<PAGE>
SCHEDULE 13E-4
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1997
SECURITIES ACT FILE NO. 333-17425
INVESTMENT COMPANY ACT FILE NO. 811-07957
------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
GT GLOBAL FLOATING RATE FUND, INC.
(Name of Issuer)
GT GLOBAL FLOATING RATE FUND, INC.
(Name of Person(s) Filing Statement)
SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class of Securities)
361969108
(CUSIP Number of Class of Securities)
WILLIAM J. GUILFOYLE
GT GLOBAL FLOATING RATE FUND, INC.
50 CALIFORNIA STREET, 27TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
(415) 392-6181
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Person(s) Filing Statement)
COPIES TO:
<TABLE>
<CAPTION>
ARTHUR J. BROWN, ESQ. PHILLIP S. GILLESPIE, ESQ.
<S> <C>
DANIEL T. STEINER, ESQ. CHANCELLOR LGT ASSET
KIRKPATRICK & LOCKHART LLP MANAGEMENT, INC.
1800 MASSACHUSETTS AVENUE, N.W. 50 CALIFORNIA STREET, 27TH FLOOR
WASHINGTON, D.C. 20036 SAN FRANCISCO, CALIFORNIA 94111
</TABLE>
AUGUST 25, 1997
(Date Tender Offer First Published,
Sent or Given to Security Holders)
<PAGE>
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
<S> <C>
- -------------------------------------------------------------------------------------------
Transaction Valuation: $9,000,000(a) Amount of Filing Fee: $1,800(b)
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(a) Calculated as the aggregate maximum purchase price to be paid for 900,000 shares in the
offer, based upon the net asset value per share $10.00 at August 18, 1997.
<S> <C>
(b) Calculated as 1/50th of 1% of the Transaction Valuation.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify
the filing with which the offsetting fee was previously paid. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its
filing.
</TABLE>
<TABLE>
<CAPTION>
Amount Previously Paid:
-----------------------------------------------------------------
<S> <C>
Form or Registration
No.:
-----------------------------------------------------------------
Filing Party:
-----------------------------------------------------------------
Date of Filing:
-----------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is GT Global Floating Rate Fund, Inc., a
closed-end investment company organized as a Maryland corporation (the "Fund").
The principal executive offices of the Fund are located at 50 California Street,
27th Floor, San Francisco, California 94111.
(b) The title of the securities being sought is shares of common stock, par
value $0.001 per share (the "Shares"). As of August 18, 1997 there were
approximately 10.2 million Shares issued and outstanding.
The Fund is seeking tenders for up to 900,000 Shares (the "Offer"), at net
asset value per Share (the "NAV") calculated on the day the tender offer
terminates, less any "Early Withdrawal Charge," upon the terms and subject to
the conditions set forth in the Offer to Purchase dated August 25, 1997 (the
"Offer to Purchase"). A copy of each of the Offer to Purchase and the related
Letter of Transmittal is attached hereto as Exhibit (a)(1) and Exhibit (a)(2),
respectively. Reference is hereby made to the Cover Page and Section 1 ("Price;
Number of Shares") of the Offer to Purchase, which are incorporated herein by
reference. The Fund has been informed that no Directors, officers or affiliates
of the Fund intend to tender Shares pursuant to the Offer.
(c) The Shares are not currently traded on an established trading market.
(d) Not Applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is hereby made to Section 10 "Source and Amount of Funds"
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
Reference is hereby made to Section 8 ("Purpose of the Offer"), Section 9
("Certain Effects of the Offer") and Section 10 ("Source and Amount of Funds")
of the Offer to Purchase, which are incorporated herein by reference. The Fund
is currently engaged in a public offering, from time to time, of its Shares. The
Fund otherwise has no plans or proposals which relate to or would result in (a)
the acquisition by any person of additional securities of the Fund or the
disposition of securities of the Fund; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Fund; (c) a sale or transfer of a material amount of assets of the Fund; (d) any
change in the present Board of Directors or management of the Fund, including,
but not limited to, any plans or proposals to change the number or the term of
Directors, or to fill any existing vacancy on the Board or to change any
material term of the employment contract of any executive officer; (e) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Fund; (f) any other material change in the Fund's
corporate structure or business, including any plans or proposals to make any
changes in its investment policy for which a vote would be required by Section
13 of the Investment Company Act of 1940, as amended; or (g) changes in the
Fund's articles of incorporation, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Fund by any
person. Paragraphs (h) through (j) of this Item 3 are not applicable.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Except for the issuance by the Fund of approximately 2.6 million Shares
during the past 40 business days, all at prices equal to NAV on the date of
sale, there have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or director of any such subsidiary.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
The Fund does not know of any contract, arrangement, understanding or
relationship relating directly or indirectly, to the Offer (whether or not
legally enforceable) between the Fund, any of the Fund's executive officers or
Directors, any person controlling the Fund or any executive officer or director
of any
3
<PAGE>
corporation ultimately in control of the Fund and any person with respect to any
securities of the Fund (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies, consents or authorizations).
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No persons have been employed, retained or are to be compensated by the Fund
to make solicitations or recommendations in connection with the Offer.
ITEM 7. FINANCIAL INFORMATION.
(a) Reference is hereby made to the financial statements included as Exhibit
(g)(1) hereto, which are incorporated herein by reference.
(b) None.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) None.
(c) Not applicable.
(d) None.
(e) The Offer to Purchase, attached hereto as Exhibit (a)(1), is
incorporated herein by reference in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Offer to Purchase.
(a)(2) Form of Letter of Transmittal.
(a)(3) Letter to Shareholders.
(b)(1) Credit Agreement by and among The First National Bank of Boston and certain
GT Global Funds.
(b)(2) First Amendment to Credit Agreement by and among The First National Bank of
Boston and certain GT Global Funds.
(b)(3) Credit Agreement by and among State Street Bank and Trust Company and
certain GT Global Funds.
(c)-(f) Not Applicable.
(g)(1) Unaudited Financial Statements of the Fund for the two months ended June 30,
1997.
</TABLE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
GT GLOBAL FLOATING RATE FUND, INC.
By: /s/ PHILLIP S. GILLESPIE
--------------------------------------------------------------------
Phillip S. Gillespie, Assistant
Secretary
August 25, 1997
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
- ----------
<S> <C>
(a)(1) Offer to Purchase.
(a)(2) Form of Letter of Transmittal.
(a)(3) Letter to Shareholders.
(b)(1) Credit Agreement by and among The First National Bank of Boston and
certain GT Global Funds.
(b)(2) First Amendment to Credit Agreement by and among The First National Bank
of Boston and certain GT Global Funds.
(b)(3) Credit Agreement by and among State Street Bank and Trust Company and
certain GT Global Funds.
(c)-(f) Not Applicable.
(g)(1) Unaudited Financial Statements of the Fund for the two months ended June
30, 1997.
</TABLE>
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
------------------------
OFFER TO PURCHASE FOR CASH AT NET ASSET VALUE UP TO 900,000
OF ITS ISSUED AND OUTSTANDING COMMON SHARES
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON SEPTEMBER 23, 1997, UNLESS EXTENDED.
------------------------
To the Holders of Shares of
GT GLOBAL FLOATING RATE FUND, INC.:
The Fund is offering to purchase up to 900,000 of its shares of common
stock, par value $.001 per share (the "Shares"), for cash at a price equal to
their net asset value ("NAV"), less any applicable Early Withdrawal Charge, as
of the close of regular trading on the New York Stock Exchange on September 23,
1997 (the "Initial Expiration Date"), unless extended, upon the terms and
conditions set forth in this Offer to Purchase (the "Offer") and the related
Letter of Transmittal.
The Shares are not traded on an established secondary market and, to provide
liquidity to Fund shareholders, the Fund's board of directors (the "Board")
presently intends each quarter to consider making a tender offer for all or a
portion of its Shares at a price per Share equal to its then current NAV, less
any applicable early withdrawal charge. The NAV on August 18, 1997 was $10.00
per Share. You may obtain current NAV quotations during the pendency of the
Offer by calling 1-800-223-2138.
If more than the number of Shares contemplated by this Offer are duly
tendered prior to the expiration of the Offer, assuming no changes in the
factors originally considered by the Board when it determined to make the Offer,
the Fund will either (1) extend the Offer period, if necessary, and increase the
number of Shares that the Fund is offering to purchase to an amount which it
believes will be sufficient to accommodate the excess Shares tendered as well as
any additional Shares that may be tendered during the extended Offer period or
(2) purchase the number of Shares sought on a pro rata basis.
THIS OFFER IS BEING MADE TO ALL SHAREHOLDERS OF THE FUND AND IS NOT
CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
IMPORTANT: If you desire to tender all or any portion of your Shares, you
should do one of the following: (1) if you own your Shares through a broker,
dealer, commercial bank, trust company or other nominee (each a "Nominee"),
request your Nominee to effect the transaction for you or (2) if you own your
Shares directly, complete and sign the Letter of Transmittal and mail or deliver
it along with any Share certificate(s) and any other required documents to the
Fund's transfer agent, GT Global Investor Services, Inc. (the "Transfer Agent").
If your Shares are registered in the name of a Nominee, you MUST contact such
Nominee if you desire to tender your Shares.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH
SHAREHOLDER MUST MAKE HIS OWN DECISION WHETHER TO TENDER SHARES, AND IF SO, HOW
MANY SHARES TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
FUND AS TO WHETHER SHAREHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER. NO
PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND.
<PAGE>
Questions, requests for assistance and requests for additional copies of
this Offer to Purchase and the Letter of Transmittal may be directed to the
Transfer Agent at 1-800-223-2138 or at the address set forth below:
GT Global Investor Services, Inc.
California Plaza
2121 North California Blvd.
Suite 450
Walnut Creek, CA 94596
GT GLOBAL FLOATING RATE FUND, INC.
August 25, 1997
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTIONS PAGE
- ---------------------------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1. Price; Number of Shares.............................................................................. 4
2. Procedure for Tendering Shares....................................................................... 4
3. Early Withdrawal Charge.............................................................................. 5
4. Exchanges............................................................................................ 6
5. Withdrawal Rights.................................................................................... 6
6. Payment for Shares................................................................................... 6
7. Certain Conditions of the Offer...................................................................... 7
8. Purpose of the Offer................................................................................. 7
9. Certain Effects of the Offer......................................................................... 7
10. Source and Amount of Funds........................................................................... 8
11. Summary of Selected Financial Information............................................................ 8
12. Certain Information About the Fund................................................................... 9
13. Additional Information............................................................................... 10
14. Certain Federal Income Tax Consequences.............................................................. 10
15. Extension of Tender Period; Termination; Amendments.................................................. 11
16. Miscellaneous........................................................................................ 11
</TABLE>
EXHIBIT A: Unaudited Financial Statements for the two-month period ended June
30, 1997
3
<PAGE>
1. PRICE; NUMBER OF SHARES. The Fund will, upon the terms and subject to
the conditions of the Offer, purchase up to 900,000 of its issued and
outstanding Shares which are tendered and not withdrawn prior to 12:00 midnight,
New York City time, on September 23, 1997 (such time and date being hereinafter
called the "Initial Expiration Date"), unless it determines to accept none of
them. The Fund reserves the right to extend the Offer (see Section 15). The
later of the Initial Expiration Date or the latest time and date to which the
Offer is extended is hereinafter called the "Expiration Date." The purchase
price of the Shares will be their NAV as of the close of regular trading on the
New York Stock Exchange on the Expiration Date. An Early Withdrawal Charge
payable to GT Global, Inc. to recover its distribution expenses will be assessed
on Shares accepted for purchase which have been held for less than the
applicable holding period (see Section 3).
The Offer is being made to all shareholders of the Fund and is not
conditioned upon any number of Shares being tendered. If more than the number of
Shares sought by the Fund are duly tendered prior to the expiration of the
Offer, assuming no changes in the factors originally considered by the Board
when it determined to make the Offer, the Fund will either (1) extend the Offer
period, if necessary, and increase the number of Shares that the Fund is
offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Shares tendered as well as any additional Shares that may
be tendered during the extended Offer period or (2) purchase the number of
Shares sought on a pro rata basis.
The Fund reserves the right, in its sole discretion, at any time or from
time to time, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Transfer Agent and making
a public announcement thereof (see Section 15). There is no assurance, however,
that the Fund will exercise its right to extend the Offer. If the Fund decides,
in its sole discretion, to increase (except for any increase not in excess 2% of
the outstanding Shares) or decrease the number of Shares being sought and, at
the time that notice of such increase or decrease is first published, sent or
given to holders of Shares in the manner specified below, the Offer is scheduled
to expire at any time earlier than the tenth business day from the date that
such notice is first so published, sent or given, the Offer will be extended at
least until the end of such ten business day period.
As of August 18, 1997 there were approximately 10.2 million Shares issued
and outstanding and there were 2,735 record holders of Shares. The Fund has been
informed that none of the directors, officers or affiliates of the Fund intends
to tender any Shares pursuant to the Offer. The Shares currently are not traded
on any established secondary market. Current NAV quotations for the Shares can
be obtained by calling the Transfer Agent at 1-800-223-2138.
2. PROCEDURE FOR TENDERING SHARES. In order for you to tender any of your
Shares pursuant to the Offer, you may either: (a) request your Nominee to effect
the transaction for you, in which case a Letter of Transmittal is not required
or (b) if the Shares are registered in your name, send to the Transfer Agent, at
the address set forth below, any certificates for such Shares, a properly
completed and executed Letter of Transmittal and any other documents required
therein. Please contact the Transfer Agent at 1-800-223-2138 as to any
additional documents which may be required.
A. Procedures for Beneficial Owners Holding Shares through Brokers,
Dealers, or other Nominees. If your Shares are registered in the name of a
Nominee, you must contact such Nominee if you desire to tender your Shares. You
should contact such Nominee in sufficient time to permit notification of your
desire to tender to reach the Transfer Agent by the Expiration Date. No
brokerage commission will be charged on the purchase of Shares by the Fund
pursuant to the Offer. However, a broker or dealer may charge a fee for
processing the transaction on your behalf.
B. Procedures for Registered Shareholders. If you will be mailing or
delivering the Letter of Transmittal and any other required documents to the
Transfer Agent to tender your Shares, they must be received on or prior to the
Expiration Date by the Transfer Agent at its address set forth below.
Signatures on the Letter of Transmittal are not required to be guaranteed
unless (1) the proceeds for the tendered Shares will amount to more than
$50,000, (2) the Letter of Transmittal is signed by someone other than the
registered holder of the Shares tendered therewith, or (3) payment for tendered
Shares is
4
<PAGE>
to be sent to a payee other than the registered owner of such Shares or to an
address other than the registered address of the registered owner of the Shares.
In each of those instances, all signatures on the Letter of Transmittal must be
guaranteed by an "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the existence and validity of which may be verified by the
Transfer Agent through the use of industry publications; notarized signatures
are not sufficient.
Please note that those shareholders holding Shares in an Individual
Retirement Account ("IRA") that mail or deliver a Letter of Transmittal to
tender Shares must also provide the Transfer Agent with a completed IRA
distribution form.
Payment for Shares tendered and purchased will be made only after receipt by
the Transfer Agent on or before the Expiration Date of a properly completed and
duly executed Letter of Transmittal and any other required documents. If your
Shares are evidenced by certificates, those certificates must also be received
by the Transfer Agent on or prior to the Expiration Date.
THE METHOD OF DELIVERY OF ANY DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE PARTY TENDERING THE SHARES. IF DOCUMENTS ARE
SENT BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED.
C. Determinations of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of tenders will be
determined by the Fund, in its sole discretion, which determination shall be
final and binding. The Fund reserves the absolute right to reject any or all
tenders determined by it not to be in appropriate form or the acceptance of or
payment for which would, in the opinion of counsel for the Fund, be unlawful.
The Fund also reserves the absolute right to waive any of the conditions of the
Offer or any defect in any tender with respect to any particular Shares or any
particular shareholder, and the Fund's interpretations of the terms and
conditions of the Offer will be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such times as the
Fund shall determine. Tendered Shares will not be accepted for payment unless
the defects or irregularities have been cured within such time or waived.
Neither the Fund, the Transfer Agent nor any other person shall be obligated to
give notice of any defects or irregularities in tenders, nor shall any of them
incur any liability for failure to give such notice.
D. Tender Constitutes an Agreement. A tender of Shares made pursuant to any
one of the procedures set forth above will constitute an agreement between the
tendering shareholder and the Fund in accordance with the terms and subject to
the conditions of the Offer.
3. EARLY WITHDRAWAL CHARGE. The Fund will assess an Early Withdrawal
Charge on Shares accepted for purchase which have been held for less than four
years. The charge will be paid to GT Global, Inc., the Fund's distributor, to
recover its distribution expenses. The Early Withdrawal Charge will be imposed
on those Shares accepted for tender based on an amount equal to the lesser of
the then current NAV of the Shares or the shareholder's cost of the Shares being
tendered. Accordingly, the Early Withdrawal Charge will not be imposed on
increases in the NAV above the initial purchase price. In addition, the Early
Withdrawal Charge will not be imposed on Shares derived from reinvestments of
dividends or capital gain distributions. The Early Withdrawal Charge imposed
will vary depending on the length of time the Shares have been owned since
purchase (separate purchases shall not be aggregated for these purposes), as set
forth in the following table:
<TABLE>
<CAPTION>
EARLY
WITHDRAWAL CHARGE
YEAR OF TENDER AFTER PURCHASE (AS A PERCENTAGE OF NAV)
- -------------------------------------------------------------------- -------------------------
<S> <C>
First............................................................... 3.0%
Second.............................................................. 2.5%
Third............................................................... 2.0%
Fourth.............................................................. 1.0%
Fifth and following................................................. 0.0%
</TABLE>
5
<PAGE>
In determining whether an Early Withdrawal Charge is applicable to a tender
of Shares, 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 acquired through dividend reinvestment and of Shares
held for over four years and then of Shares held longest during the four-year
period. Because the Fund commenced operations on May 1, 1997, all Shares other
than dividend reinvestment Shares and Shares exchanged pursuant to Section 4
below will be subject to a 3.0% Early Withdrawal Charge. The Early Withdrawal
Charge will not be applied to dollar amounts representing an increase in the NAV
since the time of purchase.
4. EXCHANGES. Tendering shareholders may, instead of receiving the
proceeds from the tender of Shares of the Fund in cash, elect to have those
proceeds invested in Class B shares that are subject to a contingent deferred
sales charge ("Class B Shares") of certain open-end investment companies advised
by Chancellor LGT Asset Management, Inc. ("GT Global Funds") purchased at their
respective NAVs determined on the Expiration Date. The Early Withdrawal Charge
will be waived for Shares tendered in exchange for Class B shares in the GT
Global Funds; however, such Class B shares will immediately become subject to a
contingent deferred sales charge equivalent to the Early Withdrawal Charge on
Shares of the Fund. Thus, such Class B shares may be subject to a contingent
deferred sales charge upon a subsequent redemption from the GT Global Funds. The
purchase of such Class B shares will be deemed to have occurred at the time of
the purchase of the Shares of the Fund for purposes of calculating the
applicable contingent deferred sales charge. An exchange is a taxable event and
may result in a taxable gain or loss for shareholders. Shareholders should
consult their own tax advisors for a complete description of possible gains and
losses.
The prospectus for each GT Global Fund describes its investment objectives
and policies. Shareholders can obtain a prospectus without charge by calling
1-800-223-2138 and should consider these objectives and policies carefully
before requesting an exchange. Each tender for an exchange must involve proceeds
from Shares that have a NAV of at least $500.
5. WITHDRAWAL RIGHTS. You may withdraw Shares tendered at any time prior
to the Expiration Date and, if the Shares have not yet been accepted for payment
by the Fund, at any time after October 15, 1997.
To be effective, any notice of withdrawal must be timely received by the
Transfer Agent at the address set forth below. Any notice of withdrawal must
specify the name of the person having deposited the Shares to be withdrawn, the
number of Shares to be withdrawn, and, if the certificates representing such
Shares have been delivered or otherwise identified to the Transfer Agent, the
name of the registered holder(s) of such Shares as set forth in such
certificates and the number of Shares to be withdrawn. If the certificates have
been delivered to the Transfer Agent, then, prior to the release of such
certificate, you must also submit the certificate numbers shown on the
particular certificates evidencing such Shares and the signature on the notice
of the withdrawal must be guaranteed by an eligible guarantor institution.
Shareholders whose accounts are maintained through a Nominee should notify such
nominee prior to the Expiration Date if they wish to withdraw Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Fund in its sole discretion,
which determination shall be final and binding. Shares properly withdrawn shall
not thereafter be deemed to be tendered for purposes of the Offer. However,
withdrawn Shares may be retendered by following one of the procedures described
in Section 2 prior to the Expiration Date.
6. PAYMENT FOR SHARES. For purposes of the Offer, the Fund will be deemed
to have accepted for payment (and thereby purchased) Shares that are tendered
as, if and when it gives oral or written notice to the Transfer Agent of its
election to purchase such Shares. Upon the terms and subject to the conditions
of the Offer, the Fund will accept for payment (and thereby purchase) promptly
after the Expiration Date Shares properly tendered.
6
<PAGE>
As directed by the Fund, the Transfer Agent will send payment for the Shares
directly to tendering shareholders, or in the case of tendering shareholders
electing an exchange in lieu of cash, directly to the Class B share account of
the designated GT Global Funds. Certificates for Shares not purchased, or for
Shares not tendered included in certificates forwarded to the Transfer Agent,
will be returned promptly following the termination, expiration or withdrawal of
the Offer, without expense to the tendering shareholder.
The Fund will pay all transfer taxes, if any, payable on the transfer to it
of Shares purchased pursuant to the Offer. If tendered certificates are
registered in the name of any person other than the person signing the Letter of
Transmittal, the amount of any such transfer taxes (whether imposed on the
registered holder or such other person) payable on account of the transfer to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted. The
Fund will not pay any interest on the purchase price under any circumstances.
