AIM FLOATING RATE FUND, POS 8C, 1998-09-01

AIM FLOATING RATE FUND
POS 8C, 1998-09-01

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 1, 1998.

SECURITIES ACT FILE NO. 333-37243
INVESTMENT COMPANY ACT FILE NO. 811-07957

POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT AS STATED BELOW
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

PRE-EFFECTIVE AMENDMENT NO. _

POST-EFFECTIVE AMENDMENT NO. 4 X

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

AMENDMENT NO. 7 X

(CHECK APPROPRIATE BOX OR BOXES)
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GT GLOBAL FLOATING RATE FUND, INC.

(D/B/A AIM FLOATING RATE FUND)
(Exact name of Registrant as specified in charter)

11 GREENWAY PLAZA, SUITE 100, HOUSTON, TX 77046
(Address of principal executive offices)

Registrant's Telephone Number, including Area Code: (713) 626-1919

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Copies to:

<TABLE>
<S> <C> <C>
ARTHUR J. BROWN, ESQ. SAMUEL D. SIRKO, ESQ. MICHAEL A. SILVER
R. CHARLES MILLER, ESQ. A I M ADVISORS, INC. INVESCO (NY), INC.
KIRKPATRICK & LOCKHART LLP 11 Greenway Plaza 50 California Street, 27th Floor
1800 Massachusetts Avenue, N.W. Suite 100 San Francisco, CA 94111
Washington, D.C. 20036 Houston, Texas 77046 (Name and address of agent for
(713) 626-1919 service)
</TABLE>

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Approximate date of proposed public offering: AS SOON AS PRACTICABLE AFTER THIS
REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
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CALCULATION OF REGISTRATION FEE

<TABLE>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES BEING REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock ($.001 par value).........
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</TABLE>

(1) This registration statement is being filed for the purpose of updating
information herein and no additional shares are being registered hereby.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE> 2

AIM FLOATING RATE FUND

FORM N-2 CROSS REFERENCE SHEET

PART A

<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION PROSPECTUS CAPTION
- ------ ------- ------------------
<C> <S> <C>
1 Outside Front Cover................ Outside Front Cover of Prospectus
2 Inside Front and Outside Back Cover
Page............................. Inside Front and Outside Back Cover Page of
Prospectus
3 Fee Table and Synopsis............. Summary; Table of Fees and Expenses
4 Financial Highlights............... Financial Highlights
5 Plan of Distribution............... Outside Front Cover; Summary; Purchase of Shares;
Description of Capital Stock
6 Selling Shareholders............... Not Applicable
7 Use of Proceeds.................... Use of Proceeds; Investment Objective and Policies
8 General Description of
Registrant....................... Summary; Organization of the Fund; Investment
Objective and Policies; Investment Restrictions;
Special Considerations and Risk Factors;
Description of Capital Stock
9 Management......................... Management; Description of Capital Stock; Custodian,
Transfer and Dividend Disbursing Agent and Registrar
10 Capital Stock, Long-Term Debt and
Other Securities................. Dividends and Other Distributions; Dividend
Reinvestment Plan; Taxes; Description of Capital
Stock
11 Defaults and Arrears on Senior
Securities....................... Not Applicable
12 Legal Proceedings.................. Not Applicable
13 Table of Contents of the Statement
of Additional Information........ Not Applicable
</TABLE>

PART B

<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION
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<C> <S> <C>
14 Cover Page......................... Not Applicable
15 Table of Contents.................. Not Applicable
16 General Information and History.... Not Applicable
17 Investment Objective and
Policies......................... Investment Objective and Policies; Investment
Restrictions; Portfolio Transactions
18 Management......................... Management
19 Control Persons and Principal
Holders of Securities............ Description of Capital Stock
20 Investment Advisory and Other
Services......................... Management; Custodian, Transfer and Dividend
Disbursing Agent and Registrar
21 Brokerage Allocation and Other
Practices........................ Portfolio Transactions
22 Tax Status......................... Taxes
23 Financial Statements............... Financial Statements
</TABLE>

