Increase (decrease) in net assets
Operations:
Net investment income......................................................... $ 795,073
Net realized gain on investments.............................................. 610
Net change in unrealized depreciation of investments.......................... (12,743)
--------------
Net increase in net assets resulting from operations........................ 782,940
--------------
Distributions to shareholders: (Note 1)
From net investment income.................................................... (789,366)
--------------
Capital share transactions: (Note 4)
Increase from capital shares sold............................................. 80,344,479
Increase from shares reinvested............................................... 427,092
Decrease from capital shares repurchased...................................... --
--------------
Net increase from capital share transactions................................ 80,771,571
--------------
Total increase in net assets.................................................... 80,765,145
Net assets:
Beginning of period........................................................... 100,000
--------------
End of period *............................................................... $ 80,865,145
--------------
--------------
* Includes undistributed net investment income of.............................. $ 5,707
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
STATEMENT OF CASH FLOWS
May 1, 1997 (commencement of operations) to June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Cash Provided by Operating Activities:
Net increase in net assets resulting from operations...... $ 782,940
Adjustments to reconcile net increase in net assets
resulting from operations to net cash provided by
operating activities:
Increase in receivables................................. (818,320)
Decrease in unamortized organizational costs............ 7,098
Net realized and unrealized loss on investments......... 12,133
Increase in payables.................................... 433,608
Deferred facility fees.................................. 28,308
------------
Net cash provided by operating activities............. 445,767
------------
Cash Used for Investing Activities:
Proceeds from principal payments and sales of senior
secured floating rate interests.......................... 294,778
Purchases of senior secured floating rate interests....... (79,149,747)
Purchases of short-term investments....................... (32,966,021)
Proceeds from sales and maturities of short-term
investments.............................................. 32,836,000
------------
Net cash used for investing activities................ (78,984,990)
------------
Cash Provided by Financing Activities:
Proceeds from capital shares sold......................... 78,802,341
Proceeds from bank line of credit......................... 10,711,000
Repayment of bank line of credit.......................... (10,711,000)
Dividends paid to shareholders............................ (362,274)
------------
Net cash provided by financing activities............. 78,440,067
------------
Net decrease in cash...................................... (99,156)
Cash, beginning of the period............................. 100,000
------------
Cash, end of the period................................... $ 844
------------
------------
Non-Cash Financing Activities:
Capital shares issued in reinvestment of dividends paid to
shareholders............................................. $ 427,092
------------
------------
</TABLE>
F7
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
MAY 1, 1997
(COMMENCEMENT
OF
OPERATIONS)
TO
JUNE 30, 1997
(UNAUDITED)
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period............................................ $ 10.00
-------------
Income from investment operations:
Net investment income......................................................... 0.11
Net realized and unrealized loss on investment................................ --(c)
-------------
Net increase from investment operations..................................... 0.11
Distributions to shareholders:
From net investment income.................................................... (0.11)
-------------
Net asset value, end of period.................................................. $ 10.00
-------------
-------------
Total investment return......................................................... 1.25% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's)............................................ $80,865
Ratio of net investment income to average net assets............................ 7.31% (a)
Ratio of expenses to average net assets:
With expense reimbursement by Chancellor LGT Asset Management, Inc. (Notes 1 &
5)........................................................................... 1.50% (a)
Without expense reimbursement by Chancellor LGT Asset Management, Inc......... 2.22% (a)
Ratio of interest expense to average net assets (Note 1)........................ .08% (a)
Portfolio turnover rate......................................................... 4% (a)
</TABLE>
- --------------
(a) Annualized
(b) Not annualized
(c) Amount is less than $.01 per share.
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
NOTES TO
FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Floating Rate Fund, Inc. ("Fund") is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as a continuously offered non-diversified, closed-end
management investment company.
The Fund invests all of its investable assets in the Floating Rate Portfolio
("Portfolio"). The Portfolio is organized as a Delaware Business Trust and is
registered under the 1940 Act as a non-diversified, closed-end management
investment company.
The Portfolio has investment objectives, policies, and limitations substantially
identical to those of the Fund. Therefore, the financial statements of the Fund
and the Portfolio have been presented on a consolidated basis, and represent all
activities of both the Fund and Portfolio. Through June 30, 1997, all of the
beneficial interest in the Portfolio was owned either by the Fund or Chancellor
LGT Asset Management, Inc., which has a nominal ($100) investment in the
Portfolio.