7. CERTAIN CONDITIONS OF THE OFFER. The Fund shall not be required to
accept for payment or to pay for any Shares tendered, and may terminate or amend
the Offer or may postpone the acceptance for payment of or payment for Shares
tendered, if: (1) such purchases would impair the Fund's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code") (which would cause the Fund's income to be taxed at the corporate level
in addition to the taxation of shareholders who receive dividends from the
Fund); (2) in the judgment of the Board, the Portfolio would not be able to
liquidate portfolio securities in a manner that is orderly and consistent with
the Portfolio's investment objective and policies in order to purchase interests
in the Portfolio tendered by the Fund to effect the Offer; or (3) there is, in
the judgment of the Board, any (a) legal action or proceeding instituted or
threatened challenging the Offer or otherwise materially adversely affecting the
Fund, (b) declaration of a banking moratorium by federal or state authorities or
any suspension of payment by banks in the United States or New York State, that
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 that is material to the Fund, or (e)
other event or condition that would have a material adverse effect on the Fund
or its shareholders if Shares tendered pursuant to the Offer were purchased.
If the Fund determines to amend the Offer or to postpone the acceptance for
payment of or payment for Shares tendered, it will, to the extent necessary,
extend the period of time during which the Offer is open as provided in Section
15. Moreover, if any of the foregoing conditions is modified or waived in whole
or in part at any time, the Fund will promptly make a public announcement of
such modification or waiver and may, depending on the materiality of the
modification or waiver, extend the Offer period as provided in Section 15.
8. PURPOSE OF THE OFFER. The Fund does not currently believe there will be
an active secondary market for its Shares. The Board has determined that it
would be in the best interest of shareholders for the Fund to take action to
attempt to provide liquidity to shareholders. To that end, the Board presently
intends each quarter to consider the making of a tender offer to purchase all or
a portion of the Fund's Shares at NAV. The Fund will at no time be required to
make any such tender offer.
NEITHER THE FUND NOR THE BOARD MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER
AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
SHAREHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY PERS0N TO MAKE ANY SUCH
RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN
DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
9. CERTAIN EFFECTS OF THE OFFER. The purchase of Shares pursuant to the
Offer will have the effect of increasing the proportionate interest in the Fund
of shareholders who do not tender their Shares. If you retain your Shares,
however, you will be subject to any increased risks that may result from the
7
<PAGE>
reduction in the Fund's aggregate assets resulting from payment for the Shares,
including, for example, the potential for greater volatility due to decreased
diversification of the Portfolio and higher expenses. However, the Fund believes
that those risks will be reduced to the extent new Shares of the Fund are sold.
All Shares purchased by the Fund pursuant to the Offer will be retired by the
Board.
10. SOURCE AND AMOUNT OF FUNDS. The aggregate purchase price if 900,000
Shares are tendered and accepted for payment pursuant to the Offer will be
approximately $9,000,000. The Fund expects to finance the Offer through cash on
hand and through borrowings under two lines of credit previously established by
the Fund and certain other GT Global Funds. These two credit facilities, each
with a maximum aggregate principal amount of $100,000,000, are: (a) an
uncommitted, unsecured line of credit with The First National Bank of Boston,
providing for a rate of interest based on the lower of (i) an adjusted
Eurodollar rate based on the London InterBank Offered Rate ("LIBOR") plus a
reserve percentage established by the Federal Reserve, (ii) the federal funds
effective rate plus 1/2 of 1%, or (iii) a money market rate quoted by the Bank;
and (b) an uncommitted, unsecured line of credit with State Street Bank and
Trust Company, providing for a variable rate of interest as agreed to from time
to time by particular GT Global Funds and State Street Bank and Trust Company.
The Fund expects to repay any amounts borrowed under these lines of credit with
the proceeds of sales of additional Fund Shares.
The Fund invests its assets in Floating Rate Portfolio (the "Portfolio"). In
the event that the number of tendered Shares significantly exceeds 900,000 and
the Fund determines to increase the number of Shares sought in the Offer, it may
be necessary to sell underlying securities held by the Portfolio and to conduct
a simultaneous tender offer at the Portfolio level to provide the Fund with
additional liquidity. Under these circumstances, the Fund would tender a portion
of its interest in the Portfolio sufficient to provide the additional liquidity
necessary to effect the Offer.
Under the Investment Company Act of 1940, as amended (the "1940 Act"), the
Fund is not permitted to incur indebtedness unless immediately after such
incurrence the Fund 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 distribution or at the
time of any such purchase, an asset coverage of at least 300% after deducting
the amount of such distribution or purchase price, as the case may be. If, in
the judgment of the Board, there is not sufficient liquidity of the assets of
the Fund, or availability of funds from borrowings, to pay for tendered Shares,
the Fund may terminate the Offer.
11. SUMMARY OF SELECTED FINANCIAL INFORMATION. Set forth below is a summary
of selected financial information for the Fund for the period May 1, 1997
(commencement of Fund operations) to June 30, 1997. More comprehensive financial
information is included in the Fund's semiannual unaudited financial statements,
which are attached hereto as Exhibit A and have been filed as an exhibit to the
Schedule 13E-4 filed with the Securities and Exchange Commission (the "SEC") in
connection with the Offer. The summary of selected financial information set
forth below is qualified in its entirety by reference to such documents and the
financial information, the notes thereto and related matter contained therein.
8
<PAGE>
SUMMARY OF SELECTED FINANCIAL INFORMATION
(IN 000'S EXCEPT PER SHARE DATA AND RATIOS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
TWO MONTHS
ENDED
JUNE 30,
1997
(UNAUDITED)
------------
<S> <C>
INCOME STATEMENT
Investment Income................................................................................. $ 958
Expenses.......................................................................................... 163
------------
Investment income--net............................................................................ $ 795
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Realized gain (loss) on investments--net.......................................................... 1
Change in unrealized appreciation on investments--net............................................. (13)
FINANCIAL HIGHLIGHTS (AT END OF PERIOD)
Total assets...................................................................................... $ 81,539
Total liabilities................................................................................. 674
------------
Net assets........................................................................................ $ 80,865
Net asset value per share......................................................................... $ 10.00
Shares of common stock............................................................................ 8,087
PER SHARE
Investment income--net............................................................................ $ 0.11
Realized and unrealized gain (loss) on investments--net........................................... 0
Dividends from net investment income to common shareholders....................................... $ 0.11
RATIOS
Total expenses to average net assets.............................................................. 1.50%*
Investment income--net, to average net assets..................................................... 7.25%*
</TABLE>
- ------------------------
* Annualized
12. CERTAIN INFORMATION ABOUT THE FUND. The Fund was incorporated under the
laws of the State of Maryland on December 4, 1996 and is a continuously offered,
non-diversified, closed-end, management investment company registered under the
1940 Act. 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"). The Fund seeks to achieve its
objective by investing all of its investable assets in the Portfolio, a
separate, non-diversified, closed-end, management 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 LIBOR or the prime rate of a designated U.S. bank. The
Fund is managed by Chancellor LGT Senior Secured Management, Inc., a subsidiary
of Chancellor LGT Asset Management, Inc.
Except for the issuance by the Fund of approximately 2.6 million Shares
during the past 40 business days, all at prices equal to NAV on the date of
sale, there have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or director of any such subsidiary.
9
<PAGE>
The principal executive offices of the Fund are located at 50 California
Street, 27th Floor, San Francisco, California 94111.
13. ADDITIONAL INFORMATION. The Fund has filed a statement on Schedule
13E-4 with the SEC which includes certain additional information relating to the
Offer. Such material may be inspected and copied at prescribed rates at the
SEC's public reference facilities at 450 Fifth Street, N.W., Washington, D.C.
20549; Seven World Trade Center, New York, New York 10048; and Room 3190, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained by mail at prescribed rates from the Public
Reference Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
general summary of the federal income tax consequences of a sale of Shares
pursuant to the Offer. You should consult your own tax adviser for a complete
description of those consequences to you.
The sale of Shares pursuant to the Offer will be a taxable transaction for
federal income tax purposes, either an "exchange" or, under certain
circumstances, a "dividend." In general, the transaction should be treated as an
exchange of the tendered Shares under section 302 of the Code if the payment for
the Shares (1) is "substantially disproportionate" with respect to the
shareholder, (2) results in a "complete redemption" of the shareholder's
interest in the Fund, or (3) is "not essentially equivalent to a dividend" with
respect to the shareholder. A "substantially disproportionate" distribution
generally requires a reduction of at least 20% in the shareholder's
proportionate interest in the Fund after all Shares are tendered. A "complete
redemption" of a shareholder's interest generally requires that all Shares
directly owned by or attributed to such shareholder under section 318 of the
Code be disposed of. A distribution "not essentially equivalent to a dividend"
requires that there be a "meaningful reduction" in the shareholder's interest,
which should occur if the shareholder has a minimal interest in the Fund,
exercises no control over Fund affairs and suffers a reduction in his
proportionate interest in the Fund.
If any of these three tests for exchange treatment is met, you will
recognize gain or loss on the Fund's purchase of your Shares equal to the
difference between the amount of cash you receive for those Shares (including
any cash used to purchase Class B Shares of GT Global Funds) and your adjusted
tax basis for them. That gain or loss will be a capital gain or loss if you held
the Shares as capital assets. In general, capital gain or loss with respect to
your sold Shares will be short-term capital gain or loss because your holding
period for the Shares will be less than one year.
If none of the tests for exchange treatment can be met, you will be treated
as having received a dividend, a return of capital and/or a capital gain,
depending on (1) whether the Fund has sufficient earnings and profits to support
a dividend and (2) your tax basis for the Shares. To the extent your tender of
Shares is treated as a dividend, your tax basis for the tendered Shares will be
transferred to any remaining Shares you continue to hold. If the sale of Shares
pursuant to the Offer is treated as a dividend to any tendering shareholder, a
constructive dividend may result to a non-tendering shareholder whose
proportionate interest in the Fund's earnings and assets is increased as a
result of the tender.
Accordingly, the difference between dividend and exchange treatment is
important with respect to the amount and character of income that tendering
shareholders are deemed to receive. In addition, while the marginal tax rates
for dividends and capital gains remain the same for corporate shareholders, the
top tax rate on ordinary income of individuals (39.6%) exceeds the maximum tax
rate on long-term capital gains (28% under current law).
If the sale of Shares by a corporate shareholder pursuant to the Offer is
treated as a dividend, the shareholder may be entitled to claim a
dividends-received deduction on the cash received, which ordinarily would equal
70% of the dividend. However, corporate shareholders should consult their tax
advisors about certain Code provisions that may affect their eligibility for the
dividends-received deduction.
The Transfer Agent generally will be required to withhold 31% of the gross
proceeds payable to an individual or certain other noncorporate shareholder
pursuant to the Offer unless the shareholder provides a taxpayer identification
number and certifies under penalties of perjury (1) that such number is
10
<PAGE>
correct and (2) either that (a) the shareholder is exempt from backup
withholding, (b) the shareholder is not otherwise subject to backup withholding
as a result of a failure to report all interest or dividends, or (c) the
Internal Revenue Service has notified the shareholder that the shareholder is no
longer subject to backup withholding. Foreign shareholders may be required to
provide the Transfer Agent with a completed Form W-8, available from the
Transfer Agent, in order to avoid 31% backup withholding.
Unless a reduced rate of withholding or a withholding exemption is available
under an applicable tax treaty, a shareholder who is a nonresident alien or a
foreign entity may be subject to a 30% U.S. withholding tax on the gross
proceeds received by the shareholder from the sale of Shares pursuant to the
Offer if the proceeds are treated as a dividend under the rules described above.
Foreign shareholders should consult their tax advisors regarding application of
these withholding rules.
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. The Fund reserves
the right, at any time and from time to time, to extend the period of time
during which the Offer is pending by making a public announcement thereof. If
the Fund so elects to extend the tender period, the NAV for the Shares tendered
will be determined as of the close of regular trading on the New York Stock
Exchange on the Expiration Date, as extended. During any such extension, all
Shares previously tendered and not purchased or withdrawn will remain subject to
the Offer. The Fund also reserves the right, at any time and from time to time
up to and including the Expiration Date, to (a) terminate the Offer and not to
purchase or pay for any Shares, and (b) amend the Offer in any respect, by
making a public announcement. Such public announcement will be issued no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date and will disclose the approximate number of
Shares tendered as of that date. Without limiting the manner in which the Fund
may choose to make a public announcement of extension, termination or amendment,
except as provided by applicable law (including Rule 13e-4(e)(2) under the
Exchange Act), the Fund shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
release to the Dow Jones News Service.
If the Fund materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Fund will extend the Offer to the extent required by Rule 13e-4 under the
Exchange Act. These rules require that the minimum period during which an offer
must remain open following material changes in the terms of the Offer or
information concerning the Offer (other than a change in price or a change in
percentage of securities sought) will depend on the facts and circumstances,
including the relative materiality of such terms of information. If (i) the Fund
increases or decreases the consideration to be paid for Shares, or the Fund
increases the number of Shares being sought by an amount exceeding 2% of the
outstanding Shares, or the Fund decreases the number of Shares being sought and
(ii) the Offer is scheduled to expire at any time earlier than the expiration of
a period ending on the tenth business day from, and including, the date that
notice of such increase or decrease is first published, sent or given, the Offer
will be extended at least until the expiration of such period of ten business
days.
16. MISCELLANEOUS. The Offer is not being made to, nor will tenders be
accepted from, shareholders in any jurisdiction in which the Offer or its
acceptance would not comply with the securities laws of such jurisdiction. The
Fund is not aware of any jurisdiction in which the Offer or tenders pursuant
thereto would not be in compliance with the laws of such jurisdiction. However,
the Fund reserves the right to exclude shareholders from the Offer in any
jurisdiction in which it is asserted that the Offer cannot lawfully be made. The
Fund believes such exclusion is permissible under applicable tender offer rules,
provided the Fund makes a good faith effort to comply with any state law deemed
applicable to the Offer. In any jurisdiction the securities laws of which
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on the Fund's behalf by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
GT GLOBAL FLOATING RATE FUND, INC.
August 25, 1997
11
<PAGE>
The Letter of Transmittal and certificates for Shares tendered by registered
shareholders should be sent or delivered to the Transfer Agent as set forth
below. Any questions or requests for assistance or additional copies of the
Offer, the Letter of Transmittal and other documents may be directed to the
Transfer Agent at its telephone number and location listed below. Shareholders
may also contact their Nominee for assistance concerning the Offer.
TRANSFER AGENT:
GT GLOBAL INVESTOR SERVICES, INC.
FACSIMILE COPY NUMBER:
(510) 472-5545
CONFIRM BY TELEPHONE:
(800) 223-2138
FOR INFORMATION CALL:
(800) 223-2138
BY HAND, MAIL, OR OVERNIGHT COURIER:
GT Global Investor Services, Inc.
California Plaza
2121 North California Blvd.
Suite 450
Walnut Creek, CA 94596
12
<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
------------
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 --
</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 (Continued)
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 --
------------
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
------------
</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>
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 of three 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)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
-----------
-----------
</TABLE>
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, (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 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.
F9
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
(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 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
F10
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
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 $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.
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 decrease............................ 8,087,189 $ 80,771,571
--------------- ------------------
--------------- ------------------
</TABLE>
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>
BORROWER
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
KSL Recreation Group.................................................................................................
Affinity Group.......................................................................................................
<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.
F11
<PAGE>
LETTER OF TRANSMITTAL
TO BE USED TO TENDER SHARES
OF
GT GLOBAL FLOATING RATE FUND, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 25, 1997
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT
NEW YORK CITY TIME, ON SEPTEMBER 23, 1997, UNLESS EXTENDED
IMPORTANT: THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY IF THE SHAREHOLDER IS
A RECORD OWNER OF SHARES WHO DESIRES TO EFFECT THE TENDER OFFER TRANSACTION
HIMSELF OR HERSELF BY TRANSMITTING THE NECESSARY DOCUMENTS TO THE
FUND'S TRANSFER AGENT. A SHAREHOLDER WHO HOLDS SHARES THROUGH A
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE
("NOMINEE") IS NOT THE RECORD OWNER AND SHOULD INSTRUCT HIS OR
HER NOMINEE TO EFFECT THE TENDER ON HIS OR HER BEHALF.
TRANSFER AGENT:
GT GLOBAL INVESTOR SERVICES, INC.
FACSIMILE COPY NUMBER:
(510) 472-5545
CONFIRM BY TELEPHONE:
(800) 223-2138
FOR INFORMATION CALL:
(800) 223-2138
BY HAND, MAIL, OR OVERNIGHT COURIER:
GT Global Investor Services, Inc.
California Plaza
2121 North California Blvd.
Suite 450
Walnut Creek, CA 94596
DELIVERY TO AN ADDRESS OTHER THAN THAT SHOWN ABOVE DOES
NOT CONSTITUTE VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Pursuant to the Offer to Purchase dated August 25, 1997 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, the undersigned hereby
tenders to GT Global Floating Rate Fund, Inc., a closed-end investment company
incorporated under the laws of the State of Maryland (the "Fund"), the shares
described below of its common stock, par value $.001 per share (the "Shares"),
at a price equal to the net asset value per Share ("NAV") calculated on the
Expiration Date (as defined in the Offer to Purchase), in cash, less any
applicable Early Withdrawal Charge, upon the terms and conditions set forth in
the Offer to Purchase and this Letter of Transmittal.
The undersigned hereby sells to the Fund all Shares tendered hereby that are
purchased pursuant to the Offer and hereby irrevocably constitutes and appoints
GT Global Investor Services, Inc. (the "Transfer Agent") as attorney in fact of
the undersigned, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to present such
Shares and any Share certificates for cancellation of such Shares on the Fund's
books. The undersigned hereby warrants that the undersigned has full authority
to sell the Shares tendered hereby and that the Fund will acquire good title
thereto, free and clear of all liens, charges, encumbrances, conditional sales
agreements or other obligations relating to the sale thereof, and not subject to
any adverse claim, when and to the extent the same are purchased by it. Upon
request, the undersigned will execute and deliver any additional documents
necessary to complete the sale in accordance with the terms of the Offer.
The names and addresses of the registered owners should be printed in the
box below as they appear on the registration of the Shares. The number of Shares
that the undersigned wishes to tender should be indicated. The undersigned may
elect to receive proceeds from the Offer (less any applicable Early Withdrawal
Charge) in cash by checking Option A. The undersigned may elect to receive, in
lieu of cash, Class B Shares of certain open-end
<PAGE>
investment companies advised by Chancellor LGT Asset Management, Inc.
("Chancellor LGT") by checking Option B. Each shareholder should check either
Option A or Option B. If the Shares tendered hereby are in certificate form, the
certificates representing such Shares must be returned together with this Letter
of Transmittal.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Fund may not be required to purchase any of the Shares
tendered hereby. In that event, the undersigned understands that, in the case of
Shares evidenced by certificates, certificate(s) for any Shares not purchased
will be returned to the undersigned at the address indicated above.
The check for the purchase price for the tendered Shares purchased will be
issued to the order of the undersigned and mailed to the address indicated in
the "Description of Shares Tendered" table below.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and the obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
NAME(S) AND ADDRESS(ES) AND ACCOUNT NUMBER(S)
OF
REGISTERED HOLDERS(S): (PLEASE FILL IN, IF SHARE(S) TENDERED
BLANK) (ATTACH ADDITIONAL SIGNED SCHEDULE IF NECESSARY)
TOTAL NUMBER OF
SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
ACCT. NUMBER(S):
TOTAL SHARES
TENDERED
* Need not be completed by shareholders who tender by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by any certificate
delivered to the Transfer Agent are being tendered
</TABLE>
CHECK ONE OF THE FOLLOWING AND FILL IN AS REQUIRED
OPTION A ____ I elect to have the proceeds of the Shares tendered hereby
and accepted for payment paid in cash, less any applicable
Early Withdrawal Charge.
OPTION B ____ I elect to have the proceeds of the Shares tendered hereby
and accepted for payment invested in Class B shares of GT
Global ________________________ Fund.
THE UNDERSIGNED TENDERS ALL UNCERTIFICATED SHARES THAT MAY BE HELD IN THE NAME
OF THE REGISTERED HOLDER(S) BY THE FUND'S TRANSFER AGENT PURSUANT TO THE FUND'S
DIVIDEND REINVESTMENT PLAN. ___ YES ___ NO
Note: If you do not check either of the boxes above, uncertificated Shares, if
any, held in the name of the registered holder(s) by the Fund's transfer agent
pursuant to the Fund's dividend reinvestment plan will NOT be tendered.
<PAGE>
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 2, 5, 6 AND 7) (SEE INSTRUCTIONS 2, 5, 6 AND 7)
To be completed ONLY if certificates for To be completed ONLY if certificates for Shares
Shares not tendered or not purchased and/or the not tendered or not purchased and/or the check
check for the purchase price of Shares for the purchase price of Shares purchased are
purchased are to be issued in the name of and to be issued in the name of the undersigned,
sent to someone other than the undersigned. but sent to someone other than the undersigned,
or to the undersigned at an address other than
that shown above.
Issue / / Check / / Certificate to Mail / / Check / / Certificate to
(partial tenders (partial tenders only):
only):
Name --------------------------------------- Name ---------------------------------------
(PLEASE PRINT) (PLEASE PRINT)
Address Address
(CITY, STATE, ZIP CODE) (CITY, STATE, ZIP CODE)
(TAXPAYER IDENTIFICATION (SOCIAL SECURITY)
NUMBER)
</TABLE>
SIGNATURE FORM
(SEE INSTRUCTIONS 1, 5 AND 8)
SOCIAL SECURITY NO.
OR TAXPAYER IDENTIFICATION NO. _________________________________
Under penalty of perjury, I certify that (1) the number set
forth above is my correct Social Security No. or other Taxpayer
Identification No. and (2) I am not subject to backup
withholding either because (a) I am exempt from backup
withholding, (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject thereto as a
result of failure to report all interest or dividends, or (c)
the IRS has notified me that I am no longer subject thereto.
INSTRUCTION: You must strike out the language in (2) above
if you have been notified that you are subject to backup
withholding due to underreporting and you have not received a
notice from the IRS that backup withholding has been terminated.
_____________________________
_____________________________
(SIGNATURE(S) OF OWNER(S) EXACTLY AS REGISTERED) Date:
__________________________________________________________, 1997
Name(s) ________________________________________________________
________________________________________________________________
(PLEASE PRINT)
Address(es) ____________________________________________________
________________________________________________________________
(PLEASE PRINT)
Telephone Number ( ) _________________________________________
Signature(s) Guaranteed by:
________________________________________________________________
________________________________________________________________
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. USE OF LETTER OF TRANSMITTAL. This Letter of Transmittal is to be used
only if you do not have a Nominee and intend to effect the tender offer
transaction yourself. If your shares are registered in the name of a Nominee, do
not use this form -- you must contact such Nominee if you desire to tender your
shares.