PART C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE> 3

[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--

AIM FLOATING RATE FUND

PROSPECTUS
SEPTEMBER 8, 1998

This Prospectus contains information about AIM FLOATING RATE FUND (the "Fund"),
a continuously offered, non-diversified, closed-end management investment
company. The Fund invests all of its investable assets in Floating Rate
Portfolio (the "Portfolio"), a separate, non-diversified, closed-end management
investment company that has the same investment objective as the Fund. The
investment objective of the Fund and the Portfolio is to provide as high a level
of current income and preservation of capital as is consistent with investment
in senior secured corporate loans ("Corporate Loans") and senior secured debt
securities ("Corporate Debt Securities") that meet credit standards established
by its investment manager, A I M Advisors, Inc. ("AIM") and its sub-advisor,
INVESCO Senior Secured Management, Inc. (the "Sub-advisor"). The Portfolio's
investments primarily take the form of assignments of, or participations in,
Corporate Loans made by banks and other financial institutions and Corporate
Debt Securities. It is anticipated that the Corporate Loans and Corporate Debt
Securities will pay interest at rates that float or reset at a margin above a
generally recognized base lending rate such as the London InterBank Offered Rate
("LIBOR") or the prime rate of a designated U.S. bank. There is no assurance
that the investment objective of the Fund will be achieved.

Shares of Common Stock of the Fund are continuously offered at a price equal to
the next determined net asset value per share without a front-end sales charge.
The minimum initial purchase is $500, and the minimum subsequent purchase is
$50.

No market presently exists for the Fund's Common Stock and it is not currently
expected that a secondary market will develop. Since the Fund's Common Stock may
not be considered readily marketable, the Board of Directors of the Fund
currently intends to consider making tender offers on a quarterly basis to
repurchase all or a portion of the Common Stock of the Fund from stockholders at
the net asset value per share. See "Tender Offers." Shares of Common Stock that
have been held for less than four years and that are repurchased by the Fund
pursuant to tender offers will be subject to an "Early Withdrawal Charge" that
will not exceed 3.0% of the original purchase amount for such Common Stock. See
"Early Withdrawal Charge."

The Common Stock of the Fund involves investment risks, including fluctuations
in value and the possible loss of some or all of the principal investment. The
Portfolio may invest all or substantially all of its assets in Corporate Loans,
Corporate Debt Securities or other securities that are rated below investment
grade by a nationally recognized statistical rating organization, or in
comparable unrated securities. The Fund is authorized to borrow money to finance
tender offers, for temporary, extraordinary or emergency purposes, or, while it
has no current intention of doing so, for the purpose of financing additional
investments. Such leverage creates certain risks for holders of Common Stock,
including the risk of higher volatility of the net asset value of the Common
Stock. See "Special Considerations and Risk Factors -- Effects of Leverage."

This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. Additional information concerning the Fund may be
obtained by writing to the Fund at 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173 or by calling 1-800-347-4246. Additional information about the Fund
may also be obtained from http://www.aimfunds.com.

THE FUND'S COMMON STOCK IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE FUND'S COMMON STOCK IS NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................ 2
THE FUND............................... 6
Table of Fees and Expenses........... 6
Financial Highlights................. 7
Use of Proceeds...................... 7
Investment Objective and Policies.... 8
Investment Restrictions.............. 14
Special Considerations and Risk
Factors........................... 15
Purchase of Shares................... 18
Tender Offers........................ 18
Early Withdrawal Charge.............. 20
Management........................... 20
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Directors and Executive Officers..... 22
Portfolio Transactions............... 23
Dividends and Other Distributions.... 24
Taxes................................ 25
Dividend Reinvestment Plan........... 27
Automatic Investment Plan............ 28
Exchange Privilege................... 28
Determination of Net Asset Value..... 28
Description of Capital Stock......... 29
Yield Information.................... 30
OTHER INFORMATION...................... 30
APPENDIX A............................. A-1
</TABLE>

SUMMARY
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THE FUND. AIM Floating Rate Fund (the "Fund") is a continuously offered,
non-diversified, closed-end management investment company. See "The Fund."