The following is a summary of significant accounting policies consistently
followed by the Fund and Portfolio in the preparation of the financial
statements. The policies are in conformity with generally accepted accounting
principles, and the financial statements may include certain estimates made by
management.
(A) PORTFOLIO VALUATION
The Portfolio invests primarily in senior secured corporate loans ("Corporate
Loans") and senior secured debt securities ("Corporate Debt Securities") that
meet credit standards established by Chancellor LGT Senior Secured Management,
Inc. (the "Manager").
When possible, the Manager will rely on quotations provided by banks, dealers or
pricing services with respect to Corporate Loans and Corporate Debt Securities.
Whenever it is not possible to obtain such quotes, the Manager, subject to
guidelines 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 U.S. or non-U.S.
Company borrowing or issuing Corporate Debt Securities ("Borrower") and any
intermediate loan participants, (ii) the current interest rate, period until
next interest rate reset and maturity of the Corporate Loan or Corporate Debt
Security, and (iii) recent prices in the market for instruments of similar
quality, rate, period until next interest rate reset and maturity.
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.
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.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Portfolio's Board of Trustees.
(B) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, it is the
Portfolio's policy to always receive, as collateral, United States government
securities or other high quality debt securities of which the value, including
accrued interest, is at least equal to the amount to be repaid to the Portfolio
under each agreement at its maturity.
(C) FOREIGN CURRENCY SWAPS
Foreign currency swaps are the exchange by the Portfolio with another party (the
"counterparty") of the right to receive the currency in which a loan is
denominated for the right to receive U.S. dollars.
The Portfolio may 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 or determined to be of
comparable quality in the judgement of the Manager. The amounts of U.S. dollar
payments to be received by the
F9
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
Portfolio and the foreign currency payments to be received by the counterparty
are fixed at the time the swap arrangement is entered into. The swap protects
the Portfolio from fluctuations in exchange rates and locks in the right to
receive payments under the loan in a predetermined amount of U.S. dollars.
(D) SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. The Portfolio may trade securities
on other than normal settlement terms. This may increase the market risk if the
other party to the transaction fails to deliver and causes the Portfolio to
subsequently invest at less advantageous prices.
(E) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or excise tax on income
and capital gains.
(F) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income are declared daily and
paid or reinvested monthly. Income and capital gain distributions are determined
in accordance with Federal income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Portfolio and timing differences.
(G) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund or Portfolio in connection with its organization,
its registration with the Securities and Exchange Commission and with various
states aggregated $212,350. These expenses are being amortized on a basis over a
five-period period.
(H) RESTRICTED SECURITIES
The Portfolio may invest all or substantially all of its assets in Corporate
Loans, Corporate Debt Securities or other securities that are rated below
investment grade by a nationally recognized statistical rating organization, or
in comparable unrated securities. The Portfolio is permitted to invest in
privately placed restricted securities. These securities may be resold in
transactions exempt from registration or to the public if the securities are
registered. Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
(I) SECURITIES PURCHASED ON A WHEN-ISSUED AND DELAYED DELIVERY BASIS
The Portfolio may purchase and sell interests in Corporate Loans and Corporate
Debt Securities and other portfolio securities on a when-issued and delayed
delivery basis, with payment and delivery scheduled for a future date. 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 fluctuations
and are subject to the risk that the value at delivery may be more or less than
the trade date purchase price. Although the Portfolio will generally purchase
these securities with the intention of acquiring such securities, they may sell
such securities before the settlement date. These securities are identified on
the accompanying Portfolio of Investments. The Portfolio has set aside
sufficient cash or liquid high grade debt securities as collateral for these
purchase commitments.
(J) LINE OF CREDIT
The Fund, along with certain other funds advised by Chancellor LGT Asset
Management, Inc., has a line of credit with BankBoston and State Street Bank.
The arrangements with the banks allow the Fund to borrow an aggregate maximum
amount of $200,000,000. The Fund is limited to borrowing up to 33 1/3% of the
value of the Fund's total assets.
For the period ended June 30, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $1,484,525 with a weighted average interest rate of 6.28%.