<PAGE>
2. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a member firm of a registered national securities exchange
or a commercial bank or trust company having an office, branch or agency in the
United States, unless ALL of the following conditions apply:
- This Letter of Transmittal is signed by the registered holder(s) of the
Shares, AND
- There is no change of registration of any remaining shares, AND
- The payment of the tender offer proceeds and certificates for any
remaining Shares are to be sent to the registered owner of the Shares at
the address shown in the Share registration, AND
- The tender offer proceeds will be less than $50,000.
3. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for
all tendered Shares, together with a properly completed and duly executed Letter
of Transmittal, should be mailed or delivered to the Transfer Agent on or prior
to the Expiration Date at the appropriate address set forth herein and must be
received by the Transfer Agent prior to the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER.
4. INADEQUATE SPACE. If the space provided is inadequate, the certificate
numbers and number of Shares should be listed on a separate signed schedule
attached hereto.
5. PARTIAL TENDERS. If fewer than all of the Shares evidenced by any
certificate submitted are to be tendered, fill in the number of Shares that are
to be tendered in the column entitled "No. of Shares Tendered." If applicable, a
new certificate for the remainder of the Shares evidenced by your old
certificate(s) will be sent to you as soon as practicable after the Expiration
Date of the Offer. All Shares represented by certificate(s) listed are deemed to
have been tendered unless otherwise indicated.
6. SIGNATURES ON LETTER OF TRANSMITTAL, AUTHORIZATION AND ENDORSEMENTS.
(a) If the Letter of Transmittal is signed by the registered holder of the
Shares tendered hereby, the signature(s) must correspond with the name(s) in
which the Shares are registered.
(b) If the Shares are held of record by two or more joint holders, all such
holders must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations of Shares.
(d) When this Letter of Transmittal is signed by the registered holder(s) of
the Shares listed and, if applicable, of the certificates transmitted hereby, no
endorsements of certificates or separate authorizations are required.
(e) If this Letter of Transmittal or any certificates or authorizations are
signed by trustees, executors, administrators, guardians, attorneys in fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and must submit proper
evidence satisfactory to the Fund of their authority so to act.
(f) Shareholders holding shares in an Individual Retirement Account ("IRA")
that mail or deliver a Letter of Transmittal to tender Shares must also provide
the Transfer Agent with a completed IRA distribution form.
7. TRANSFER TAXES. The Fund will pay all transfer taxes, if any, payable
on the transfer to it of Shares purchased pursuant to the Offer. If tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any transfer taxes (whether
imposed on the registered holder or such other persons) payable on account of
the transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted.
8. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any tender of Shares will be
determined by the Fund, in its sole discretion, which determination shall be
final and binding. The Fund reserves the absolute right to reject any or all
tenders determined by it not to be in appropriate form or the acceptance of or
payment for which would, in the opinion of counsel for the Fund, be unlawful.
The Fund also reserves the absolute right to waive any of the conditions of the
Offer or any defect in any tender with respect to any particular Shares or any
particular shareholder, and the Fund's interpretations of the terms and
conditions of the Offer (including these instructions) will be final and
binding. Unless waived, any defects or irregularities in connection with tenders
must be cured within such time as the Fund shall determine. Tendered Shares will
not be accepted for payment unless the defects and irregularities have been
cured within such time or waived. Neither the Fund, Chancellor LGT Asset Senior
Secured Asset Management, Inc., nor the Transfer Agent, nor any other person
shall be obligated to give notice of defects or irregularities in tenders, nor
shall any of them incur any liability for failure to give any such notice.
9. IMPORTANT TAX INFORMATION. A shareholder whose tendered Shares are
accepted for payment is required BY LAW to provide the Transfer Agent (as payer)
with his or her correct taxpayer identification number, which is accomplished by
completing and signing the Signature Form.
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
50 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94111
DEAR SHAREHOLDER:
AS YOU KNOW, GT GLOBAL FLOATING RATE FUND, INC. (THE "FUND") COMMENCED
OPERATIONS ON MAY 1, 1997. THE INITIAL PERFORMANCE OF THE FUND HAS BEEN
POSITIVE: FOR THE PERIOD MAY 1 THROUGH JUNE 30, 1997, THE YIELD FOR THE FUND WAS
7.45%. THE NET ASSET VALUE PER SHARE HAS REMAINED RELATIVELY CONSTANT THROUGHOUT
THE PERIOD, FLUCTUATING BETWEEN $9.99 AND $10.00. ALTHOUGH THIS IS A SHORT
PERIOD OF TIME OVER WHICH TO ASSESS THE FUND'S PERFORMANCE, I AM PLEASED THAT
THE FIRST RESULTS HAVE BEEN SO PROMISING.
THE FUND'S SHARES ARE NOT PUBLICLY TRADED. HOWEVER, EACH QUARTER THE FUND'S
BOARD OF DIRECTORS (THE "BOARD") WILL CONSIDER WHETHER TO MAKE A TENDER OFFER
FOR ALL OR A PORTION OF THE FUND'S ISSUED AND OUTSTANDING SHARES (THE "SHARES")
TO PROVIDE LIQUIDITY FOR THE FUND'S SHAREHOLDERS. FOR THE THIRD QUARTER OF 1997,
THE BOARD HAS DETERMINED TO PURCHASE UP TO 900,000 OF THE FUND'S SHARES.
ACCORDINGLY, WE ARE ENCLOSING A COPY OF THE FUND'S FIRST OFFER TO PURCHASE
(THE "OFFER TO PURCHASE"), DATED AUGUST 25, 1997. THE OFFER TO PURCHASE IS FOR
CASH AT NET ASSET VALUE ("NAV") PER SHARE AS OF THE EXPIRATION DATE OF THE
OFFER, LESS APPLICABLE "EARLY WITHDRAWAL CHARGES." CERTAIN SELECTED FINANCIAL
INFORMATION WITH RESPECT TO THE FUND IS ALSO SET FORTH IN THE OFFER TO PURCHASE.
WE ALSO ENCLOSE A LETTER OF TRANSMITTAL (THE "LETTER OF TRANSMITTAL") FOR USE BY
RECORD HOLDERS OF SHARES. YOU SHOULD READ EACH OF THESE DOCUMENTS CAREFULLY.
IF, AFTER REVIEWING THE INFORMATION SET FORTH IN THE OFFER TO PURCHASE AND
LETTER OF TRANSMITTAL, YOU WISH TO TENDER SHARES FOR PURCHASE BY THE FUND,
PLEASE CONTACT YOUR BROKER, DEALER OR OTHER NOMINEE TO EFFECT THE TENDER FOR
YOU. IF YOU ARE THE RECORD OWNER OF THE SHARES AND INTEND TO TENDER YOUR SHARES
YOURSELF DIRECTLY TO THE TRANSFER AGENT, YOU SHOULD FOLLOW THE INSTRUCTIONS
CONTAINED IN THE OFFER TO PURCHASE, AND THE ENCLOSED LETTER OF TRANSMITTAL,
WHICH MUST BE COMPLETED BY YOU.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS IS MAKING ANY RECOMMENDATION TO
ANY HOLDER OF SHARES AS TO WHETHER TO TENDER SHARES. EACH SHAREHOLDER IS URGED
TO CONSULT HIS OR HER BROKER OR TAX ADVISER BEFORE DECIDING WHETHER TO TENDER
ANY SHARES.
THE FUND'S NAV ON AUGUST 18, 1997 WAS $10.00 PER SHARE. THE FUND PUBLISHES
ITS NAV EACH WEEK IN BARRON'S. IT APPEARS UNDER THE SUB-HEADING "LOAN
PARTICIPATION FUNDS" WITHIN THE LISTINGS OF MUTUAL FUNDS AND CLOSED-END FUNDS.
YOU MAY ALSO OBTAIN CURRENT NAV QUOTATIONS BY CALLING GT GLOBAL INVESTOR
SERVICES, INC., THE FUND'S TRANSFER AGENT, AT 1-800-223-2138.
REQUESTS FOR ADDITIONAL COPIES OF THE OFFER TO PURCHASE, THE LETTER OF
TRANSMITTAL AND ANY OTHER TENDER OFFER DOCUMENTS, AS WELL AS QUESTIONS AND
REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO GT GLOBAL INVESTOR SERVICES, INC. AT
1-800-223-2138.
SINCERELY,
[/S/ WILLIAM J. GUILFOYLE]
WILLIAM J. GUILFOYLE
CHAIRMAN OF THE BOARD
AND PRESIDENT
AUGUST 25, 1997
<PAGE>
EXHIBIT (b)(1)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CREDIT AGREEMENT
AMONG
G.T. Global Eastern Europe Fund
G.T. Global Developing Markets Fund, Inc.
G.T. Global Growth Series
GT Global Worldwide Growth Fund
GT Global International Growth Fund
GT Global New Pacific Growth Fund
GT Global Europe Growth Fund
GT Global Japan Growth Fund
GT Global America Growth Fund
GT Global America Small Cap Growth Fund
GT Global America Value Fund
G.T. Investment Funds, Inc.
GT Global Financial Services Fund
GT Global Infrastructure Fund
GT Global Natural Resources Fund
GT Global Consumer Products and Services Fund
GT Global Health Care Fund
GT Global Telecommunications Fund
GT Global Emerging Markets Fund
GT Global Latin America Growth Fund
GT Global Government Income Fund
GT Global Strategic Income Fund
GT Global High Income Fund
GT Global Growth & Income Fund
and
THE FIRST NATIONAL BANK OF BOSTON
Dated as of December 3, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Description Page
- ------- ----------- ----
1 DEFINITIONS, INTERPRETATION . . . . . . . . . . . . . . . . . . . .1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2 CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.1 Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.2 Notice and Manner of Borrowing. . . . . . . . . . . . . . . . . . .7
2.3 Loan Account. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.4 Repayment of Loans. . . . . . . . . . . . . . . . . . . . . . . . .9
2.5 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.6 Place and Mode of Payments; Computations. . . . . . . . . . . . . 10
2.7 Optional Prepayments; Certain Mandatory Prepayments . . . . . . . 10
2.8 Changed Circumstances . . . . . . . . . . . . . . . . . . . . . . 11
2.9 Increased Capital Requirements. . . . . . . . . . . . . . . . . . 13
2.10 Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.11 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.12 Discretionary Demand Facility . . . . . . . . . . . . . . . . . . 14
2.13 Collateral Security for Loans . . . . . . . . . . . . . . . . . . 14
3 CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Conditions of Loans . . . . . . . . . . . . . . . . . . . . . . . 15
4 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 16
4.1 Organization, Qualification, Etc. . . . . . . . . . . . . . . . . 16
4.2 Registration Under Applicable Law . . . . . . . . . . . . . . . . 16
4.3 Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Binding Effect of Agreement, Etc. . . . . . . . . . . . . . . . . 17
4.5 Approvals, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 Compliance with Other Instruments . . . . . . . . . . . . . . . . 17
4.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.9 Financial Statements; No Material Changes . . . . . . . . . . . . 18
4.10 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.11 Affiliated Persons. . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
Section Description Page
- ------- ----------- ----
5 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Punctual Payment. . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Taxes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.4 Compliance with Law, Etc. . . . . . . . . . . . . . . . . . . . . 20
5.5 Compliance with Regulations U and X.. . . . . . . . . . . . . . . 20
5.6 Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . 20
5.7 Total Value of Assets, Etc. . . . . . . . . . . . . . . . . . . . 21
5.8 Reports, Additional Information, Etc. . . . . . . . . . . . . . . 22
5.9 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 22
5.10 Prohibited Affiliations . . . . . . . . . . . . . . . . . . . . . 22
5.11 Negative Pledge on Assets . . . . . . . . . . . . . . . . . . . . 23
5.12 Limitation on Additional Indebtedness . . . . . . . . . . . . . . 23
5.13 Limitation on Dividends . . . . . . . . . . . . . . . . . . . . . 24
6 EVENTS OF DEFAULT; ACCELERATION . . . . . . . . . . . . . . . . . 24
6.1 Events of Default; Acceleration . . . . . . . . . . . . . . . . . 24
7 SET-OFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9 SURVIVAL OF COVENANTS, ETC. . . . . . . . . . . . . . . . . . . . 27
10 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 27
11 PARTIES IN INTEREST; PARTICIPATIONS . . . . . . . . . . . . . . . 27
12 NOTICES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
14 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
15 ENTIRE AGREEMENT, ETC.. . . . . . . . . . . . . . . . . . . . . . 29
16 CONSENTS, AMENDMENTS, WAIVERS, ETC. . . . . . . . . . . . . . . . 29
17 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . 29
18 SUBMISSION TO JURISDICTION. . . . . . . . . . . . . . . . . . . . 29
-ii-
<PAGE>
Section Description Page
- ------- ----------- ----
19 JUDGMENT CURRENCY . . . . . . . . . . . . . . . . . . . . . . . . 30
20 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . 30
21 OBLIGATIONS SEVERAL . . . . . . . . . . . . . . . . . . . . . . . 30
22 ACKNOWLEDGMENT OF TRUSTS. . . . . . . . . . . . . . . . . . . . . 30
SCHEDULES AND EXHIBITS
Schedule I Schedule of Borrowers and Portfolios
Schedule II Limitations on Borrowing and Pledging Assets
Schedule III Wiring Instructions
Schedule IV Issuers 10% or More of Whose Outstanding Voting
Securities are Owned or Controlled by the Borrowers
Schedule V Persons Holding 5% or More of the Borrowers'
Outstanding Voting Securities
Exhibit A Loan Request
Exhibit B Form of Pledge Demand
Exhibit C-1 Opinion of Outside Counsel
Exhibit C-2 Investment Adviser Officer's Certificate
Certificate of Secretary
-iii-
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of December 3, 1996, by and among each of the
management investment companies listed on SCHEDULE I hereto, acting either for
itself or on behalf of the portfolios indicated on said Schedule (each, a
"PORTFOLIO"), as said Schedule may from time to time be modified or amended
(each of such management investment companies in such individual or
representative capacity being hereafter referred to as a "BORROWER" and
collectively as the "BORROWERS") and THE FIRST NATIONAL BANK OF BOSTON, a
national banking association with its head office at 100 Federal Street, Boston,
Massachusetts 02110 (the "BANK").
WHEREAS, each of the Borrowers is authorized to borrow money for its own
temporary or emergency purposes, or the temporary or emergency purposes of any
of its Portfolios, and certain of the Borrowers are authorized to borrow money
to leverage their investment portfolios; and
WHEREAS, each of the Borrowers desires to enter into this Agreement so that
it may borrow funds from the Bank from time to time for such purposes; and
WHEREAS, the Bank is willing to advance funds to the Borrowers for their
own accounts or for the accounts of any of their Portfolios from time to time on
a demand, discretionary basis on the terms and subject to the conditions set
forth below;
NOW, THEREFORE, in consideration of the mutual promises and agreements of
the parties set forth herein, the parties hereto agree as follows:
Section 1. DEFINITIONS; INTERPRETATION.
Section 1.1. DEFINITIONS. As used herein, the following terms shall have
meanings assigned to them below:
ADJUSTED EURODOLLAR RATE. Applicable to any Interest Period, shall mean a
rate per annum determined pursuant to the following formula:
Adjusted Eurodollar Rate = [London Interbank Offered Rate]*
---------------------------------
[ 1.00 - Reserve Percentage]
*The amount in brackets shall be rounded upwards, if necessary, to the
next higher 1/100 of 1%.
Where:
"LONDON INTERBANK OFFERED RATE" applicable to any Eurodollar Loan for
any Interest Period means the rate of interest determined by the Bank to be the
prevailing rate per annum at which deposits in U.S. dollars are offered to
the Bank
<PAGE>
-2-
by first-class banks in the London interbank Eurodollar market on or
about 11:00 a.m. (London time) two Business Days before the first day
of such Interest Period in an amount approximately equal to the
principal amount of the Eurodollar Loan to which such Interest Period
is to apply for a period of time approximately equal to such Interest
Period.
"RESERVE PERCENTAGE" applicable to any Interest Period means the
rate (expressed as a decimal) applicable to the Bank during such
Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for determining the
maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency or marginal reserve requirement) of the Bank
with respect to "Eurocurrency liabilities" as that term is defined
under such regulations.
The Adjusted Eurodollar Rate shall be adjusted automatically as of the effective
date of any change in the Reserve Percentage.
AFFILIATED PERSON. As defined in the 1940 Act and the rules and
regulations promulgated thereunder.
AGREEMENT. This Credit Agreement as originally executed, or if amended or
supplemented from time to time, as so amended or supplemented. References to
the Agreement shall mean and include references to each of the Exhibits and
Schedules hereto.
BANK. As defined in the preamble hereof.
BASE RATE. The greater of (i) the annual rate of interest announced from
time to time by the Bank at its Head Office as its "Base Rate", and (ii) the
Federal Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if
necessary, to the next 1/8 of 1%).
BASE RATE LOAN. A Loan that bears interest at the Base Rate.
BORROWER and BORROWERS. As defined in the preamble hereof.
BORROWING DATE. The date on which any Loan is made or is to be made
hereunder.
BUSINESS DAY. (i) For all purposes other than as covered by clause (ii)
below, any day other than a Saturday, Sunday or legal holiday on which banks in
Boston, Massachusetts or New York, New York are open for the conduct of a
substantial part of their commercial banking business; and (ii) with respect to
all notices and determinations in connection with, and payments of principal and
interest on, Eurodollar Loans, any day that is a Business Day described in
clause (i) and that is also a day for trading by and between banks in U.S.
Dollar deposits in the London interbank Eurodollar market.
<PAGE>
-3-
COLLATERAL AGENCY AGREEMENT. A Collateral Agency Agreement, in form and
substance satisfactory to the Bank among a Borrower, the Bank and such
Borrower's Custodian, delivered to the Bank in connection with the pledge by
such Borrower of Pledged Securities, to be delivered to the Bank with respect to
the Pledged Securities of such Borrower after any demand therefor, as
contemplated in Section 2.13.
CUSTODIAN. State Street Bank and Trust Company, or such other entity that
acts as a Borrower's custodian for purposes of Section 17(f) of the 1940 Act or,
if a Borrower has more than one custodian for the assets of its Portfolios, the
entity that acts as custodian for the assets of a Portfolio.
DEFAULT. As defined in Section 6.1 hereof.
EURODOLLAR LOAN. Any Loan bearing interest at a rate determined with
reference to the Adjusted Eurodollar Rate.
EVENT OF DEFAULT. As defined in Section 6.1 hereof.
FEDERAL FUNDS EFFECTIVE RATE. For any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal Funds
transactions with members of the Federal Reserve System arranged by Federal
Funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business Day,
the average of the quotations for such day on such transactions received by
the Bank from three Federal Funds brokers of recognized standing selected by
the Bank.
HEAD OFFICE. The head office of the Bank, which at present is located at
100 Federal Street, Boston, Massachusetts 02110.
INDEBTEDNESS. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as indebtedness, or to which reference should
be made by footnotes thereto, including, without limitation, in any event and
whether or not so classified: (i) all debt for money borrowed and similar
extensions of credit, whether direct or indirect; (ii) all liabilities secured
by any mortgage, pledge, security interest, then, charge, or other encumbrance
existing on property owned or acquired subject thereto, whether or not the
liability secured thereby shall have been assumed; and (iii) all guaranties,
endorsements and other contingent obligations, whether direct or indirect, in
respect of Indebtedness of others, including any obligation to supply funds to
or in any manner to invest in, directly, or indirectly, the debtor, to purchase
Indebtedness, or to assure the owner of Indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the purpose of enabling
the debtor to make payment of the Indebtedness held by such owner or otherwise,
and the obligations to reimburse the issuer of any letters of credit.
<PAGE>
-4-
INTEREST PERIOD. (a) With respect to each Eurodollar Loan, the period
commencing on the date of the making or continuation of or conversion to such
Eurodollar Loan and ending seven, 14 or 30 days thereafter, as any Borrower may
elect in the applicable Loan Request delivered pursuant to Section 2.2(a), or
continuation notice delivered pursuant to Section 2.5(b); PROVIDED that:
(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iii) below) that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in which case
such Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (iii) below, end on the last Business Day of a calendar
month;
(iii) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date; and
(iv) notwithstanding clause (iii) above, no Interest Period shall
have a duration of less than seven days; and if any Interest Period
applicable to such Loan would be for a shorter period, such Interest
Period shall not be available hereunder; and
(v) no Interest Period applicable to a Eurodollar Loan made to a
Borrower for its own account or for the account of a Portfolio that in
either case is a open end fund may exceed seven days.
(b) With respect to each Money Market Loan, the period commencing on the
date of the making of such Money Market Loan and ending one to 30 days
thereafter, as such Borrower may elect in the applicable Loan Request delivered
pursuant to Section 2.2(a), PROVIDED that:
(i) any Interest Period (other than an Interest Period determined
pursuant to clause (ii) below) that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day;
and
(ii) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date.
INVESTMENT ADVISER. Chancellor LGT Asset Management, Inc., a California
corporation.
LOAN OR LOANS. As defined in Section 2.1 hereof.
<PAGE>
-5-
LOAN ACCOUNT. As defined in Section 2.3 hereof.
LOAN DOCUMENTS. This Agreement and all instruments, agreements and
documents required to be executed and/or delivered by the Borrower in
connection with the transactions contemplated hereby or thereby.
LOAN REQUEST. As defined in Section 2.2(a) hereof.
MARGIN STOCK. As defined in Regulation U.
MAXIMUM AMOUNT. With respect to each Borrower or, if applicable, each
Portfolio, and at the relevant time of reference thereto, an amount equal to
the lesser of the following:
(i) until the Termination Date, $100,000,000, or
(ii) at all times, and when added to all other indebtedness of such
Borrower incurred for its own account or on behalf of each such Portfolio,
as applicable, then outstanding, 33-1/3% of the value of the net assets
(total assets less all liabilities other than liabilities for borrowed
money) of such Borrower or each such Portfolio at such time, or
(iii) the maximum amount such Borrower is permitted to borrow for
its own account or on behalf of any such Portfolio, as applicable, at such
time under (a) applicable federal or state laws, statutes and regulations,
including without limitation the asset coverage requirements of Section
18(a)(1) of the 1940 Act, (b) agreements (whether or not having the force
of law) entered into by such Borrower with respect to itself or any such
Portfolio, as applicable, with federal, state, local or foreign
governmental agencies, authorities or regulators, as more particularly
described in Part 1 of SCHEDULE II hereto, as amended and in effect from
time to time, and (c) limitations on borrowing adopted by such Borrower
with respect to itself or any such Portfolio, as applicable, and described
in its Registration Statement, Prospectus or Statement of Additional
Information, if applicable, or elsewhere, as more particularly described in
Part 2 of SCHEDULE II hereto, as amended and in effect from time to time.