THE PORTFOLIO. Floating Rate Portfolio (the "Portfolio") is a non-diversified,
closed-end management investment company. See "Special Considerations and Risk
Factors -- Fund/Portfolio Investment Structure."

THE OFFERING. The Fund offers its Common Stock at a price equal to the next
determined net asset value per share without a front-end sales charge. The
minimum initial purchase is $500, and the minimum subsequent purchase is $50,
except that with respect to certain retirement accounts, the minimum initial
purchase is $250. The Fund reserves the right to waive or modify the initial and
subsequent minimum investment requirements at any time.

The Fund currently intends to offer only shares of Common Stock. Although the
Fund has no present intention to do so, it may in the future offer shares of
preferred stock, subject to the requirements of the Investment Company Act of
1940, as amended (the "1940 Act").

INVESTMENT OBJECTIVE AND POLICIES. The investment objective of the Fund and
the Portfolio is to provide as high a level of current income and preservation
of capital as is consistent with investment in senior secured corporate loans
("Corporate Loans") and senior secured debt securities ("Corporate Debt
Securities") that meet credit standards established by the Portfolio's
investment manager, A I M Advisors, Inc. ("AIM") and its sub-advisor, INVESCO
Senior Secured Management, Inc. (the "Sub-advisor").

The Fund invests all of its investable assets in the Portfolio. Under normal
market conditions, the Portfolio in turn invests primarily in Corporate Loans
and Corporate Debt Securities made to or issued by U.S. or non-U.S. companies
("Borrowers"), including those that: (i) have variable rates which adjust to a
base rate, such as the London InterBank Offered Rate ("LIBOR") on set dates,
typically every 30 days but not to exceed one year; and/or (ii) have interest
rates that float at a margin above a generally recognized base lending rate such
as the prime rate ("Prime Rate") of a designated U.S. bank.

Except during periods pending investment of the net proceeds of the public
offering of the Fund's securities and during temporary defensive periods when,
in the opinion of the Sub-advisor, suitable Corporate Loans and Corporate Debt
Securities are not available for investment by the Portfolio or prevailing
market or economic conditions warrant, the Portfolio invests at least 80% of its
total assets in Corporate Loans and Corporate Debt Securities. Under normal
conditions, the Portfolio may invest up to 20% of its total assets in (i) senior
floating rate loans made and notes issued on an unsecured basis to Borrowers
that meet the credit standards established by AIM and the Sub-advisor
("Unsecured Corporate Loans and Unsecured Corporate Debt Securities"), (ii)
secured or unsecured short-term debt obligations rated within the four highest
rating categories assigned by a nationally recognized statistical rating
organization ("NRSRO"), or determined to be of comparable quality by the
Sub-advisor, (iii) fixed rate obligations of U.S. or non-U.S. companies that
meet the credit standards established by AIM and the Sub-advisor and that the
Portfolio expects to swap to a floating rate structure, or (iv) cash or cash
equivalents. Obligations rated in the fourth highest rating category assigned by
a NRSRO or determined to be of comparable quality by the Sub-advisor, may
include obligations considered to have certain speculative characteristics.

2
<PAGE> 5

cannot be predicted with accuracy. However, it is anticipated that the
Portfolio's Corporate Loans and Corporate Debt Securities will have an expected
average life of three to five years.

In general, the net asset value of the shares of an investment company that
invests primarily in fixed-income securities changes as the general level of
interest rates fluctuates. The Sub-advisor expects the Fund's net asset value to
be relatively stable during normal market conditions because the Portfolio will
consist primarily of floating and variable rate Corporate Loans and Corporate
Debt Securities and to a lesser extent short-term instruments. For this reason,
the Sub-advisor expects the value of the Portfolio to fluctuate less as a result
of interest rate changes than would a portfolio of fixed-rate obligations.
However, because the Portfolio's policy is to invest primarily in floating and
variable rate obligations and variable interest rates only reset periodically,
and because the prevailing spreads between LIBOR, the Prime Rate and other
market rates at which Borrowers may borrow are constantly changing, the
Portfolio's, and thus the Fund's, net asset value may fluctuate from time to
time in the event of an imperfect correlation between the interest rates on
variable rate loans held by the Portfolio and prevailing interest rates. Also,
defaults on Corporate Loans and Corporate Debt Securities could cause a decline
in the Portfolio's and the Fund's net asset value. The Fund's net asset value
also may be affected by changes in the creditworthiness of Borrowers, and, in
the case of Corporate Loans, in the creditworthiness of Lenders or Participants
interposed between the Portfolio and the Borrowers. In the event such
institutions were to default on their obligations, the Portfolio might
experience a reduction of both income and the value of its assets.