(K) INTEREST RATE SWAPS
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. 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. 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
F10
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
or paying, as the case may be, only the net amount of the two payments. 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. The risk of
loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Portfolio is contractually obligated to make.
(L) INVESTMENT INCOME
Interest income is recorded on an accrual basis. Where a high level of
uncertainty exists as to collection of income on securities, income is recorded
net of all withholding tax with any rebate recorded when received. Facility fees
received are recognized as income ratably over the expected life of the loan.
Market discounts are accreted over the stated life of each applicable security.
2. RELATED PARTIES
Chancellor LGT Senior Secured Management, Inc. is the Portfolio's investment
manager and administrator. The Portfolio pays investment management and
administration fees to the Manager at the annualized rate of 0.95% of the
Portfolio's average daily net assets. Chancellor LGT Asset Management, Inc., an
affiliate of the Manager, ("Chancellor LGT") acts as administrator of the Fund.
The Fund pays Chancellor LGT administration fees, which are computed and paid
monthly, at an annualized rate of 0.25% of the Fund's average daily net assets.
GT Global, Inc., an affiliate of the Manager, acts as the distributor of shares
of Common Stock of the Fund.
The Manager, Chancellor LGT and GT Global voluntarily have undertaken during the
first year of operations to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest, and extraordinary expenses) to the maximum annual
rate of 1.50% of the average daily net assets of the Fund.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager,
Chancellor LGT and GT Global, is the transfer agent of the Funds. For performing
shareholder servicing, reporting, and general transfer agent services, GT
Services receives an annual maintenance fee of $17.50 per account, a new account
fee of $4.00 per account, a per transaction fee of $1.75 for all transactions
other than exchanges and a per exchange fee of $2.25. GT Services also is
reimbursed by the Funds for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
Chancellor LGT is the pricing and accounting agent for the Fund and Portfolio.
Each of the Fund and the Portfolio pays a monthly fee for these services to
Chancellor LGT at the annualized rate, respectively of .02% and .01% of their
average daily net assets.
The Fund pays each of its Directors who is not an employee, officer or director
of the Manager or any of its affiliated companies $5,000 per 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. The
Portfolio pays each of its Trustees who is not an employee, officer, or director
of the Manager or any of its affiliated companies $500 per year plus $150 for
each meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
For the period ended June 30, 1997, purchases and sales of investment securities
by the Portfolio, other than U.S. government obligations and short-term
investments, aggregated $79,149,747 and $501,250, respectively. There were no
purchases or sales of U.S. government obligations by the Portfolio for the
period ended June 30, 1997.
F11
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
4. CAPITAL SHARES
At June 30, 1997, the Fund is authorized to issue 1 billion shares of capital
stock, $0.001 par value, all of which is classified as Common Stock.
<TABLE>
<CAPTION>
MAY 1, 1997 (COMMENCEMENT OF
OPERATIONS) TO JUNE 30, 1997
(UNAUDITED)
-----------------------------------
SHARES AMOUNT
--------------- ------------------
<S> <C> <C>
Shares sold............................. 8,044,480 $ 80,344,479
Shares issued in connection with
reinvestment of distributions......... 42,709 427,092
--------------- ------------------
8,087,189 80,771,571
Shares repurchased...................... -- --
--------------- ------------------
Net increase............................ 8,087,189 $ 80,771,571
--------------- ------------------
--------------- ------------------
</TABLE>
As of June 30, 1997, LGT Asset Management, Inc. ("LGTAM"), GT Global and their
affiliates owned approximately 31% of the Fund's outstanding shares of Common
Stock.
5. UNFUNDED LOAN INTEREST
As of June 30, 1997, the fund had unfunded loan commitments of $1,842,788, which
would be extended at the option of the borrower, pursuant to the following loan
agreements:
<TABLE>
<CAPTION>
UNFUNDED
COMMITMENT
BORROWER (IN THOUSANDS)
- --------------------------------------------- --------------
<S> <C>
KSL Recreation Group......................... $ 2,571
Affinity Group............................... 1,250
</TABLE>
6. TENDER OFFER
The Fund's Board of Directors considers each quarter the making of Tender Offers
which are 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 Fund's Common Stock determined at the close of business on the day an offer
terminates. Shares of common stock held 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.
F12