Although it will be within the discretion of the Bank whether it makes Loans
under this Agreement, each Borrower understands that the Bank may use the
Maximum Amount as a ceiling on Loans.
MONEY MARKET LOANS. Loans bearing interest at a Money Market Rate.
MONEY MARKET RATE. The rate quoted by the Bank in its sole discretion (it
being understood that the Bank is under no obligation to quote such rate) to a
Borrower as the
<PAGE>
-6-
fixed rate of interest at which it is willing to make a "money market" loan to
such Borrower or to a Portfolio of such Borrower in the amount and for the
period of the requested Loan.
1940 ACT. The Investment Company Act of 1940, as amended.
OBLIGATIONS. All obligations of the Borrowers to the Bank hereunder and
under the other Loan Documents of every kind and description, direct or
indirect, absolute or contingent, primary or secondary, due or to become due,
now exiting or hereafter arising, regardless of how they arise or by what
agreement or instrument, if any, and including obligations to perform acts and
refrain from taking action as well as obligations to pay money.
PLEDGE AGREEMENT. A Pledge Agreement, in form and substance satisfactory
to the Bank, executed by a Borrower for the benefit of the Bank and to be
delivered to the Bank with respect to the Pledged Securities of such Borrower
after any demand therefor, as contemplated in Section 2.13 hereof.
PLEDGE DEMAND. A Pledge Demand substantially in the form of EXHIBIT B
hereto, pursuant to which the Bank will demand the pledge of Pledged Securities
of a Borrower as a condition precedent to making Loans to such Borrower, as
contemplated in Section 2.13 hereof.
PLEDGED SECURITIES. The stock or other portfolio securities pledged to the
Bank pursuant to the Pledge Agreements and Section 2.13 of this Agreement.
PORTFOLIO. As defined in the preamble hereof.
PROSPECTUS. The Prospectus required to be delivered by each Borrower and
each Portfolio to offerees of its securities pursuant to the Securities Act of
1933, as amended from time to time.
REGISTRATION STATEMENT. The most recent Registration Statement on Form N-2
or Form N-1A, as applicable, filed by each Borrower on its own behalf or on
behalf of its Portfolios with, and declared effective by, the Securities and
Exchange Commission and amended from time to time, pursuant to the 1940 Act.
REGULATION U. Regulation U promulgated by the Board of Governors of the
Federal Reserve System, as in effect from time to time.
REGULATION X. Regulation X promulgated by the Board of Governors of the
Federal Reserve System, as in effect from time to time.
STATEMENT OF ADDITIONAL INFORMATION. The Statement of Additional
Information that must be provided by each Borrower and each Portfolio to
recipients of its Prospectus upon request, pursuant in the rules and regulations
of the Securities and Exchange Commission.
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TERMINATION DATE. The date on which the Bank in its discretion shall have
terminated the credit facility provided for in this Agreement and made demand
for the repayment of all amounts then outstanding hereunder.
TOTAL ASSETS. As determined for each Borrower, all assets of such Borrower
classified as such on the most recent statement of assets and liabilities of
such Borrower furnished to the Bank pursuant to Section 5.8 hereof.
Section 1.2. INTERPRETATION. All terms of an accounting character not
specifically defined herein shall have the meanings assigned thereto by
generally accepted accounting principles in the United States of America, unless
the context otherwise requires. Each reference herein to a particular person or
entity (including, without limitation, the Bank) shall include a reference to
the successors and permitted assigns of such person or entity. The words
"herein", "hereof", "hereunder", and words of like import shall refer to this
Agreement as a whole and not to any particular Section or subdivision of this
Agreement.
Section 2. CREDIT FACILITY.
Section 2.1. CREDIT FACILITY. Subject to the terms and conditions set
forth in this Agreement, the Bank agrees to make revolving loans ("LOANS") to
each Borrower, for its own account or for the account of a Portfolio of such
Borrower, from time to time in the Bank's discretion, on any Business Day during
the period from the date hereof to (but not including) the Termination Date, as
may be requested by any such Borrower. Each Loan shall be in the principal
amount stated in the applicable Loan Request, and shall be in a minimum amount
of at least $1,000,000 and an integral multiple of $100,000 (or the balance of
the applicable unborrowed Maximum Amount); PROVIDED that (i) at no time shall
the aggregate outstanding principal amount of all Loans made to any Borrower for
its own account or for the account of any Portfolio exceed the Maximum Amount
applicable to such Borrower or Portfolio; (ii) at the time of such Loan, and
after giving effect thereto, the aggregate principal amount of all outstanding
Loans to such Borrower shall not exceed 50% of the current market value of Total
Assets of such Borrower; and (iii) at no time shall the aggregate outstanding
principal amount of all Loans to all Borrowers exceed $100,000,000. Within the
limits of the provisions of this Section 2.1, each Borrower may borrow, pay or
prepay, pursuant to Section 2.7 and reborrow under this Section 2. 1.
Section 2.2. NOTICE AND MANNER OF BORROWING. All Loans shall be
requested and funded in accordance with the procedures set forth below:
(a) LOAN REQUESTS. Each request by a Borrower for a Loan hereunder shall
be made by telephonic notice to the Bank (a "LOAN REQUEST") prior to 3:00 p.m.,
Boston time, on the Borrowing Date in the case of Base Rate Loans or Money
Market Loans, and three Business Days prior to the Borrowing Date in the case
of Eurodollar Loans. Each Loan Request shall be irrevocable and shall state (i)
the principal amount of the requested Loan; (ii) the interest rate to be
applicable thereto; (iii) in the case of Eurodollar Loans or Money
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Market Loans, the Interest Period requested for such Loan (subject to the
definition of Interest Period); and (iv) in the case of a Loan to a Borrower on
behalf of a Portfolio, the name of Portfolio for which the Loan is being
requested. Each Loan Request shall also state the maximum amount such Borrower
is then permitted to borrow hereunder, for its own account or for the account of
the relevant Portfolio, as applicable, determined in accordance with the
definition of Maximum Amount. Each Loan Request shall be made by a duly
authorized representative of such Borrower, as specified by such Borrower in
writing from time to time, and the Bank may rely upon any telephone request that
it reasonably believes is made by such a representative. Each Loan Request
shall promptly be followed by a written confirmation thereof, substantially in
the form of EXHIBIT A hereto, PROVIDED that if such written confirmation differs
in any material respect from the action of the Bank taken in good faith reliance
upon such telephone request, the records of the Bank shall control absent
manifest error.
Each Loan Request made by a Borrower shall constitute a representation and
warranty by such Borrower to the Bank that (i) the Loan requested thereby is
permitted under the Prospectus, Registration Statement and, if applicable,
Statement of Additional Information of such Borrower or the applicable Portfolio
of such Borrower; (ii) such Loan will not, when made, cause the aggregate
outstanding principal amount of all Loans of all Borrowers hereunder to exceed
$100,000,000; (iii) such Loan will not, when made, cause the aggregate principal
amount of all outstanding Loans to such Borrower to exceed 50% of the current
market value of Total Assets of such Borrower on the Borrowing Date; (iv) the
proceeds of such Loan will be applied by such Borrower for its own purposes or
for the purposes of the applicable Portfolio only in accordance with the
provisions of Section 2.11 hereof; and (v) all of the representations and
warranties of such Borrower contained in Section 4 hereof are true and correct
on and as of the date of such Loan Request and the date of such Loan as though
made on and as of such dates.
(b) FUNDING THE LOANS. If, upon receipt of a Loan Request in accordance
with Section 2.2(a) hereof, the Bank is willing, in its discretion, to make a
Loan to the requesting Borrower for its own account or for the account of a
Portfolio of such Borrower, the Bank shall make such Loan by depositing or
wiring the proceeds thereof, on the same day in immediately available funds and
at the applicable Borrower's expense, to an account maintained on behalf of such
Borrower or Portfolio by the Custodian of such Borrower or Portfolio in
accordance with the wiring instructions set forth in SCHEDULE III
hereto, as amended by such Borrower and in effect from time to time.
Section 2.3. LOAN ACCOUNT. The Bank will maintain a separate account on
its books for each Borrower and each Portfolio (each a "LOAN ACCOUNT") on which
win be recorded, in accordance with the Bank's customary accounting practice,
(a) all Loans made by the Bank to such Borrower for its own account or for the
account of each such Portfolio, (b) all payments on such Loans made by such
Borrower for its own account or for the account of each such Portfolio to the
Bank, and (c) all other charges and expenses properly chargeable to such
Borrower for its own account or for the account of each such Portfolio
hereunder. The debit balance of each Loan Account shall reflect the amount of
the
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applicable Borrower's indebtedness incurred for its own account or the
account of its Portfolios from time to time to the Bank hereunder and, in the
absence of manifest error, shall constitute conclusive evidence of such
indebtedness.
Section 2.4. REPAYMENT OF LOANS. Each Loan made hereunder shall be
payable on demand or upon the termination of the credit facility PROVIDED
hereunder, as contemplated by Section 2.12; provided that if demand is not
earlier made, each Base Rate Loan made to a Borrower that is an open-end fund
shall mature and the principal amount thereof become due and payable in full on
the seventh day following the date of the making of such Base Rate Loan, and
each Eurodollar Loan and Money Market Loan shall mature and the principal
amount thereof become due and payable on the last day of the applicable
Interest Period. Only the relevant Borrower or the assets of the relevant
Portfolio, as applicable, shall be liable for the due and punctual payment of
the principal amount of the Loans made to such Borrower for its own account or
the account of such Portfolio, respectively, together with interest accrued
thereon and any other amounts payable with respect thereto.
Section 2.5. INTEREST.
(a) INTEREST RATE ON LOANS. Except as otherwise provided in Section
2.5(d) below, the outstanding principal amount of each Loan to a Borrower shall
bear interest until maturity at (i) the Base Rate, (ii) the Adjusted Eurodollar
Rate plus 1-1/4%, or (iii) the applicable Money Market Rate as selected by the
applicable Borrower from time to time in the applicable Loan Request. Interest
accrued on each Base Rate Loan shall be paid by the applicable Borrower on the
last day of each month and upon demand by the Bank for repayment of such Loan.
Interest accrued on each Eurodollar Loan or Money Market Loan shall be paid on
the last day of the Interest Period applicable thereto and upon demand by the
Bank for repayment of such Loan.
(b) DURATION OF INTEREST PERIODS. Subject to the provisions of the
definition of Interest Period, the duration of each Interest Period applicable
to a Eurodollar Loan or Money Market Loan shall be as specified in the
applicable Loan Request delivered pursuant to Section 2.2(a). The applicable
Borrower shall have the option to elect a subsequent Interest Period to be
applicable to a Eurodollar Loan or a Money Market Loan (if the Bank in its
discretion is then willing to make a Money Market Loan to such Borrower for its
own account or for the account of a Portfolio) by giving notice of such election
to the Bank received no later than 10:00 a.m. Boston time three Business Days
before the end of the then applicable Interest Period.
If the Bank does not receive a notice of election of duration of an
Interest Period for a Eurodollar Loan within the applicable time limits
specified therein, or if, when such notice must be given, the Bank shall not
then be willing, in its sole discretion, to continue such Loan or a Default or
Event of Default then exists, the applicable Borrower shall be deemed to have
elected to convert such Loan in whole into a Base Rate Loan on the last day of
the then current Interest Period with respect thereto.
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Notwithstanding the foregoing, no Borrower may select an Interest Period to
be applicable to a Loan that would end, but for the provisions of the definition
of Interest Period, after the Termination Date.
(c) OVERDUE PRINCIPAL AND INTEREST. Overdue principal and (to the extent
permitted by applicable law) interest on each Loan and all other overdue amounts
payable hereunder shall bear interest compounded monthly and payable on demand
at a rate per annum equal to two percent above the greater of (i) the interest
rate then in effect for such Loan and (ii) the Base Rate, until such amount
shall be paid in full (whether before or after judgment).
(d) LIMITATION ON INTEREST. No provision of this Agreement shall require
the payment or permit the collection of interest in excess of the rate then
permitted by applicable law.
Section 2.6. PLACE AND MODE OF PAYMENTS; COMPUTATIONS.
(a) Each payment made or caused to be made by a Borrower to the Bank under
this Agreement shall be made directly to the Bank in United States Dollars at
the Bank's Head Office ABA #011-000-390 Attention: Valerie Hughes, Commercial
Loan Services, not later than 2:00 p.m., Boston time, on the due date of each
such payment, and in immediately available and freely transferable funds.
(b) If any sum would, but for the provisions of this subsection (b),
become due and payable to the Bank by any Borrower on any day that is not a
Business Day, then such sum shall become due and payable on the next succeeding
Business Day, and interest payable to the Bank under this Agreement shall be
adjusted by the Bank accordingly.
(c) All computations of interest and fees hereunder shall be made by the
Bank on the basis of a 360-day year and paid for the actual number of days
elapsed.
(d) The Bank will determine the Base Rate in effect from time to time.
Any change in the Base Rate shall, for all purposes of this Agreement, become
effective on, and from the beginning of, the day on which such change shall
first be announced or determined by the Bank in accordance with the Bank's
customary banking practices.
(e) Each payment by a Borrower under this Agreement shall be made without
set-off or counterclaim and free and clear of and without deduction or
withholding of any kind.
Section 2.7. OPTIONAL PREPAYMENTS; CERTAIN MANDATORY PREPAYMENTS.
(a) Each Borrower shall have the right at any time to repay any Base Rate
Loans, in whole or in part, upon telephonic notice to the Bank of its intention
to repay such
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Loan prior to 3:00 p.m., Boston time, on the date such prepayment is to be made;
PROVIDED, HOWEVER, that each such prepayment (except a prepayment in full) shall
be made in an amount of $100,000 or an integral multiple thereof. Except as
otherwise provided herein, Eurodollar Loans may only be prepaid on the last day
of the applicable Interest Period, and no Money Market Loans may be prepaid.
(b) If at any time the aggregate unpaid principal amount of all Loans to
all Borrowers exceeds $100,000,000, the Borrower whose Loan caused such excess
agrees to immediately prepay the amount of such excess, together with any
amounts payable pursuant to Section 2.10 hereof.
(c) If at any time the aggregate unpaid principal amount of Loans made to
any Borrower for its own account or for the account of a Portfolio shall exceed
the Maximum Amount applicable to such Borrower or Portfolio, such Borrower
agrees to immediately prepay the amount of such excess, together with any
amounts payable pursuant to Section 2.10 hereof.
(d) If at any time the sale or disposition of any assets of any Borrower
would cause the aggregate unpaid principal amount of Loans to such Borrower to
exceed 50% of the current market value of Total Assets of such Borrower, such
Borrower shall immediately prepay such excess portion of the Loans to such
Borrower.
(e) Upon each repayment or prepayment of any principal of any Loan
pursuant to any of the provisions of this Agreement, the applicable Borrower
hereby absolutely and unconditionally promises to pay to the Bank, and there
shall become absolutely due and payable on the date of each such repayment or
prepayment, all of the unpaid interest accrued to such date on the amount of the
principal of the Loans being repaid or prepaid by such Borrower on such date.
Whenever any interest on and any principal of the Loans are paid simultaneously
hereunder, the whole amount paid shall be applied first to interest then due and
payable.
2.8. CHANGED CIRCUMSTANCES.
(a) In the event that:
(i) on any date on which the Adjusted Eurodollar Rate would otherwise
be set the Bank shall have determined in good faith (which determination
shall be final and conclusive) that adequate and fair means do not exist
for ascertaining the London Interbank Offered Rate, or
(ii) at any time the Bank shall have determined in good faith
(which determination shall be final and conclusive) that:
(A) the making or continuation of or conversion of any Loan to a
Eurodollar Loan has been made impracticable or unlawful by (1) the
occurrence of a
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contingency that materially and adversely affects the London interbank
Eurodollar market or (2) compliance by the Bank in good faith with any
applicable law or governmental regulation, guideline or order or
interpretation or change thereof by any governmental authority charged with
the interpretation or administration thereof or with any request or
directive of any such governmental authority (whether or not having the
force of law); or
(B) the Adjusted Eurodollar Rate shall no longer represent the
effective cost to the Bank for U.S. dollar deposits in the London interbank
market;
then, and in any such event, the Bank shall forthwith so notify each Borrower
thereof. Until the Bank notifies the Borrowers that the circumstances giving
rise to such notice no longer apply, the obligation of the Bank to allow
selection by the Borrowers of Eurodollar Loans shall be suspended. If at the
time the Bank so notifies each Borrower, a Borrower has previously given the
Bank a Loan Request with respect to one or more Eurodollar Loans but such Loans
have not yet gone into effect, such Loan Request shall be deemed to be void and,
if the Bank in its discretion continues to be willing to lend to such Borrower,
such Borrower may borrow Loans of a non-affected type by delivering a substitute
Loan Request pursuant to Section 2.2(a) hereof.
Upon such date as shall be specified in such notice (which shall not be
earlier than the date such notice is given) each Borrower shall, with respect to
the outstanding Eurodollar Loans, prepay the same, together with interest
thereon and any amounts required to be paid pursuant to Section 2.10, and may
borrow Loans of another type in accordance with Section 2.1 hereof by delivering
substitute Loan Requests pursuant to Section 2.2(a) hereof.
(b) In case any change in law, regulation, treaty or official directive or
the interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):
(i) subjects the Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by any
Borrower or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of the Bank imposed by the
United States of America or any political subdivision thereof), or
(ii) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, the Bank (other than such
requirements as are already included in the determination of the Adjusted
Eurodollar Rate), or
(iii) imposes upon the Bank any other condition with respect to
its performance under this Agreement,
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and the result of any of the foregoing is to increase the cost to the Bank,
reduce the income receivable by the Bank or impose any expense upon the Bank
with respect to any Loans, the Bank shall notify each Borrower thereof. The
applicable Borrower(s) agree(s) to pay to the Bank the amount of such increase
in cost, reduction in income or additional expense attributable to such Loan or
Loans as and when such cost, reduction or expense is incurred or determined,
upon presentation by the Bank of a statement in the amount and setting forth the
Bank's calculation thereof, which statement shall be deemed true and correct
absent manifest error.
Section 2.9. INCREASED CAPITAL REQUIREMENTS. If any law or any
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) or the interpretation thereof by a court or
governmental authority with appropriate jurisdiction affects the amount of
capital required to be maintained by the Bank or any corporation controlling
the Bank and the Bank determines that the amount of capital required is
increased by or based upon the existence of the credit facilities established
hereunder or any Loans made pursuant hereto, and such increase has or would
have the effect of reducing the return on the Bank's equity to a level below
that which the Bank could have achieved (taking into consideration the Bank's
then existing policies with respect to capital adequacy and assuming the full
utilization of the Bank's capital) but for such law, rule, regulation, policy,
guideline or directive, then the Bank shall notify each Borrower in writing of
such fact. To the extent such reduction is attributable to any specific Loan
or Loans, the applicable Borrower(s) agree(s) to pay to the Bank, the amount of
such reduction attributable to such Loan or Loans as and when such reduction is
determined, upon presentation by the Bank of a statement in the amount and
setting forth the Bank's calculation thereof, which statement shall be deemed
true and correct absent manifest error. To the extent such reduction is not
so attributable to any Loan or Loans, each Borrower agrees to pay, in the
proportion that such Borrower's net assets as of the date of such statement
bears to the net assets of all Borrowers as of such date, the amount of such
reduction, determined and paid as aforesaid. In determining such amount, the
Bank may use any reasonable averaging and attribution methods. In this
connection, the Bank shall allocate such costs among its customers in good
faith and on an equitable basis.
Section 2.10. FUNDING LOSSES. If a Borrower for any reason makes any
payment of principal with respect to a Eurodollar Loan or Money Market Loan
on any date other than the scheduled maturity thereof (other than a payment
occasioned by the Bank's demand therefor pursuant to Section 2.4 or 2.12
hereof), or fails to borrow or continue a Eurodollar Loan or Money Market Loan
after giving a Loan Request or continuation notice therefor, such Borrower shall
reimburse the Bank for any resulting loss or expense incurred by the Bank,
including without limitation any loss reasonably incurred in obtaining,
liquidating or employing of deposits from third parties. Such Borrower shall pay
the amount of such loss or expense upon presentation of a statement in the
amount thereof and setting forth the Bank's calculation thereof, which statement
shall be deemed true and correct absent manifest error.
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Section 2.11. USE OF PROCEEDS. The proceeds of the Loans shall be used by
the applicable Borrower to meet requests for funds from such Borrower for its
own account or for the account of a Portfolio of such Borrower for temporary or
emergency purposes, as specified in the Prospectus and/or Statement of
Additional Information of such Borrower or Portfolio. If then permitted by the
Prospectus and/or Statement of Additional Information of a Borrower or a
Portfolio of such Borrower, the proceeds of the Loans may also be used by the
applicable Borrower to leverage the investment portfolio of such Borrower or of
a Portfolio of such Borrower. No portion of any Loan made to a Borrower that is
to be used for the "purpose of purchasing or carrying" any Margin Stock, as such
terms are defined in Regulations U and X, shall be used in violation of such
Regulations.
Section 2.12. DISCRETIONARY DEMAND FACILITY. It is acknowledged and
agreed by each Borrower that the Bank has no obligation to make any Loan
hereunder, and that the decision whether or not to make any Loan requested by
any Borrower is within the sole and exclusive discretion of the Bank. The Bank
may terminate the credit facilities provided for herein either in whole or in
part with respect to one or more Borrowers or one or more Portfolios of the
Borrowers at any time by written notice to the affected Borrower(s).
Section 2.13. COLLATERAL SECURITY FOR LOANS. As a condition precedent to
making any Loan or continuing any Loan made hereunder, if any Borrower shall
then have outstanding any secured Indebtedness with any other creditor (other
than Indebtedness consisting of investments purchased by a Borrower in
accordance with its Prospectus for which assets are segregated or cover is
maintained in accordance with the 1940 Act), the Bank may require, by written
notice to such Borrower substantially in the form attached hereto as EXHIBIT B
(a "PLEDGE DEMAND") that such Borrower pledge certain of its portfolio
securities and other assets, to be determined at the time of such notice (its
"PLEDGED SECURITIES") as collateral for such Loan. The minimum market value of
the stock and other portfolio securities of any Borrower required to be pledged
to the Bank hereunder with respect to any Loan to such Borrower shall be
determined by the Bank in its discretion and stated in the Pledge Demand for
such Loan. Upon demand by the Bank, the applicable Borrower shall forthwith
grant to the Bank a security interest in the Pledged Securities and deliver
to the Bank a Pledge Agreement with respect to such Pledged Securities, a
Collateral Agency Agreement among such Borrower, the Bank and the Custodian for
such Pledged Securities, and instruct the Custodian to take any action necessary
under the Collateral Agency Agreement as the Bank may require to realize the
full benefits of this Section 2.13 and the security interest described herein.
Section 3. CONDITIONS PRECEDENT.
Section 3.1. CONDITIONS OF CLOSING. This Agreement shall become
effective upon the receipt by the Bank of the following:
(a) executed original counterparts of this Agreement, signed by the Bank
and each Borrower;
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(b) certified copies of the charter documents and bylaws of each Borrower
and all amendments thereto;
(c) certified copies of all documents relating to the due authorization
and execution by each Borrower of this Agreement and the other Loan Documents as
the Bank may reasonably request including, without limitation, all votes of the
Board of Directors of such Borrower authorizing (i) the execution and delivery
by such Borrower of this Agreement and the other Loan Documents, (ii) its
performance of all of its agreements and Obligations under this Agreement and
the other Loan Documents, and (iii) the borrowings and other transactions
contemplated by this Agreement and the other Loan Documents;
(d) an incumbency certificate, dated the date hereof, signed by the
Secretary or Assistant Secretary of each Borrower setting forth the names and
specimen signatures of each individual authorized to give notices, sign or act
on behalf of such Borrower in connection with the transactions contemplated by
this Agreement;
(e) a duly completed and executed Federal Reserve Form U-1, describing all
securities then held by each Borrower, in the form required by such Form U-1;
(f) an opinion of Kirkpatrick & Lockhart LLP, outside counsel to the
Borrowers, substantially in the form of EXHIBIT C-1, and an officer's
certificate from an officer of the Investment Adviser, substantially in the form
of EXHIBIT C-2; and
(g) such other documents as the Bank shall have requested in order to
comply with applicable rules and regulations promulgated by the Federal Reserve
Board and other governmental and regulatory authorities.
Section 3.2. CONDITIONS OF LOANS. The willingness of the Bank in its
discretion to make any loan to a Borrower for its own account or for the account
of a Portfolio on a Borrowing Date shall be subject to the satisfaction, at or
before the time each such Loan is made, of each of the following conditions
precedent (unless and to the extent that satisfaction of such conditions
precedent or any of them is waived pursuant to Section 16 hereof):
(a) the Bank shall have received a Loan Request from the applicable
Borrower, as required by Section 2.2(a);
(b) if the Bank shall have made a Pledge Demand in connection with such
Loan, the Bank shall have received a Pledge Agreement from such Borrower,
together with an opinion of counsel in form and substance satisfactory to the
Bank as to the enforceability of such Pledge Agreement and the security
interests granted therein and confirmation from the applicable Borrower's
Custodian of the segregation of the applicable Pledged Securities for the
benefit of the Bank;
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(c) the representations and warranties contained in Section 4 of this
Agreement and otherwise made by or on behalf of or with respect to such Borrower
or any Portfolio of such Borrower shall (except to the extent that such
representations and warranties relate expressly to a specific date, and except
to the extent of changes resulting from the transactions contemplated or
permitted by this Agreement and changes occurring in the ordinary course of
business that, singly or in the aggregate, do not materially adversely affect
such Borrower or such Portfolio or its business, assets, operations, prospects
or its condition (financial or otherwise)), be true and correct at and as of
such Borrowing Date;
(d) there shall exist no Default or Event of Default upon the making of
such Loan;
(e) the Bank shall be satisfied that there has been no material adverse
change (i) in the business, assets, operations, prospects or condition
(financial or otherwise) of such Borrower or Portfolio since the date of the
most recent financial statements of such Borrower or Portfolio referred to in
Section 4.9, or (ii) in the political or economic conditions prevailing in the
countries of origin of the issuers of the portfolio securities of such Borrower
or Portfolio; and
(f) the making of such Loan shall not contravene any law, regulation,
decree or order binding on such Borrower or the Bank, and the Bank shall have
received all such certificates and documents in relation thereto as the Bank or
the Bank's counsel shall have reasonably requested.
Section 4. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers
represents and warrants to the Bank that:
Section 4.1. ORGANIZATION, QUALIFICATION, ETC. Such Borrower is duly
organized and validly existing as a corporation or business trust under the laws
of its jurisdiction of incorporation and each Borrower is duly qualified to do
business in each other jurisdiction wherein the nature of its properties or its
business requires such qualification and in which the failure to be so qualified
could materially adversely affect the business, assets or condition (financial
or otherwise) of such Borrower or any Portfolio of such Borrower.
Section 4.2. REGISTRATION UNDER APPLICABLE LAW. Such Borrower is
registered as a closed- or open-end management investment company under the 1940
Act.
Section 4.3. AUTHORIZATION, ETC. The execution, delivery and performance
by such Borrower of this Agreement and the borrowing of Loans for its account or
for the accounts of any of its Portfolios are within the powers of such
Borrower, have been duly authorized by all necessary and proper action on the
part of such Borrower, and do not and will not (i) violate or contravene any
provision of such Borrower's charter documents or bylaws, or any amendment
thereof; (ii) violate or contravene any provision of the Prospectus,
Registration Statement or Statement of Additional Information, if applicable, of
such Borrower or any of its Portfolios; (iii) conflict with, or result in a
breach of any material term, condition or
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provision of, or constitute a default under or result in the creation of any
mortgage, lien, pledge, charge, security interest or other encumbrance upon any
of the property or assets of such Borrower or Portfolio (other than as
contemplated by this Agreement and the Pledge Agreement, if applicable) under,
any agreement, trust deed, indenture, mortgage or other instrument to which such
Borrower is a party or by which such Borrower or any of its or its Portfolios'
property or assets is bound or affected; or (iv) violate or contravene any
provision of any material law, regulation, order, ruling or interpretation
thereunder or any decree, order or judgment of any court or governmental or
regulatory authority, bureau, agency or official.
Section 4.4. BINDING EFFECT OF AGREEMENT, ETC. This Agreement and all
the provisions hereof constitute the legally valid and binding Obligations of
such Borrower, enforceable against such Borrower in accordance with their terms,
except as enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement of
creditors' rights and except to the extent that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought.
Section 4.5. APPROVALS, ETC. No authorization, approval, consent or
other action by, and no notice to or filing with, any shareholder or creditor of
such Borrower, or governmental or regulatory agency or authority having
jurisdiction over such Borrower, is required to make valid and legally binding
the execution, delivery and performance by such Borrower of this Agreement or
the consummation by such Borrower of the transactions contemplated hereby or
thereby, or the exercise by the Bank of its rights and remedies hereunder or
thereunder.
Section 4.6. COMPLIANCE WITH OTHER INSTRUMENTS. Such Borrower is in
compliance with all investment policies and restrictions applicable to it and
to its Portfolios, if any, identified in its Prospectus, Registration Statement
and Statement of Additional Information, if applicable, and is in compliance
with all investment policies and restrictions applicable to it or its Portfolios
under Section 8(b), Section 13 and all other provisions of the 1940 Act, except
for such noncompliance that could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the business,
operations, assets or financial condition of such Borrower. Such Borrower is
not in violation of any material provision of its charter documents or bylaws,
or any amendment thereof, or in default under any material indenture or
agreement to which it is a party or by which it or any of its property or assets
is bound, or in violation of any material applicable laws or orders,
regulations, rulings, decrees or requirements of any court or governmental or
regulatory agency or authority by which it or any of its property or assets is
bound, which default or violation could have a material adverse effect on the
business, assets, operations, prospects or condition (financial or otherwise) of
such Borrower or any of the Portfolios of such Borrower.
Section 4.7. LITIGATION. There are no pending or, to the best knowledge
of such Borrower, threatened actions, suits, investigations or proceedings at
law or in equity before
<PAGE>
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any federal, state, local or foreign court, governmental or regulatory
authority, agency, commission, board, bureau or instrumentality, or board of
arbitration, against or materially affecting such Borrower or any Portfolio of
such Borrower or materially affecting its right, title and interest in or to any
of its or any such Portfolio's properties or assets.
Section 4.8. TAXES. Such Borrower has made or filed all federal, state,
local, foreign and other tax returns, reports and declarations required by any
jurisdiction to which such Borrower is subject, and has paid all taxes and other
assessments and charges shown or determined to be due on such returns, reports
and declarations or pursuant to any matters raised by audits or for other
reasons known to it, except those being contested in good faith by appropriate
proceedings and as to which there have been set aside reserves adequate with
respect to such tax, assessment or charge so contested. Such Borrower has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. To the best of such Borrower's knowledge, there are no
unpaid taxes claimed to be due by the taxing authority of any jurisdiction, and
such Borrower knows of no basis for any such claim.
Section 4.9. FINANCIAL STATEMENTS; NO MATERIAL CHANGES.
The audited and certified financial reports of each Borrower with respect
to such Borrower or the Portfolios of such Borrower previously furnished to the
Bank, setting forth the investments of such Borrower or its Portfolios, a
statement of assets and liabilities as of the date of such report and a
statement of operations and a statement of changes in net assets of such
Borrower or its Portfolios for the period then ended, are complete and correct
in all material respects, and fairly present the financial condition of such
Borrower or its Portfolios as of such date and the results of the operations of
such Borrower or its Portfolios for the period ended on such date, all in
accordance with generally accepted accounting principles applied on a consistent
basis. Since the date of each of such reports, there has been no change in the
assets, liabilities, business, condition (financial or otherwise) or results of
operations of such Borrower or its Portfolios, that have been, in any case or in
the aggregate, materially adverse.
Section 4.10. NO DEFAULTS. No Default or Event of Default has occurred
and is continuing.
Section 4.11. AFFILIATED PERSONS.
(a) So far as appears from the records of such Borrower, neither the Bank
nor, to the knowledge of such Borrower, any Affiliated Person of the Bank,
individually or in the aggregate, owns, controls or holds with the power to
vote, five percent or more of the outstanding voting securities of such
Borrower or any Portfolio of such Borrower;
(b) neither such Borrower nor, to the knowledge of such Borrower, any
Affiliated Person of such Borrower, directly or indirectly, individually or in
the aggregate, owns,
<PAGE>
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controls or holds with power to vote, either for its own account or for the
account of its Portfolios, five percent or more of the outstanding voting
securities of the Bank or, to the knowledge of such Borrower, any Affiliated
Person of the Bank;
(c) neither such Borrower, for its own account or for the account of any
Portfolio, nor, to the knowledge of such Borrower, any Affiliated Person of such
Borrower or Portfolio, directly or indirectly, individually or in the aggregate,
controls or, to the knowledge of such Borrower, after due inquiry, is controlled
by or under common control with, the Bank or, to the knowledge of such Borrower,
any Affiliated Person of the Bank;
(d) no officer, director or employee of such Borrower or, to the knowledge
of such Borrower, any Affiliated Person of such Borrower or of a Portfolio of
such Borrower is an Affiliated Person of the Bank or, to the knowledge of such
Borrower, any Affiliated Person of the Bank;
(e) except as described in SCHEDULE IV hereto, as amended and in effect
from time to time, such Borrower does not, directly or indirectly, own, control,
or hold with power to vote, either for its own account or for the account of its
Portfolios, ten percent or more of the outstanding voting securities of any
issuer; and
(f) except as described in SCHEDULE V, as amended and in effect from time
to time, to the knowledge of such Borrower, no person, directly or indirectly,
owns, controls or holds with power to vote, five percent or more of the
outstanding voting securities of such Borrower or a Portfolio of such Borrower.
Section 4.12. DISCLOSURE. Neither this Agreement nor any of the other
Loan Documents, nor any of the information concerning such Borrower or any
Portfolio of such Borrower submitted to the Bank in connection herewith or
therewith contains any untrue statement of a material fact or, to the best
knowledge of such Borrower, omits to state a material fact necessary in order
to make the statements contained therein not misleading in light of the
circumstances in which they are made. Except as disclosed herein, in the other
Loan Documents or in the Prospectuses, Registration Statements or Statements of
Additional Information, there is no fact known to such Borrower that materially
adversely affects, or that, in the best judgment of the management of such
Borrower, could in the future materially adversely affect, the assets, business,
prospects, condition (financial or otherwise) or operations of such Borrower or
any Portfolio of such Borrower.
Section 5. COVENANTS. Each Borrower covenants and agrees that, so long
as any amounts are owing with respect to the Loans or otherwise under this
Agreement or under any of the other Loan Documents, or if no such amount is
owing, so long as the Bank shall, in its discretion, be willing to make Loans
hereunder as provided herein, it will comply with the following covenants. EACH
BORROWER ACKNOWLEDGES AND AGREES THAT COMPLIANCE WITH THE FOLLOWING COVENANTS
SHALL IN NO WAY COMPROMISE THE ABSOLUTE DISCRETION OF THE BANK TO ADVANCE FUNDS
UNDER THIS CREDIT FACILITY TO SUCH BORROWER OR MAKE DEMAND
<PAGE>
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AT ANY TIME FOR PAYMENT OF THE OBLIGATIONS OF SUCH BORROWER TO THE BANK.
Section 5.1. USE OF PROCEEDS. Such Borrower shall use the proceeds of
the Loans provided hereunder only for the purposes specified in Section 2.11.
Section 5.2. PUNCTUAL PAYMENT. Such Borrower will duly and punctually
pay or cause to be paid principal and interest and all other sums due from it
under this Agreement in accordance with the terms hereof.
Section 5.3. TAXES, ETC. Such Borrower (a) will file all federal, state,
local, foreign and other tax returns, reports and declarations required by any
jurisdiction to which such Borrower is subject on or before the due dates for
the returns, reports and declarations; and (b) will pay and discharge, before
the same shall become in arrears, all taxes, assessments and other governmental
charges shown or determined to be due on such returns, reports and declarations,
unless, and in any such case, the same is being contested in good faith by
appropriate proceedings and an adequate reserve therefor has been established.
Section 5.4. COMPLIANCE WITH LAW, ETC. Such Borrower will comply in all
material respects with (i) all applicable federal, state and local laws, rules,
regulations and governmental or regulatory directives (whether or not having the
force of law), and all orders, writs, judgments, injunctions, decrees or awards
to which it may be subject; (ii) all of the investment policies and restrictions
set forth in its or its Portfolios' Prospectuses, Registration Statements or
Statements of Additional Information, if applicable, or otherwise; and (iii) the
provisions of its charter documents and bylaws and all agreements and
instruments by which it or any of its property or assets or the property or
assets of any of its Portfolios may be affected or bound.
Section 5.5. COMPLIANCE WITH REGULATIONS U AND X. Such Borrower will, at
any time and from time to time upon receipt of notice from the Bank, and at the
expense of such Borrower, promptly execute and deliver or file all additional
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Bank may reasonably request, in order to fully comply
with the requirements of Regulation U or X.
Section 5.6. NOTICE OF CERTAIN EVENTS. Such Borrower will give the Bank
prompt written notice of:
(a) any change in any federal, state or local law, rule or regulation or
governmental or regulatory directive (whether or not having the force of law)
materially adversely affecting such Borrower or any Portfolio of such Borrower,
or any of the property or assets of such Borrower or any Portfolio of such
Borrower, or affecting such Borrower's ability to repay the Loans and comply
with the terms of this Agreement;
<PAGE>
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(b) any change in any agreements with governmental authorities or
regulators or its investment policies or restrictions that would make any of the
information set forth in SCHEDULE II hereto incorrect, incomplete or misleading
in any material respect, and will prepare and submit to the Bank for attachment
to this Agreement an amendment to SCHEDULE II reflecting such change;
(c) any change in its portfolios or in the ownership of its outstanding
voting securities that would make any of the information set forth in SCHEDULES
IV and V hereto incorrect or incomplete in any material respect, and will
prepare and submit to the Bank for attachment to this Agreement an amendment to
SCHEDULE IV or V, as applicable, reflecting such change;
(d) any material change in its method of business or in its or its
Portfolios' Prospectuses, Registration Statements or Statements of Additional
Information, if applicable (it being understood that any change in the
investment restrictions and limitations on indebtedness applicable to such
Borrower or any Portfolio of such Borrower shall constitute material changes);
(e) any sales or other dispositions of assets by any Borrower that would
cause the limitations on Loans to such Borrower set forth in Section 2.1 to be
breached, such notice to be accompanied by a revised schedule of Total Assets
after giving effect to such sales or other dispositions and any prepayment of
Loans to such Borrower required by Section 2.10(d);
(f) the commencement of any litigation or any administrative, regulatory
or arbitration proceeding or investigation to which such Borrower may hereafter
become a party that may involve any material risk of any material final judgment
or liability not adequately covered by insurance or that may otherwise result in
any material adverse change in the business, assets, operations, prospects or
condition (financial or otherwise) of such Borrower or any Portfolio of such
Borrower;
(g) any incurrence of secured Indebtedness (other than Indebtedness
consisting of investments purchased by a Borrower in accordance with its
Prospectus for which assets are segregated or cover is maintained in accordance
with the 1940 Act); and
(h) the occurrence of any Default or Event of Default.
Section 5.7. TOTAL VALUE OF ASSETS, ETC. Such Borrower will, at any time
and from time to time during normal business hours, notify the Bank by telephone
or in writing, as requested by the Bank, of a listing of the portfolio
securities, the total asset value of such securities and the net asset value of
such securities of such Borrower or any of the Portfolios of such Borrower, and
any changes in any of such values, in each case as most recently calculated.
<PAGE>
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Section 5.8. REPORTS, ADDITIONAL INFORMATION, ETC. Such Borrower will
cause to be furnished to the Bank:
(a) as soon as available, and not later than 90 days after the end of each
fiscal year of such Borrower, the Annual Report(s) of such Borrower for itself
or for its Portfolios, including audited financial statements certified by
Coopers & Lybrand L.L.P. or other independent public accountants of national
standing, setting forth the Schedule of Investments and the Statement of Assets
and Liabilities of such Borrower or Portfolios, each as of the end of such
fiscal year, and including Statements of Operations, Cash Flows and Changes in
Net Assets of such Borrower or Portfolios for the fiscal period then ended;
(b) as soon as available, and not later than 60 days after the end of the
second fiscal quarter of such Borrower, the Semi-Annual Report(s) prepared by
such Borrower for itself or for its Portfolios, its administrator or accounting
agent, setting forth the Schedule of Investments and the Statement of Assets and
Liabilities of such Borrower or Portfolios, each as of the end of such fiscal
quarter, and including Statements of Operations, Cash Flows and Changes in Net
Assets of such Borrower or Portfolios for the fiscal period then ended;
(c) at the same times as such reports are furnished to the shareholders of
such Borrower or Portfolio, any additional reports required by Section 30(d) of
the 1940 Act or any applicable law;
(d) upon request by the Bank, within 10 Business Days after the issuance
thereof, copies of all other regular and periodic reports and any other reports
that such Borrower may be required to file with the Securities and Exchange
Commission or any similar or corresponding governmental commission, department
or agency; and
(e) such other information with respect to the financial standing and
history or the business, property, assets or prospects of such Borrower or any
of the Portfolios of such Borrower as the Bank may, at any time and from time to
time, reasonably request.
Section 5.9. FURTHER ASSURANCES. Such Borrower will, at any time and
from time to time, execute and deliver such additional instruments and take
such further action as the Bank may reasonably request to carry out to the
Bank's satisfaction the transactions contemplated by this Agreement and the
other Loan Documents.
Section 5.10. PROHIBITED AFFILIATIONS. (a) Such Borrower will not,
directly or indirectly, own, control, or hold with power to vote, either for
its own account or for the account of its Portfolios, five percent or more of
the outstanding voting securities of the Bank or any Affiliated Person of the
Bank known to such Borrower to be such an Affiliated Person;
<PAGE>
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(b) such Borrower will use its best efforts to ensure that it will not,
directly or indirectly, control the Bank or any Affiliated Person of the Bank
known to such Borrower to be such an Affiliated Person; and
(c) such Borrower will use its best efforts to ensure that none of its
officers, directors, or employees is or becomes an Affiliated Person of the Bank
or any Affiliated Person of the Bank known to such Borrower to be such an
Affiliated Person.
Section 5.11. NEGATIVE PLEDGE ON ASSETS. Such Borrower will not create or
permit to exist any lien or encumbrance upon any of its property or assets, or
the assets of any of its Portfolios, as applicable, other than (i) liens in
favor of the Bank; (ii) liens incurred in connection with the Indebtedness
permitted by Sections 5.12(b) and 5.12(c); (iii) liens arising from attachments
or similar proceedings, pending litigation, judgments or taxes or assessments,
in any such event whose validity or amount is being contested in good faith by
appropriate proceedings and for which adequate reserves have been established
and are maintained, or liens arising from taxes and assessments which are not
due and delinquent; (iv) banker's liens or rights of offset on deposits held in
banks; and (v) liens of bankers or other securities intermediaries for payment
of securities purchased; PROVIDED that this provision shall not prohibit the
making of any collateral arrangement or the segregation of assets as required by
law in connection with certain portfolio strategies, such as forward contracts,
futures contracts and options.
Section 5.12. LIMITATION ON ADDITIONAL INDEBTEDNESS. Such Borrower will
not incur or permit to exist or remain outstanding, for its own account or for
the account of any of its Portfolios, as applicable, any Indebtedness to any
person or entity; PROVIDED, HOWEVER, that such Borrower may incur or permit to
exist or remain outstanding, for its own account or for the account of any
Portfolio:
(a) Indebtedness to the Bank arising under this Agreement;
(b) short term Indebtedness to State Street Bank and Trust Company under
any line of credit;
(c) Indebtedness in respect of amounts payable to a custodian for any
Borrower or Portfolio in the form of overdrafts or other advances for temporary
or emergency purposes or payments in an aggregate amount not to exceed 5% of the
value of the Fund's or Portfolio's total assets (not including the amount
borrowed);
(d) amounts payable for goods or services provided by any party in the
ordinary course of business;
(e) Indebtedness in respect of taxes, assessments and other governmental
charges to the extent that payment thereof is not at the time required to be
made or is being contested in good faith by appropriate proceedings and for
which an adequate reserve has been established;
<PAGE>
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(f) Indebtedness in respect of judgments or awards which have been in
force for less than the applicable appeal period, so long as execution is not
levied or in respect of which such Borrower shall, at the time in good faith be
prosecuting an appeal or proceedings for review; and
(g) Indebtedness in respect of investments in reverse repurchase
agreements, "roll" transactions and other investments purchased by such Borrower
in accordance with its Prospectus for which assets are segregated or cover is
maintained in accordance with the 1940 Act.
Section 5.13. LIMITATION ON DIVIDENDS. Such Borrower will not declare or
pay any dividend or make any other distribution on any class of its capital
stock or purchase any of such capital stock in violation of the requirements of
Section 18(a)(1)(B) of the 1940 Act or any other applicable law or regulation.
Section 6. EVENTS OF DEFAULT; ACCELERATION.
Section 6.1. EVENTS OF DEFAULT; ACCELERATION. If any of the following
events ("EVENTS OF DEFAULT" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice and/or lapse of time, "DEFAULTS")
shall occur:
(a) if any Borrower shall fail to pay any principal of any Loan
outstanding made to it hereunder for its own account or for the account of a
Portfolio when the same shall become due and payable, whether at the stated date
of maturity or any accelerated date of maturity or at any other date fixed for
payment;
(b) if any Borrower shall fail to pay any interest on any Loan outstanding
made to it for its own account or for the account of a Portfolio when the same
shall become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment, and such
failure shall continue unremedied for three Business Days;
(c) if any Borrower, acting for itself or on behalf of a Portfolio, shall
fail to perform, discharge, observe or comply with any of the terms, covenants
and agreements contained in Section 5.1, 5.6(h), 5.7 or 5.10 through 5.13;
(d) if any Borrower, acting for itself or on behalf of a Portfolio, shall
fail to perform, discharge, observe or comply with any of the terms, covenants
and agreements contained herein (other than those specified in paragraphs (a),
(b) and (c) of this Section 6.1), and such failure shall continue unremedied for
30 days after written notice of such failure has been given to such Borrower by
the Bank;
(e) if any representation or warranty of any Borrower made with respect to
itself or any of its Portfolios contained in this Agreement or any other
document or instrument
<PAGE>
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delivered by such Borrower pursuant to or in connection with this Agreement
shall prove to have been false or misleading in any material respect as of the
time when made or deemed to have been made;
(f) if any Borrower, acting for itself or on behalf of a Portfolio, shall
fail in the performance or the payment, at maturity or within an applicable
period of grace, of any obligation contained in any agreement or instrument
evidencing any other indebtedness with respect to borrowed money or credit
received, or any mortgage, pledge, agreement, indenture or other agreement
relating thereto, for such period of time as would, or would have permitted
(assuming the giving of appropriate notice if required) the holder or holders
thereof or of any obligations issued thereunder to accelerate the maturity
thereof;
(g) if any Borrower makes an assignment for the benefit of creditors, or
admits in writing its inability to pay or generally fails to pay its debts as
they mature or become due, or petitions or applies for the appointment of a
trustee (in bankruptcy) or other custodian, liquidator or receiver of such
Borrower or of any substantial part of the property or assets of such Borrower
or any of its Portfolios, or commences any case or other proceeding relating to
such Borrower under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or takes any action to authorize or in
furtherance of any of the foregoing;
(h) if any such petition or application is filed or any such case or other
proceeding is commenced against such Borrower and such Borrower indicates its
approval thereof consent thereto or acquiescence therein or an order for relief
or appointing any such trustee (in bankruptcy), custodian, liquidator or
receiver is entered adjudicating such Borrower bankrupt or insolvent, or
approving a petition in any such case or other proceeding, and such order
remains unstayed and in effect for more than 60 days, whether or not
consecutive;
(i) if there shall remain in force, undischarged, unsatisfied and
unstayed, for more than 30 days, whether or not consecutive, any final judgment
against such Borrower that, with other outstanding final judgments undischarged
against such Borrower, (i) exceeds, in the aggregate, $1,000,000 or (ii) shall
have a materially adverse effect upon the business, assets, operations,
prospects or condition (financial or otherwise) of such Borrower or any of its
Portfolios; or
(j) if there shall occur a material adverse change in the business,
assets, operations, prospects or condition, financial or otherwise, of such
Borrower or any of its Portfolios; it being acknowledged that a reduction in the
total assets of any Borrower or Portfolio resulting from declines in the market
value of its assets or, in the case of any Portfolios of a Borrower, shareholder
redemptions, shall not constitute a material adverse change so long en the
aggregate amount of the Loans made for such Borrower's account or for the
account of any its Portfolios does not exceed the Maximum Amount applicable to
such Borrower or Portfolios;
<PAGE>
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then and in any such event and without notice or demand by the Bank (i) the
obligation of the Bank to consider, in its discretion, making Loans to the
defaulting Borrower shall terminate, (ii) the Loans of such Borrower, all
interest thereon and all other amounts payable by such Borrower under this
Agreement shall become and be forthwith due and payable without presentment,
demand, protest or notice, all of which are expressly waived by such Borrower.
In case any one or more of the foregoing Events of Default shall have occurred
and be continuing, and whether or not the Bank shall have accelerated the
maturity of the Loans of any Borrower pursuant to the foregoing, the Bank may
proceed to protect and enforce its rights against such Borrower by suit in
equity, action at law and/or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Agreement or
any instrument pursuant to which the Obligations of any Borrower to the Bank
hereunder are evidenced, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of the Bank hereunder and under the Pledge Agreement.
No remedy conferred upon the Bank herein and under the Pledge Agreement is
intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or any other provision
of law.
EACH BORROWER ACKNOWLEDGES AND AGREES THAT INCLUSION OF THE PRECEDING
EVENTS OF DEFAULT AND REMEDIES THEREFOR SHALL IN NO WAY COMPROMISE THE ABSOLUTE
DISCRETION OF THE BANK TO ADVANCE FUNDS UNDER THIS CREDIT FACILITY TO SUCH
BORROWER OR MAKE DEMAND AT ANY TIME FOR PAYMENT OF THE OBLIGATIONS OF SUCH
BORROWER TO THE BANK.
Section 7. SET-OFF. Any deposits, balances or other sums credited by
or due from the Bank to any Borrower hereunder for its own account or for the
account of a Portfolio may be, at any time or from time to time, set-off and
applied by the Bank, in such order as the Bank in its sole discretion may
determine, against the payment of all or any part of the Obligations of such
Borrower hereunder incurred for its own account or for the account of any such
Portfolio then due and payable or thereafter arising. The Bank agrees promptly
to notify, the applicable Borrower of such set-off or application, PROVIDED
that the failure to give such notice shall not affect the validity of such
set-off or application. Nothing herein shall permit the Bank to set off any
deposits, balances or other sums credited by or due from the Bank to any
Portfolio of a Borrower against any Obligations to the Bank of another
Portfolio of such Borrower.
Section 8. EXPENSES. Whether or not the transactions contemplated
hereby are consummated, and to the extent any expense is attributable to any
specific Loan or Loans made to a Borrower, the applicable Borrower(s) agrees
to reimburse the Bank on demand the amount of all reasonable expenses
attributable to such Loan or Loans, including but not limited to reasonable
attorneys' fees and disbursements (and the allocated costs of in-house counsel
for the Bank), incurred or expended in connection with
<PAGE>
-27-
any amendment hereof, or with the enforcement of any Obligations or the
satisfaction of any indebtedness of such Borrower hereunder, or in connection
with any litigation, proceeding or dispute hereunder in any way related to the
Bank's relationship hereunder or under any of the other Loan Documents. To the
extent any such expense is not so attributable to any Loan or Loans, each
Borrower agrees to pay to the Bank, in the proportion that such Borrower's net
assets as of the date of such statement bears to the net assets of all Borrowers
as of such date, the amount of such expense, determined and paid as aforesaid.
Section 9. SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations and warranties made herein and in the other Loan Documents or in
any documents or other papers delivered by, or on behalf of, each Borrower
pursuant hereto or thereto shall be deemed to have been relied upon by the Bank,
notwithstanding any investigation heretofore or hereafter made by it, and shall
survive the making by the Bank of the Loans to such Borrower, as herein
contemplated, and shall continue in full force and effect so long as any amount
due under this Agreement remains outstanding and unpaid or the Bank has any
obligation to make any Loans to such Borrower hereunder. All statements
contained in any certificate, document or other paper delivered by any
authorized person to the Bank at any time by or on behalf of any Borrower
pursuant hereto or in connection with the transactions contemplated hereby
shall constitute representations and warranties by such Borrower hereunder.
Section 10. INDEMNIFICATION. Each Borrower agrees to indemnify and hold
harmless the Bank from and against any and all claims, actions and suits whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out of this Agreement
or any of the other Loan Documents or the transactions evidenced hereby or
thereby; PROVIDED that the Bank shall have no right to be indemnified hereunder
with respect to any such claims, actions, suits, liabilities, losses, damages
and expenses to the extent arising as a result of its own gross negligence,
willful misconduct or bad faith; and PROVIDED, FURTHER that no Borrower
shall be liable for any settlement, compromise or consent to the entry of any
order adjudicating or otherwise disposing of any claim, action, suit, liability,
loss, damage or expense effected without the consent of such Borrower. Should
any claim be made by a person not a party to this Agreement with respect to any
matter to which the foregoing indemnity relates, the Bank shall promptly notify
the applicable Borrower of any such claim, and such Borrower shall have the
right to direct and control the defense of such claim or any litigation based
thereon at its own expense through counsel of its own choosing.
Section 11. PARTIES IN INTEREST; PARTICIPATIONS. All the terms of this
Agreement and the other Loan Documents shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto; PROVIDED that no Borrower may assign or transfer its rights
hereunder or any interest herein without the prior written consent of the Bank.
The Bank may assign or transfer to any other person or entity, all or any part
of, or any interest in, its rights and obligations
<PAGE>
-28-
hereunder with respect to such Borrower, or without such consent, grant loan
participations therein; PROVIDED that in all cases other than the case of the
sale of loan participations, the Bank shall obtain the prior written consent
of the applicable Borrower, which consent will not be unreasonably withheld or
delayed, and PROVIDED, FURTHER that such Borrower shall make payment of all
amounts due and payable hereunder and deliver such documents as are required
hereunder to the Bank until such time as it is notified in writing to do
otherwise.
Section 12. NOTICES, ETC. Except as otherwise expressly provided in
this Agreement or in any of the other Loan Documents, all notices, demands and
other communications made or required to be given pursuant to this Agreement
shall be in writing and shall be delivered by hand, by accepted express mail
service, postage prepaid, or sent by telex or facsimile transmission and
confirmed by letter, addressed as follows:
(a) if to any Borrower, c/o Chancellor LGT Asset Management, Inc., 50
California Street, 27th Floor, San Francisco, CA 94111-4624 Attention:
Kenneth W. Chancey, Vice President - Fund Accounting or at such other
address for notice or demand as any Borrower shall last have furnished in
writing to the Bank; or
(b) if to the Bank, to the address set forth in the preamble of this
Agreement, Attention: John T. Daley, Vice President, or at such other
address for notice as the Bank shall last have furnished in writing to each
Borrower.
Any such notice or demand shall be deemed to love been duly given or made and to
have become effective (a) if delivered by hand to a responsible officer of the
party to which it is directed, at the time of receipt thereof by such officer,
(b) if sent by accepted express mail service, postage prepaid, one Business Day
after posting thereof, and (c) if sent by facsimile transmission or telex, at
the time of receipt of any automatic answer-back or other similar acknowledgment
of receipt thereof.
Section 13. MISCELLANEOUS. This Agreement shall be deemed to be a
contract under the laws of The Commonwealth of Massachusetts and shall for all
purposes be construed in accordance with and governed by the laws of said
Commonwealth. The rights and remedies herein expressed are cumulative and not
exclusive of any other rights that the Bank or any Borrower as the case may be,
would otherwise have. The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof. This
Agreement and any amendment hereof may be executed in several counterparts and
by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
instrument. In proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
Section 14. SEVERABILITY. If any of the provisions of this Agreement or
the application thereof to any party hereto or to any person or entity or
circumstance is held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or
<PAGE>
-29-
unenforceability shall not affect any other term or provision hereof or thereof
or the application thereof to any other party hereto or to any other person or
entity or circumstance.
Section 15. ENTIRE AGREEMENT, ETC. This Agreement and the other Loan
Documents, together with any of the documents executed in connection herewith or
therewith, express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated orally or in writing, except as
provided in Section 16 hereof.
Section 16. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise
expressly provided in this Agreement, any consent or approval required or
permitted by this Agreement or any of the other Loan Documents to be given by
the Bank may be given, and any term of this Agreement or any of the other Loan
Documents or of any other instrument related hereto or thereto or mentioned
herein or therein may be amended, and the performance or observance by any
Borrower of any terms of this Agreement or such other instrument or the
continuance of any Default or Event of Default by such Borrower, or any
condition or term hereof applicable to such Borrower, may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of such Borrower and the Bank. No
waiver shall extend to or affect any Obligation not expressly waived or impair
any right consequent thereon. No course of dealing or delay or omission on the
part of the Bank in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand on any Borrower shall
entitle such Borrower to other or further notice in similar or other
circumstances.
Section 17. WAIVER OF JURY TRIAL. THE BANK AND EACH BORROWER AGREE THAT
NONE OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT
OF, THIS AGREEMENT OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF
THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH
A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH
HAVE BEEN FULLY DISCUSSED BY THE BANK AND EACH BORROWER AND THESE PROVISIONS
SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE BANK NOR ANY BORROWER HAS AGREED
WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT
BE FULLY ENFORCED IN ALL INSTANCES.
Section 18. SUBMISSION TO JURISDICTION. Each Borrower agrees that any
suit for the enforcement of this Agreement may be brought in the courts of The
Commonwealth of Massachusetts or any Federal Court sitting therein and consents
to the non-exclusive jurisdiction of such court and to service of process in any
such suit being made upon such Borrower by mail at the address specified in
Section 12 hereof. Each
<PAGE>
-30-
Borrower hereby waives any objection that it may now or hereafter have to the
venue of any such suit or any such court or that such suit was brought in an
inconvenient court.
Section 19. JUDGMENT CURRENCY. Each Borrower agrees to indemnify the
Bank against any loss incurred by it as a result of any judgment or order
against such Borrower being given or made For the payment of any amount due
hereunder which is expressed and paid in a currency (the "JUDGMENT CURRENCY")
other than the currency in which such amount was to be paid (the "OBLIGATION
CURRENCY") and as a result of any variation between (a) the rate of exchange at
which the Obligation Currency amount is converted into Judgment Currency for the
purposes of such judgment or order, and (b) the rate of exchange at which the
Bank is able to purchase the Obligation Currency with the amount of Judgment
Currency actually received by the Bank. The foregoing indemnity shall
constitute a separate and independent Obligation of each Borrower and shall
continue in full force and effect notwithstanding any such judgment or order
as aforesaid. The term "rate of exchange" shall include any premiums and costs
of exchange payable in connection with the purchase of, or conversions into, the
relevant currency.
Section 20. CONFIDENTIALITY. The Bank agrees that in handling any
nonpublic information received from any Borrower hereunder the Bank shall
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same or similar types in order to maintain the
confidentiality of such information, it being understood by each Borrower,
however, that disclosure of such information may be made (i) to the subsidiaries
or affiliates of the Bank in connection with their present or prospective
business relations with any Borrower, (ii) to prospective transferees or
purchasers of an interest in the Loans made to any Borrower for its own account
or for the account of any Portfolio, (iii) as required by law, regulation, rule
or order, subpoena, judicial order or similar order and (iv) as may be required
in connection with the examination, audit or similar investigation of the Bank.
Section 21. OBLIGATIONS SEVERAL. The Bank agrees that the Obligations
of each Borrower and each Portfolio hereunder are several and that the Bank
shall have no recourse against any Borrower or Portfolio for the payment or
performance of the Obligations of any other Borrower or Portfolio.
Section 22. ACKNOWLEDGMENT OF TRUSTS. The Bank acknowledges that
certain of the Borrowers are business trusts or series of business trusts
organized under the laws of The Commonwealth of Massachusetts and that the
trustees of each such trust are entering into this Agreement as trustees and not
personally. The Bank agrees that neither the officers, trustees nor
shareholders of the Borrowers shall be personally liable for any Obligation,
loss, claim, expense, fee or other charge arising hereunder.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
<PAGE>
-31-
be duly executed as an instrument under seal by its duly authorized officer as
of the date first written above.
G.T. GLOBAL EASTERN EUROPE FUND
By: /s/ Kenneth W. Chancey
-----------------------
Title: Vice President
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
By: /s/ Kenneth W. Chancey
-----------------------
Title: Vice President
G.T. GLOBAL GROWTH SERIES
on behalf of
GT Global Worldwide Growth Fund
GT Global International Growth Fund
GT Global New Pacific Growth Fund
GT Global Europe Growth Fund
GT Global Japan Growth Fund
GT Global America Growth Fund
GT Global America Small Cap Growth Fund
GT Global America Value Fund
By: /s/ Kenneth W. Chancey
-----------------------
Title: Vice President
G.T. INVESTMENT FUNDS, INC.
on behalf of
GT Global Financial Services Fund
GT Global Infrastructure Fund
GT Global Natural Resources Fund
GT Global Consumer Products and Services Fund
GT Global Health Care Fund
GT Global Telecommunications Fund
GT Global Emerging Markets Fund
GT Global Latin America Growth Fund
GT Global Government Income Fund
GT Global Strategic Income Fund
GT Global High Income Fund
GT Global Growth & Income Fund
By: /s/ Kenneth W. Chancey
-----------------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ John T Daley
-----------------
Vice President
<PAGE>
EXHIBIT (b)(2)
FIRST AMENDMENT
TO
CREDIT AGREEMENT
This First Amendment (this "AMENDMENT") dated as of April 18, 1997 to the
Credit Agreement dated as of December 3, 1996 (the "CREDIT AGREEMENT"), by
and among each of the management investment companies listed on Schedule I
thereto, either acting for itself or on behalf of the portfolios (each a
"PORTFOLIO") set forth next to such series' or portfolio's name on said
Schedule (each of such management investment companies in such individual or
representative capacity being hereinafter referred to as an "EXISTING
BORROWER" and collectively, the "EXITING BORROWERS"), and THE FIRST NATIONAL
BANK OF BOSTON, a national banking association with its head office at 100
Federal Street, Boston, Massachusetts 02110 (the "BANK"). Capitalized terms
used herein but not otherwise defined shall have the meanings assigned to
them in the Credit Agreement.
WHEREAS, the Existing Borrowers and the Bank have executed the Credit
Agreement providing for a demand, discretionary revolving line of credit for
several borrowings by the Existing Borrowers in an aggregate principal amount of
up to $100,000,000; and
WHEREAS, the Existing Borrowers have requested, and the Bank has agreed,
to add G.T. Global Variable Investment Series, G.T. Global Variable
Investment Trust and G.T. Global Floating Rate Fund, Inc. as Borrowers (herein
collectively called the "NEW BORROWERS"), in the case of G.T. Global Variable
Investment Series acting on behalf of GT Global Variable New Pacific Fund, GT
Global Variable Europe Fund, GT Global Variable America Fund and GT Global
Variable International Fund, and in the case of G.T. Global Variable Investment
Trust acting on behalf of GT Global Variable Latin America Fund, GT Global
Variable Infrastructure Fund, GT Global Variable Natural Resources Fund, GT
Global Variable Telecommunications Fund, GT Global Variable Growth & Income
Fund, GT Global Variable Strategic Income Fund, GT Global Variable Emerging
Markets Fund, GT Global Variable Global Government Income Fund and GT Global
Variable U.S. Government Income Fund, all of the foregoing funds becoming
Portfolios entitled to the benefits of the Credit Agreement, on the terms and
conditions set forth below (the Existing Borrowers and the New Borrowers
being hereinafter referred to as the "Borrowers");
NOW, THEREFORE, the Bank and the Borrowers agree as follows:
SECTION 1. AMENDMENT TO THE CREDIT AGREEMENT. Schedules I, II and III
to the Credit Agreement are hereby amended by deleting said schedules in
their entirety and substituting therefor new Schedules I, II, III, IV and V
in the forms attached hereto.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
Each of the Borrowers represents and warrants as follows:
<PAGE>
-2-
(a) The execution, delivery and performance by such Borrower of this
Amendment and the other Loan Documents as amended hereby and the borrowing of
Loans for its account or for the accounts of any of its Portfolios are within
the powers of such Borrower, have been duly authorized by all necessary and
proper action on the part of such Borrower, and do rat and will not (i) violate
or contravene any provision of such Borrower's charter documents or bylaws, or
any amendment thereof; (ii) violate or contravene any provision of the
Prospectus, Registration Statement or Statement of Additional Information, if
applicable, of such Borrower or any of its Portfolios; (iii) conflict with, or
result in a breach of any material term, condition or provision of, or
constitute a default under or result in the creation of any mortgage, lien,
pledge, charge, security interest or other encumbrance upon any of the property
or assets of such Borrower or Portfolio (other than as contemplated by the
Credit Agreement and the Pledge Agreement, if applicable) under, any agreement,
trust deed, indenture, mortgage or other instrument to which such Borrower is a
party or by which such Borrower or any of its or its Portfolios' property or
assets is bound or affected; or (iv) violate or contravene any provision of any
material law, regulation, order, ruling or interpretation thereunder or any
decree, order or judgment of any court or governmental or regulatory authority,
bureau, agency or official.
(b) This Amendment and all the provisions hereof and of the other Loan
Documents constitute the legally valid and binding Obligations of such Borrower,
enforceable against such Borrower in accordance with their terms, except as
enforceability is limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting generally the enforcement of creditors'
rights and except to the extent that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought.
(c) No authorization, approval, consent or other action by, and no notice
to or filing with, any shareholder or creditor of such Borrower, or governmental
or regulatory agency or authority having jurisdiction over such Borrower, is
required to make valid and legally binding the execution, delivery and
performance by such Borrower of this Amendment or the other Loan Documents or
the consummation by such Borrower of the transactions contemplated hereby or
thereby, or the exercise by the Bank of its rights and remedies hereunder or
thereunder.
(d) The representations and warranties contained in Section 4 of the
Credit Agreement are true and correct as of the date hereof as though made on
and as of the date hereof
SECTION 3. CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment is conditioned on the following:
(a) each Borrower and the Bank shall each have executed and delivered a
counterpart of this Amendment;
<PAGE>
-3-
(b) each of the New Borrowers, acting on behalf of their respective
Portfolios, shall have executed and delivered an Assumption Agreement in the
form attached hereto, together with the documents and certificates referred to
therein;
(c) the representations and warranties contained in Section 2 hereof shall
be true and correct in all material respects as of the date hereof as though
made on and as of the date hereof; and
(d) no default under the Credit Agreement shall have occurred and is
continuing.
SECTION 4. MISCELLANEOUS.
(a) On and after the date hereof, each reference in the Credit Agreement
to "this Agreement" or words of like import shall mean and be deemed to be a
reference to the Credit Agreement as amended hereby. Each reference to the
"Loan Documents" shall include a reference to this Amendment and the Assumption
Agreement executed in connection herewith.
(b) Except as amended and modified hereby, the Credit Agreement is in all
respects ratified and confirmed as of the date hereof, and the terms, covenants
and agreements therein shall remain in full force and effect.
(c) This Amendment and the modifications to the Credit Agreement set forth
herein shall be deemed to be a document executed under seal and shall be
governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts.
(d) This Amendment may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
(e) The Bank agrees that it shall look only to the assets of the
applicable Borrower or Portfolio for payment of the obligations of such Borrower
or Portfolio under the Credit Agreement; and neither the shareholders nor the
trustees, nor any of such Borrower's officers, employees or agents, whether
past, present or future, nor the assets belonging to any other series of such
Borrower shall be personally liable therefor. Every note, bond, contract,
instrument, certificate or undertaking and every other act or thing whatsoever
executed or done by the shareholders or trustees of any Borrower on behalf of
such Borrower under the Credit Agreement shall be conclusively deemed to have
been executed or done only by or for such Borrower and not personally.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
<PAGE>
-4-
executed as of the date and the year first above written.
G.T. GLOBAL EASTERN EUROPE FUND
By: /s/ Kenneth W. Chancey
----------------------
Title: Vice President
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
By: /s/ Kenneth W. Chancey
----------------------
Title: Vice President
G.T. GLOBAL GROWTH SERIES
on behalf of
GT Global Worldwide Growth Fund
GT Global International Growth Fund
GT Global New Pacific Growth Fund
GT Global Europe Growth Fund
GT Global Japan Growth Fund
GT Global America Growth Fund
GT Global America Small Cap Growth Fund
GT Global America Value Fund
By: /s/ Kenneth W. Chancey
----------------------
Title: Vice President
G.T. INVESTMENT FUNDS, INC.
on behalf of
GT Global Financial Services Fund
GT Global Infrastructure Fund
GT Global Natural Resources Fund
GT Global Consumer Products and Services Fund
GT Global Health Care Fund
GT Global Telecommunications Fund
GT Global Emerging Markets Fund
GT Global Latin America Growth Fund
GT Global Government Income Fund
GT Global Strategic Income Fund
GT Global High Income Fund
GT Global Growth & Income Fund
By: /s/ Kenneth W. Chancey
----------------------
Title: Vice President
<PAGE>
-5-
G.T. GLOBAL VARIABLE INVESTMENT SERIES
on behalf of
GT Global Variable New Pacific Fund
GT Global Variable Europe Fund
GT Global Variable America Fund
GT Global Variable International Fund
By: /s/ Kenneth W. Chancey
----------------------
Title: Vice President
G.T. GLOBAL VARIABLE INVESTMENT TRUST
on behalf of
GT Global Variable Latin America Fund
GT Global Variable Infrastructure Fund
GT Global Variable Natural Resources Fund
GT Global Variable Telecommunications Fund
GT Global Variable Growth & Income Fund
GT Global Variable Strategic Income Fund
GT Global Variable Emerging Markets Fund
GT Global Variable Global Government Income Fund
GT Global Variable U.S. Government Income Fund
By: /s/ Kenneth W. Chancey
----------------------
Title: Vice President
G.T. GLOBAL FLOATING RATE FUND, INC.
By: /s/ Kenneth W. Chancey
----------------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ John T. Daley
-----------------
Vice President
<PAGE>
SCHEDULE I
SCHEDULE OF BORROWERS AND PORTFOLIOS
NAME OF BORROWER ACTING ON BEHALF OF:
- ---------------- --------------------
CLOSED-END FUNDS:
- ----------------
GT Global Eastern Europe Fund
GT Global Developing Markets Fund, Inc.
GT Global Floating Rate Fund, Inc.
OPEN-END FUNDS:
- --------------
G.T. Global Growth Series GT Global Worldwide Growth Fund
GT Global International Growth Fund
GT Global New Pacific Growth Fund
GT Global Europe Growth Fund
GT Global Japan Growth Fund
GT Global America Growth Fund
GT Global America Small Cap Growth Fund
GT Global America Value Fund
G.T. Investment Funds, Inc. GT Global Financial Services Fund
GT Global Infrastructure Fund
GT Global Natural Resources Fund
GT Global Consumer Products and Services Fund
GT Global Health Care Fund
GT Global Telecommunications Fund
GT Global Emerging Markets Fund
GT Global Latin America Growth Fund
GT Global Government Income Fund
GT Global Strategic Income Fund
GT Global High Income Fund
GT Global Growth & Income Fund
G.T. Global Variable Investment GT Global Variable New Pacific Fund
Series GT Global Variable Europe Fund
GT Global Variable America Fund
GT Global Variable International Fund
<PAGE>
-2-
G.T. Global Variable Investment GT Global Variable Latin America Fund
Trust GT Global Variable Infrastructure Fund
GT Global Variable Natural Resources Fund
GT Global Variable Telecommunications Fund
GT Global Variable Growth & Income Fund
GT Global Variable Strategic Income Fund
GT Global Variable Emerging Markets Fund
GT Global Variable Global Government Income
Fund
GT Global Variable U.S. Government Income Fund
<PAGE>
SCHEDULE II
LIMITATIONS ON BORROWING AND PLEDGING ASSETS
Part 1. AGREEMENTS WITH REGULATORS:
[NONE.]
Part 2. LIMITATIONS ON BORROWING CONTAINED IN PROSPECTUS OR STATEMENT OF
Additional INFORMATION:
The Prospectus of G.T. GLOBAL EASTERN EUROPE FUND provides as follows:
"The Fund may not:...
Issue senior securities (or borrow money, including through the use of
margin, if margin securities are owned, and reverse repurchase agreements)
in excess of 33-1/3% of its total assets (including the amount of senior
securities issued but excluding any liabilities and indebtedness not
constituting senior securities). For purposes of this limitation,
privately arranged loans and temporary borrowings from banks not in excess
of 5% of the Fund's total assets (not including the amount borrowed) shall
not be deemed a senior security as defined in the 1940 Act."
***
The Prospectus of G.T. GLOBAL DEVELOPING MARKETS FUND, INC. provides as
follows:
"The Fund may not:...
issue senior securities or borrow money in amounts in excess of those
permitted under the 1940 Act."
***
<PAGE>
-2-
The Statement of Additional Information of GT GLOBAL WORLDWIDE GROWTH FUND, GT
GLOBAL INTERNATIONAL GROWTH FUND, GT GLOBAL NEW PACIFIC GROWTH FUND, GT GLOBAL
EUROPE GROWTH FUND, GT GLOBAL JAPAN GROWTH FUND, and GT GLOBAL AMERICA GROWTH
FUND provides as follows:
"No Fund may...
Borrow money in excess of 33-1/3% of the Fund's total assets (including the
amount borrowed), less all liabilities and indebtedness (other than borrowing).
Transactions involving options, futures contracts, options on futures contracts
and forward currency contracts, and collateral arrangements relating thereto
will not be deemed to be borrowings.
Each Fund may not:...
Borrow money except for temporary or emergency purposes (not for leveraging) not
in excess of 33 1/3% of the value of the Fund's total assets."
***
The Statement of Additional Information of FINANCIAL SERVICES FUND,
INFRASTRUCTURE FUND, NATURAL RESOURCES FUND and CONSUMER PRODUCTS AND SERVICES
FUND provides as follows:
Each [Fund] may not:...
Borrow money except from banks not in excess of 33-1/3% of the value of each
Portfolio's total assets, (including the amount borrowed), less all liabilities
and indebtedness (other than the borrowing). This restriction shall not prevent
any Portfolio from entering into reverse repurchase agreements, provided that
reverse repurchase agreements, and any other transactions constituting borrowing
by a Portfolio may not exceed one-third of that Portfolio's total assets.
Transactions involving options, futures contracts, options on futures contracts
and forward currency contracts, as described in the Prospectus and Statement of
Additional Information, and collateral arrangements relating thereto will not be
deemed to be borrowings.
No [Fund] may:...
Borrow money except for temporary or emergency purposes (not for leveraging)
[not] in excess of 33-1/3% of the value of the Portfolio's total assets (while
borrowings exceed 5% of the Infrastructure Portfolio's and Natural Resources
Portfolio's total assets, such Portfolio will not make any additional
investments)."
***
<PAGE>
-3-
The Statement of Additional Information of HEALTH CARE FUND provides as follows:
"The Health Care Fund may not:...
Issue senior securities, except that for purposes of this limitation the Health
Care Fund may borrow money in such amounts and in such fashion as is permitted
under the 1940 Act and the rules thereunder."
***
The Statement of Additional Information of TELECOMMUNICATIONS FUND provides as
follows:
"The Telecommunications Fund may not:...
Borrow money except from banks not in excess of 33-1/3% of the value of the
Telecommunications Fund's total assets, including the amount borrowed, less all
liabilities and indebtedness (other than the borrowing). This restriction shall
not prevent the Telecommunications Fund from entering into reverse repurchase
agreements, provided that reverse repurchase agreements, and any other
transactions constituting borrowing by the Telecommunications Fund may not
exceed one-third of the Telecommunications Fund's total assets. Transactions
involving options, futures contracts, options on futures contracts and forward
currency contracts, as described in the Prospectus and Statement of Additional
Information, and collateral arrangements relating thereto will not be deemed to
be borrowings.
The Telecommunications Fund may not:...
Borrow money except for temporary or emergency purposes (not for leveraging) not
in excess of 33-1/3% of the value of the Telecommunications Fund's total assets.
While borrowings exceed 5% of the Telecommunications Fund's total assets, the
Telecommunications Fund will not make any additional investments."
***
<PAGE>
-4-
The Statement of Additional Information of GT GLOBAL EMERGING MARKETS FUND
provides as follows:
"The Fund may not:...
Borrow money in excess of 33-1/3% of the Fund's total assets (including the
amount borrowed), less all liabilities and indebtedness (other than borrowing).
Transactions involving options, futures contracts, options on futures contracts
and forward currency contracts, and collateral arrangements relating thereto
will not be deemed to be borrowings.
The Fund may not:...
Borrow money except for temporary or emergency purposes (not for leveraging) not
in excess of 33-1/3% of the value of the Fund's total assets, except that the
Fund may purchase securities when outstanding borrowings represent less than 5%
of the Fund's Assets."
***
The Statement of Additional Information of GT GLOBAL LATIN AMERICA GROWTH FUND
provides as follows:
"The Fund may not:...
Borrow money except from banks for temporary or emergency purposes not in
excess of 33-1/3% of the value of the Fund's total assets (at the lower of
cost or fair market value) The Fund will not purchase securities while
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding. This restriction shall not prevent the Fund
from entering into reverse repurchase agreements, provided that reverse
repurchase agreements, and any other transactions constituting borrowing by
the Fund may not exceed one-third of the Fund's total assets. In the event
that the asset coverage for the Fund's borrowings falls below 300%, the Fund
will reduce, within three days (excluding Sundays and holidays), the amount
of its borrowings in order to provide for 300% asset coverage."
***
The Statement of Additional Information of GT GLOBAL GOVERNMENT INCOME FUND
provides as follows:
"The Fund may not:...
Borrow money, except from banks for temporary or emergency purposes not in
excess of 30% of the value of the Fund's total assets. The Fund will not
purchase
<PAGE>
-5-
securities while such borrowings are outstanding. This restriction shall not
prevent the Fund from entering into reverse repurchase agreements and engaging
in "roll" transactions, provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting borrowing by the Fund may
not exceed one-third of the Fund's total assets. In the event that the asset
coverage for the Fund's borrowings falls below 300%, the Fund will reduce,
within three days (excluding Sundays and holidays), the amount of its borrowings
in order to provide for the 300% asset coverage.
The Fund may not:...
Borrow money to purchase securities."
***
The Statement of Additional Information of GT GLOBAL STRATEGIC INCOME FUND
provides as follows:
"The Fund may not:...
Borrow money in excess of 33-1/3% of the Fund's total assets (including the
amount borrowed), less all liabilities and indebtedness (other than borrowing).
This restriction shall not prevent the Fund from entering into reverse
repurchase agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's total
assets. In the event that the asset coverage for the Fund's borrowings falls
below 300%, the Fund will reduce, within three days (excluding Sundays and
holidays), the amount of its borrowings in order to provide for current
contracts, and collateral arrangements relating thereto will not be deemed to be
borrowings.
The Fund may not:...
Borrow money to purchase securities."
***
The Statement of Additional Information of GT GLOBAL HIGH INCOME FUND [and the
portfolio, GT GLOBAL HIGH INCOME PORTFOLIO] provides as follows:
"The High Income Fund [and the Portfolio each] may not:...
Borrow money in excess of 33-1/3% of the Fund's or the Portfolio's total assets
(including the amount borrowed), less all liabilities and indebtedness (other
than borrowing). This restriction shall not prevent the Fund or the Portfolio
from
<PAGE>
-6-
entering into reverse repurchase agreements and engaging in "roll" transactions,
provided that reverse repurchase agreements, "roll" transactions and any other
transactions constituting borrowing by the Fund or the Portfolio may not exceed
one-third of the Fund's or the Portfolio's respective total assets. In the
event that the asset coverage for the Fund's or the Portfolio's borrowings falls
below 300%, the Fund or the Portfolio will reduce, within three days (excluding
Sundays and holidays), the amount of its borrowings in order to provide for 300%
asset coverage. Transactions involving options, futures contracts, options on
futures contracts and forward currency contracts, and collateral arrangements
relating thereto will not be deemed to be borrowings."
***
The Statement of Additional Information of GT GLOBAL GROWTH & INCOME FUND
provides as follows:
"The Fund may not:...
The Fund may not borrow money except from banks for temporary or emergency
purposes not in excess of 33-1/3% of the value of the Fund's total assets at the
lower of cost or fair market value. The Fund will not purchase securities while
borrowings in excess of 5% of its total assets are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse repurchase
agreements, "roll" transactions and any other transactions constituting
borrowing by the Fund may not exceed one-third of the Fund's total assets. In
the event that the asset coverage for the Fund's borrowings falls below 300%,
the Fund will reduce, within three days (excluding Sundays and holidays), the
amount of its borrowings in order to provide for 300% asset coverage."
***
The Statement of Additional Information of GT GLOBAL AMERICA SMALL CAP FUND and
GT GLOBAL AMERICA VALUE FUND provides as follows:
"No [Fund] may:...
Borrow money in excess of 33-1/3% of the value of the Portfolio's total assets
(including the amount borrowed), less all liabilities and indebtedness (other
than borrowing. Transactions involving options, futures contracts, options on
futures contracts, and collateral arrangements relating thereto will not be
deemed to be borrowings.
Each [Fund] may not:...
<PAGE>
-7-
Borrow money except for temporary or emergency purposes (not for leveraging) not
in excess of 33-1/3% of the value of the [Fund's] total assets."
***
The Statement of Additional Information of GT GLOBAL VARIABLE NEW PACIFIC FUND,
GT GLOBAL VARIABLE EUROPE FUND, GT GLOBAL VARIABLE AMERICA FUND and GT GLOBAL
VARIABLE INTERNATIONAL FUND provides as follows:
"No Fund may:...
Borrow money in excess of 33-1/3% of a Fund's total assets (including the amount
borrowed), less all liabilities and indebtedness (other than borrowing).
Transactions involving options, futures contracts, options on futures contracts
and forward currency contracts, and collateral arrangements relating thereto
will not be deemed to be borrowings.
No Fund may:...
Borrow money except for temporary or emergency purposes (not for leveraging) not
in excess of 33-1/3% of the value of the Fund's total assets."
***
The Statement of Additional Information of GT GLOBAL VARIABLE LATIN AMERICA FUND
provides as follows:
"The Fund may not:...
Borrow money except from banks for temporary or emergency purposes not in excess
of 33-1/3% of the value of the Fund's total assets (at the lower of cost or fair
market value). The Fund will not purchase securities while borrowings (including
reverse repurchase agreements) in excess of 5% of total assets are outstanding.
This restriction shall not prevent the Fund from entering into reverse
repurchase agreements provided that reverse repurchase agreements, and any other
transactions constituting borrowing by the Fund, may not exceed one-third of the
Fund's total assets. In the event that the asset coverage for the Fund's
borrowings falls below 300%, the Fund will reduce, within three days (excluding
Sundays and holidays), the amount of its borrowings in order to provide for the
300% asset coverage."
***
The Statement of Additional Information of GT GLOBAL VARIABLE INFRASTRUCTURE
FUND and GT GLOBAL VARIABLE NATURAL RESOURCES FUND provides as follows:
<PAGE>
-8-
"Neither Fund may:...
Borrow money except from banks not in excess of 33-1/3% of the value of each
Fund's total assets, (including the amount borrowed), less all liabilities and
indebtedness (other than the borrowing). This restriction shall not prevent the
Fund from entering into reverse repurchase agreements, provided that reverse
repurchase agreements, and any other transactions constituting borrowing by a
Fund may not exceed one-third of that Fund's total assets. Transactions
involving options, futures contracts, options on futures contracts and forward
currency contracts, as described in the Prospectus and Statement of Additional
Information, and collateral arrangements relating thereto will not be deemed to
be borrowings.
"Neither Fund may:...
Borrow money except for temporary or emergency purposes (not for leveraging) in
excess of 33-1/3% of the value of the Fund's total assets. While borrowings
exceed 5% of the Infrastructure Fund's or Natural Resources Fund's total assets,
such Fund will not make any additional investments."
***
The Statement of Additional Information of GT GLOBAL VARIABLE TELECOMMUNICATIONS
FUND provides as follows:
"The Fund may not:...
Borrow money except from banks not in excess of 33-1/3% of the value of the
Fund's total assets, including the amount borrowed, less all liabilities and
indebtedness (other than the borrowing). This restriction shall not prevent the
Fund from entering into reverse repurchase agreements, provided that reverse
repurchase agreements, and any other transactions constituting borrowing by the
Fund may not exceed one-third of the Fund's total assets, respectively.
Transactions involving options, futures contracts, options on futures contracts
and forward currency contracts, as described in the Funds' Prospectus and
Statement of Additional Information, and collateral arrangements relating
thereto will not be deemed to be borrowings.
The Fund may not:...
Borrow money except for temporary or emergency purposes (not for leveraging) not
in excess of 33-1/3% of the value of the Fund's total assets. While borrowings
exceed 5% of the Fund's total assets, the Fund will not make any additional
investments."
<PAGE>
-9-
***
The Statement of Additional Information of GT GLOBAL VARIABLE GROWTH AND INCOME
FUND provides as follows:
"The Fund may not:...
Borrow money except from banks for temporary or emergency purposes not in excess
of 33-1/3% of the value of the Fund's total assets (at the lower of cost or fair
market value). The Fund will not purchase securities while borrowings in excess
of 5% of total assets are outstanding. This restriction shall not prevent the
Fund from entering into reverse repurchase agreements and engaging in "roll"
transactions, provided that reverse repurchase agreements, "roll" transactions
and any other transactions constituting borrowing by the Fund may not exceed
one-third of the Fund's total assets. In the event that the asset coverage for
the Fund's borrowings falls below 300%, the Fund will reduce, within three days
(excluding Sundays and holidays), the amount of its borrowings in order to
provide for 300% asset coverage."
***
The Statement of Additional Information of GT GLOBAL VARIABLE STRATEGIC INCOME
FUND provides as follows:
"The Fund may not:...
Borrow money in excess of 33-1/3% of the value of the Fund's total assets
(including the money borrowed), less all liabilities and indebtedness (other
than borrowing). The restriction shall not prevent the Fund from entering into
reverse repurchase agreements and engaging in "roll" transactions, provided that
reverse repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's total
assets. In the event that the asset coverage for the Fund's borrowings fall
below 300%, the Fund, as the case may be, will reduce, within three days
(excluding Sundays and holidays), the amount of its borrowings in order to
provide for the 300% asset coverage. Transactions involving options, futures
contracts, options on futures contracts and forward currency contracts, and
collateral arrangements relating thereto will not be deemed to be borrowings."
***
The Statement of Additional Information of GT GLOBAL VARIABLE EMERGING MARKETS
FUND provides as follows:
<PAGE>
-10-
"The Fund may not:...
Borrow money except from banks not in excess of 33-1/3% of the value of the
Fund's total assets (including the amount borrowed), less all liabilities and
indebtedness (other than borrowing). Transactions involving options, futures
contracts, options on futures contracts and forward currency contracts, and
collateral arrangements relating thereto will not be deemed to be borrowings."
"The Fund may not...
Borrow money, except for temporary or emergency purposes (not for leveraging)
not in excess of 33-1/3% of the value of the Fund's total assets and except that
the Fund may purchase securities when outstanding borrowings represent no more
than 5% of the Fund's assets."
***
The Statement of Additional Information of GT GLOBAL VARIABLE GLOBAL GOVERNMENT
INCOME FUND provides as follows:
"The Fund may not:
Borrow money, except from banks or for temporary or emergency purposes not in
excess of 300% of the value of the Fund's total assets. The Fund will not
purchase securities while such borrowings are outstanding. This restriction
shall not prevent the Fund from entering into reverse repurchase agreements and
engaging in "roll" transactions, provided that reverse repurchase agreements,
"roll" transactions and any other transactions constituting borrowing by the
Fund may not exceed one-third of the Fund's total assets. In the event that the
asset coverage for the Fund & borrowings falls below 300%, the Fund will reduce,
within three days (excluding Sundays and holidays), the amount of its borrowings
in order to provide for the 300% asset coverage."
***
The Statement of Additional Information of GT GLOBAL VARIABLE U.S. GOVERNMENT
INCOME FUND provides as follows:
"The Fund may not:...
Borrow money in excess of 33-1/3% of the value of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness (other
than borrowings).
<PAGE>
-11-
The restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse repurchase
agreements, "roll" transactions and any other transactions constituting
borrowing by the Fund may not exceed one-third of the Fund's total assets. In
the event that the asset coverage for the Fund's borrowings falls below 300%,
the Fund, as the case may be, will reduce, within three days (excluding Sundays
and holidays), the amount of its borrowings in order to provide for the 300%
asset coverage. Transactions involving options, futures contracts, options on
futures contracts and forward currency contracts, and collateral arrangements
relating thereto will not be deemed to be borrowings."
***
The Prospectus of G.T. GLOBAL FLOATING RATE FUND, INC. provides as follows:
"The Fund and the Portfolio each may not:...
Borrow money or issue senior securities, except as permitted by Section 18 of
the 1940 Act."
<PAGE>
[COMPANY LETTERHEAD]
EXHIBIT (b)(3)
April 24, 1997
The Funds Listed in Appendix I
50 California Street
San Francisco, California 94111-4624
Ladies and Gentlemen:
This is to advise you that, based on the information you have furnished to
us and our discussions to date, State Street Bank and Trust Company (the "Bank")
has established a $100 million uncommitted, short-term, unsecured line of credit
(the "Uncommitted Line of Credit") for each of the Borrowers listed in Appendix
I (each a "Borrower"), acting either for itself or on behalf of the portfolios
or series indicated on Appendix I (each a "Portfolio"), as Appendix I may from
time to time be modified or amended, effective April 24, 1997 (the "Effective
Date").
This facility carries no legal obligation on the part of the Bank to lend
any amount of money to any Borrower at any point in time, and the Borrower will
not be paying a commitment fee for this facility. The Bank expects, however,
that it will lend amounts consistent with the established credit line limits in
place in response to loan requests by the Borrower. This facility will expire
on May 1, 1998.
In addition, the Bank's willingness to provide the proposed financing is
contingent upon and subject to the following terms and conditions in this letter
(the "Agreement").
The proceeds of advances made under the Uncommitted Line of Credit (the
"Loans") may be used only for temporary or emergency purposes (including for
redemptions).
Prior to making any initial Loan to a Borrower, the Bank shall have
received from the Borrower the following:
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 2
1. A Loan request in the form attached hereto as EXHIBIT I (the "Loan
Request") stating the principal amount of the requested Loan and warranting
(i) compliance by the Borrower with all of the terms and conditions of the
Agreement, and (ii) use of the Loan in accordance with this Agreement;
2. An executed Promissory Note in the form attached hereto as EXHIBIT II;
3. An Officer's Certificate in the form attached hereto as EXHIBIT III; and
4. An opinion of counsel to the Borrower in a form satisfactory to the Bank,
attached hereto as EXHIBIT IV.
Prior to making any further Loan after making an initial Loan, the Bank
shall have received a completed Loan Request.
With respect to each Borrower which is a Massachusetts business trust or a
New York trust all persons dealing with the Borrower shall look solely to the
trust property of that Borrower for the enforcement of any claim against the
Borrower. None of the trustees, officers, agents or shareholders of the
Borrower assumes any personal liability for obligations entered into on behalf
of the trust.
Loans under the Uncommitted Line of Credit will be evidenced by a
Promissory Note in the form attached hereto as EXHIBIT II. At the time of
borrowing or at the time of receipt of any payment of principal, the Borrower
authorizes the Bank to make the proper notation on the Note Schedule attached
to the Promissory Note, reflecting the making of such Loan(s) or the receipt
of such payment(s). The outstanding amount of the Loan(s) set forth on the
Note Schedule shall be prima facie evidence of the principal amount thereof
owing and unpaid to the Bank. The failure to record, or any error in so
recording, any such amount on the Note Schedule or any other record
maintained by the Bank, shall not limit or otherwise affect the obligation of
the Borrower hereunder or under the Promissory Note to make payments of
principal of and interest on the Promissory Note when due.
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 3
Loans under the Uncommitted Line of Credit shall be payable upon demand by
the Bank and may be paid, in whole or in part and without penalty, at any time
by each Borrower. Payment of the principal amount of the Loans made to a
Borrower for its own account or for the account of a Portfolio, together with
interest accrued thereon and any other amounts payable with respect thereto,
shall be payable only out of the assets of the Borrower, or the Portfolio, as
applicable. Loans under the Uncommitted Line of Credit shall be made available
at the interest rate determined at the time of each borrowing. At the time each
Loan is made, the Bank shall telecopy to the Borrower a written confirmation of
the amount of such Loan and the interest rate initially applicable thereto.
Temporary or emergency borrowings in the aggregate will be limited to the
lesser of: (i) the advance rate percentages listed in Appendix I; (ii) $50
million per Borrower, except where $25 million sublimits are noted; and (iii)
the remaining available balance under the Uncommitted Line of Credit; provided
that the aggregate amount of Loans outstanding to any Borrower at any time shall
be consistent with the Borrower's Prospectus, Registration Statement and
Statement of Additional Information (this paragraph being the "Leverage
Covenant").
If at any time a Borrower is in violation of the Leverage Covenant, that
Borrower is required within 3 (three) business days to repay Loans in an amount
sufficient to achieve compliance with the Leverage Covenant.
Each Borrower hereby promises to pay the principal and interest of each
Loan made to it for its own account or the account of a Portfolio, and related
fees, on the day when due to the Bank at its address stated above. Each
Borrower hereby authorizes the Bank, if and to the extent a payment is owed by
that Borrower, to charge against the Borrower's deposit account with the Bank
any amount so due on the 15th business day of the following month.
Each Borrower agrees that it shall not borrow from any other bank, issue
preferred stock or create, incur or assume or suffer to exist any lien
(statutory or otherwise), security interest,
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 4
priority, conditional sale, pledge, charge or other encumbrance or similar
rights of others or any agreement to give any of the foregoing ("liens"), upon
or with respect to any of its properties, owned or acquired during such period,
except (i) as a result of its investment activities as described in its then
current Prospectus and Statement of Additional Information or Registration
Statement under the Investment Company Act of 1940, as amended (the "1940 Act"),
(ii) indebtedness in favor of the Borrower's custodian consisting of extensions
of credit from the custodian in the ordinary course of business to cover
securities trades or liens in favor of the Borrower's custodian granted pursuant
to the custody agreement(s) in force and (iii) loans made pursuant to that
certain Credit Agreement dated December 3, 1996, as amended from time to time,
by and among some or all of the Borrowers and the First National Bank of Boston.
Each Borrower agrees to furnish to the Bank a statement of assets and
liabilities as of the end of each semi-annual period, audited annual statements
which present fairly, in all material respects, in conformity with generally
accepted accounting principles, the financial position of the Borrower, the
portfolio of investments as of the end of each semi-annual period, proxy
materials, reports to the shareholders and such other information as the Bank
shall reasonably request from time to time.
Each Borrower agrees that while any Loan is outstanding with respect to
that Borrower under this Uncommitted Line of Credit it will not change its
investment objective or fundamental investment policy, as set forth in the
Borrower's most recent Statement of Additional Information or most recent
Prospectus, without the consent of the Bank. Each Borrower agrees that it will
be a default hereunder if Chancellor LGT Asset Management ceases to be its
Investment Advisor, or the Borrower changes its Custodian without the consent of
the Bank, which consent will not be unreasonably withheld.
Notwithstanding any provision to the contrary contained herein, each Loan
made to any Borrower shall be made only with respect to that Borrower or on
behalf of a Portfolio and shall be repaid solely from the assets of that
Borrower, or the assets of that Portfolio as the case may be, and the Bank shall
have no
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 5
right of recourse or offset, or any other right whatsoever, against the assets
of any other Portfolio of the Borrower with respect to such Loan or any default
in respect thereof. A default by any Borrower shall not, by itself, constitute
a default by any other Borrower hereunder.
Each Borrower represents and warrants to the Bank, as an inducement to the
Bank to extend the Uncommitted Line of Credit, and at any time Loans are
outstanding to that Borrower or at any time a Loan Request is made by that
Borrower, that:
1. The Borrower is duly organized, validly existing and in good standing under
the laws of the state of its organization and has all trust or corporate powers
and all governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted;
2. Neither the Bank nor any affiliate of the Bank individually or in the
aggregate owns, controls or holds with the power to vote, 5% or more of the
outstanding shares of the Borrower and any affiliate of the Borrower, and
neither the Borrower nor any affiliate of the Borrower, directly or indirectly,
individually or in the aggregate, owns, controls or holds with the power to
vote, 5% or more of the outstanding voting securities of the Bank or any
affiliate of the Bank known to the Borrower;
3. Neither the Borrower nor any affiliate of the Borrower, directly or
indirectly, individually or in the aggregate, controls or, to the best knowledge
of the Borrower after due inquiry, is controlled by or under common control with
the Bank or any affiliate of the Bank known to the Borrower. Furthermore, no
officer, director, trustee or employee of the Borrower or any affiliate of the
Borrower is an affiliated Person of the Bank or of any affiliate of the Bank
known to the Borrower;
4. The Borrower has no subsidiaries;
5. The Borrower is not a member of an ERISA Group and has no liability in
respect of any benefit arrangement, plan or multi-employer plan subject to
ERISA;
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 6
6. The Borrower qualifies as a "regulated investment company" within the
meaning of the Internal Revenue Code, and as such, because it intends to timely
distribute all its income (including capital gains) to its shareholders, its
income will not be subject to tax at the trust or corporate level under the
Internal Revenue Code. The Borrower has filed all United States Federal income
tax returns and all other material tax returns which are required to be filed by
it and has paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower. The charges, accruals and reserves on the
books of the Borrower in respect of taxes or other governmental charges are, in
the opinion of the Borrower, adequate;
7. All information heretofore furnished by the Borrower to the Bank for
purposes of or in connection with this Agreement or any transaction contemplated
hereby is, and all such information hereafter furnished by the Borrower to the
Bank will be, true and accurate in all material respects on the date as of which
such information is stated or certified. The Borrower has disclosed to the Bank
in writing any and all facts which, to the best of the Borrower's knowledge
after due inquiry, materially and adversely affect or may affect (to the extent
the Borrower can now reasonably foresee), the business, operations or financial
condition of the Borrower or the ability of the Borrower to perform its
obligations under this Agreement or the Note;
8. The execution, delivery and performance of all of the agreements and
instruments in connection with the Uncommitted Line of Credit are within the
Borrower's power and authority and have been authorized by all necessary
proceedings and will not contravene any provision of the Borrower's
organizational documents, by laws, then-current Prospectus and Statement of
Additional Information or registration statement, as the case may be, or any
agreement or undertaking binding upon the Borrower;
9. There is no litigation, proceeding or investigation pending, or to the
knowledge of each Borrower, threatened against the Borrower, which would have a
material adverse effect on the Borrower's ability to carry out its obligations
hereunder or under the Note;
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 7
10. The Borrower has statutory authority to enter into this Agreement and any
Loan Requests hereunder will not result in an aggregate of all loans outstanding
which exceed the limits permitted under the Borrower's then-current Prospectus
and Statement of Additional Information (or 1940 Act Registration Statement, as
the case may be), the 1940 Act, or any applicable rule, regulation, statute or
the Leverage Covenant, as defined herein;
11. The Borrower is a registered open-end or closed-end management investment
company under the 1940 Act and the shares of stock or beneficial interest of
each Borrower have been registered under the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, and applicable state securities
or so-called "Blue Sky" laws; and
12. The Borrower is in compliance in all material respects with applicable law,
including the 1940 Act, the Securities Act of 1933 and regulations promulgated
thereunder, the Securities and Exchange Act of 1934 and regulations promulgated
thereunder and Federal Reserve Regulation U.
13. This Agreement and the Note have been duly executed and delivered by the
Borrower. This Agreement constitutes a valid and binding agreement of the
Borrower and the Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting enforcement of creditors' rights generally and general principles of
equity, regardless of whether such enforcement is sought in a proceeding in
equity or at law.
Upon the occurrence of any of the following events, a Borrower shall be
deemed to be in default under this Agreement:
(a) Failure of the Borrower to make payment when due of any Loan; or
available cash in the deposit account is insufficient to repay a Loan due
the Bank by the Borrower;
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 8
(b) Breach or failure to perform by the Borrower of any terms or conditions
as set forth in this Agreement, or any obligation of the Borrower to the
Bank;
(c) If any representation, statement or warranty made or furnished in any
manner to the Bank by the Borrower in connection with this Agreement or the
Loan was false in any material respect when made or furnished;
(d) A material adverse change in the business, assets, financial condition
or prospects for the Borrower (but no such adverse change shall be deemed to
have occurred as a result of a decline in net assets resulting from
redemptions by shareholders or investors or as a result of a decline in the
value of the securities held by the Borrower), as reasonably determined by
the Bank, has occurred;
(e) A material adverse change, as reasonably determined by the Bank shall
have occurred in the facts or information disclosed to the Bank or otherwise
relied on by the Bank in considering requests hereunder;
(f) If, by reason of any default by the Borrower, any obligation of the
Borrower to any other person or entity for money borrowed or on account of
any bond, note or debenture is accelerated prior to maturity;
(g) Upon termination of existence, insolvency, business failure, appointment
of a receiver of any part of the property of the Borrower, assignment for
the benefit of creditors by, the calling of a meeting of creditors, or the
commencement of any voluntary or involuntary proceeding under any bankruptcy
or insolvency laws by or against the Borrower or any co-maker, accommodation
maker, surety, or guarantor of the Borrower, or entry of any final judgment
or order against them for the payment of money in excess of $500,000 shall
be rendered against the Borrower and such judgement or order shall remain
unsatisfied, undischarged, or unstayed for a period of 10 days; or
(h) Upon the issuance of or notice of any tax levy, attachment, by trustee
process or otherwise, levy of execution or other process issued against the
Borrower.
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 9
Any Borrower may terminate the Uncommitted Line of Credit as to it by
giving five (5) days irrevocable prior written notice to the Bank and
repaying in full all amounts then outstanding to it under the Uncommitted
Line of Credit or the Note.
The Bank agrees that prior to assigning to any other lender (but not the
Federal Reserve Bank) any of its rights and obligations under the Uncommitted
Line of Credit or the Note, or granting to any other lender any participation
in any of such rights and obligations, the Bank will obtain the Borrowers'
prior written consent, which shall not unreasonably be withheld.
Copies of all notices and confirmations hereunder and under the Note
shall be sent to the Bank at its address above, Attention: Edward A. Siegel,
Assistant Vice President, and to each Borrower at its address on the
signature page hereto, to the attention of the person signing on behalf of
the Borrower, or to such other address or person for notice as the parties
shall have last furnished in writing to the person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at
the time of receipt thereof by such officer or the sending of such facsimile
and (ii) if sent by registered or certified first-class mail, postage
prepaid, on the third business day following the mailing thereof.
This Agreement shall take effect as a sealed instrument and shall be
governed by the laws (other than the conflict of law rules) of the
Commonwealth of Massachusetts.
This Agreement and the Note constitute the entire understanding between
each Borrower and the Bank on this subject and supersede all prior
discussions.
If the foregoing satisfactorily sets forth the terms and conditions of
the Uncommitted Line of Credit, please execute and return the enclosed copy
of this Agreement together with the enclosed
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 10
documents and the opinion of your outside counsel concerning this transaction.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By: /s/ Edward A. Siegel
---------------------------------
Name: Edward A. Siegel
Title: Assistant Vice President
Accepted:
G.T. GLOBAL GROWTH SERIES,
BORROWER, on behalf of:
GT Global Worldwide Growth
Fund, GT Global International
Growth Fund, GT Global New
Pacific Growth Fund, GT
Global Europe Growth Fund,
GT Global Japan Growth Fund,
GT Global America Small Cap
Growth Fund, GT Global America
Value Fund and GT Global
America Mid Cap Growth Fund
By: /s/ Kenneth W. Chancey
-------------------------
Name: Kenneth W. Chancey
Title: Vice President
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 11
Accepted:
G.T. INVESTMENT FUNDS, INC.,
BORROWER, on behalf of:
GT Global Financial Services
Fund, GT Global Infrastructure
Fund, GT Global Natural
Resources Fund, GT Global
Consumer Products and Services
Fund, GT Global Health Care Fund,
GT Global Telecommunications
Fund, GT Global Latin America
Growth Fund, GT Global Emerging
Markets Fund, GT Global Growth
& Income Fund and GT Global
Government Income Fund
By: /s/ Kenneth W. Chancey
-------------------------
Name: Kenneth W. Chancey
Title: Vice President
Accepted:
G.T. GLOBAL EASTERN EUROPE FUND,
BORROWER
By: /s/ Kenneth W. Chancey
-------------------------
Name: Kenneth W. Chancey
Title: Vice President
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 12
Accepted:
G.T. GLOBAL FLOATING RATE FUND, INC.
By: /s/ Kenneth W. Chancey
-------------------------
Name: Kenneth W. Chancey
Title: Vice President
Accepted:
G.T. GLOBAL DEVELOPING MARKETS FUND, INC., BORROWER
By: /s/ Kenneth W. Chancey
-------------------------
Name: Kenneth W. Chancey
Title: Vice President
Accepted:
G.T. GLOBAL VARIABLE INVESTMENT
SERIES, BORROWER, on behalf of
GT Global Variable New Pacific Fund,
GT Global Variable Europe Fund,
GT Global Variable America Fund
and GT Global Variable International
Fund
By: /s/ Kenneth W. Chancey
-------------------------
Name: Kenneth W. Chancey
Title: Vice President
<PAGE>
[COMPANY LETTERHEAD] The Funds Listed in Appendix I
May 1, 1997
Page 13
Accepted:
G.T. GLOBAL VARIABLE INVESTMENT
TRUST, BORROWER, on behalf of
GT Global Variable Latin America
Fund, GT Global Variable Growth
& Income Fund, GT Global Variable
Government Income Fund, GT Global
Variable U.S. Government Income
Fund, GT Global Variable
Telecommunications Fund, GT Global
Variable Emerging Markets Fund,
GT Global Variable Infrastructure
Fund and GT Global Variable Natural
Resources Fund
BY: /s/ Kenneth W. Chancey
-------------------------
Name: Kenneth W. Chancey
Title: Vice President
Address for Notices to Each Borrower:
Chancellor LGT Asset Management, Inc.
Legal Department
50 California Street
San Francisco, California 94111
<PAGE>
APPENDIX I
Borrowers under the $l00 million unsecured uncommitted credit facility are
highlighted. Borrowings are for temporary or emergency purposes only,
including redemptions, as defined by the Investment Company Act of 1940.
Borrowings to each Fund are capped at the lesser of: (i) the advance rate
percentages noted below: (ii) $50 million per Fund, except where $25 million
sublimits are noted; and (iii) the remaining available balance under the
uncommitted credit facility.
<TABLE>
MAX. ADVANCE RATE MAX. BORROWINGS
PERCENTAGE AGAINST OR
BORROWER TOTAL ASSETS SUBLIMITS
<S> <C> <C>
G.T. Global Growth Series, a Massachusetts
business trust on behalf of the following series:
GT Global Worldwide Growth Fund 10% $50 million
GT Global International Growth Fund 10% $50 million
GT Global New Pacific Growth Fund 10% $25 million
GT Global Europe Growth Fund 10% $50 million
GT Global Japan Growth Fund 10% $50 million
GT Global America Mid Cap Growth Fund 10% $50 million
GT Global America Small Cap Growth Fund 10% $50 million
GT Global America Value Fund 10% $50 million
G.T. INVESTMENT FUNDS, INC., a Maryland corporation
on behalf of the following series:
GT Global Financial Services Fund 10% $50 million
GT Global Infrastructure Fund 10% $50 million
GT Global Natural Resources Fund 10% $50 million
GT Global Consumer Products and Services Fund 10% $50 million
GT Global Health Care Fund 10% $50 million
GT Global Telecommunications Fund 10% $50 million
GT Global Latin America Growth Fund 10% $25 million
GT Global Emerging Markets Fund 10% $25 million
GT Global Growth & Income Fund 10% $50 million
GT Global Government Income Fund 10% $50 million
G.T. GLOBAL EASTERN EUROPE FUND, a Massachusetts
business trust 10% $50 million
G.T. GLOBAL FLOATING RATE FUND, INC., a Maryland
corporation. 10% $50 million
G.T. GLOBAL DEVELOPING MARKETS FUND, Inc., a
Maryland corporation 5% $25 million
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
G.T. GLOBAL VARIABLE INVESTMENT SERIES, A
Massachusetts business trust, on behalf of the
following series:
GT Global Variable New Pacific Fund 10% $50 million
GT Global Variable Europe Fund 10% $50 million
GT Global Variable America Fund 10% $50 million
GT Global Variable International Fund 10% $50 million
G.T. GLOBAL VARIABLE INVESTMENT TRUST, A
Massachusetts business trust, on behalf of the
following series:
GT Global Variable Latin America Fund 10% $50 million
GT Global Variable Growth & Income Fund 10% $50 million
GT Global Variable Government Income Fund 10% $50 million
GT Global Variable U.S. Government Income Fund 10% $50 million
GT Global Variable Telecommunications Fund 10% $50 million
GT Global Variable Emerging Markets Fund 10% $50 million
GT Global Variable Infrastructure Fund 10% $50 million
GT Global Variable Natural Resources Fund 10% $50 million
</TABLE>
<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
------------
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 --
</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 (Continued)
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 --
------------
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
------------
</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>
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 of three 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)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
-----------
-----------
</TABLE>
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, (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 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.
F9
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
(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 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
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<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
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 $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.
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 decrease............................ 8,087,189 $ 80,771,571
--------------- ------------------
--------------- ------------------
</TABLE>
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>
BORROWER
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
KSL Recreation Group.................................................................................................
Affinity Group.......................................................................................................
<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.
F11