The Portfolio invests in a Corporate Loan or Corporate Debt Security only if,
in the Sub-advisor's judgment, the Borrower can meet debt service on such
Corporate Loan or Corporate Debt Security. The Sub-advisor performs its own
credit analysis of the Borrower. The Portfolio invests only in Unsecured
Corporate Loans and Unsecured Corporate Debt Securities made to Borrowers that
meet the credit standards established by the Sub-advisor for Corporate Loans and
Corporate Debt Securities.

A Corporate Loan in which the Portfolio may invest typically is negotiated and
structured by a syndicate of lenders ("Lenders") consisting of commercial banks,
thrift institutions, insurance companies, finance companies or other financial
institutions, one or more of which administers the Loan on behalf of all the
Lenders (the "Agent Bank"). The investment of the Portfolio in a Corporate Loan
may take the form of participation interests in a Corporate Loan ("Participation
Interests") or assignments of a Corporate Loan ("Assignments"). Participation
Interests may be acquired from a Lender or other holders of Participation
Interests ("Participants"). If the Portfolio purchases an Assignment from a
Lender, the Portfolio will generally become a "Lender" for purposes of the
relevant loan agreement, with direct contractual rights thereunder and under any
related collateral security documents in favor of the Lenders. On the other
hand, if the Portfolio purchases a Participation Interest either from a Lender
or a Participant, the Portfolio will not have established any direct contractual
relationship with the Borrower. The Portfolio would be required to rely on the
Lender or the Participant that sold the Participation Interest not only for the
enforcement of the Portfolio's rights against the Borrower but also for the
receipt and processing of payments due to the Portfolio under the Corporate
Loans. The Portfolio is thus subject to the credit risk of both the Borrower and
a Lender or Participant who sold the Participation Interest. The Portfolio will
invest in Loans through the purchase of Participation Interests only if at the
time of investment, the outstanding debt obligations of the Agent Bank and any
Lenders and Participants interposed between the Portfolio and a Borrower are
investment grade; i.e., rated BBB, A-3 or higher by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"), or Baa, P-3
or higher by Moody's Investors Service, Inc. ("Moody's"), or, if unrated, deemed
by the Sub-advisor to be of equivalent quality. See "Investment Objective and
Policies." A description of Moody's and Standard & Poor's ratings is included in
the Appendix to this Prospectus.

Corporate Debt Securities typically are in the form of notes or bonds issued
in a public or private placement in the securities markets. Corporate Debt
Securities will typically have substantially similar terms to Corporate Loans,
but will not be in the form of Participations or Assignments.

The Corporate Loans and Corporate Debt Securities in which the Portfolio
invests primarily consist of direct obligations of a Borrower undertaken to
finance the growth of the Borrower's business internally or externally or to
finance a capital restructuring. A significant portion of such Corporate Loans
and Corporate Debt Securities may be issued in highly leveraged transactions
such as leveraged buy-out loans, leveraged recapitalization loans and other
types of acquisition financing. As noted above, the Portfolio may invest in
Corporate Loans and Corporate Debt Securities that are made to non-U.S.
Borrowers, provided that any such Borrower meets the credit standards
established by the Sub-advisor for U.S. Borrowers. The Portfolio similarly may
invest in loans to and securities issued by U.S. Borrowers with significant
non-dollar-denominated revenues, provided that the loans are U.S.
dollar-denominated or otherwise provide for payment in U.S. dollars. In all
cases where the Corporate Loans or Corporate Debt Securities are not denominated
in U.S. dollars, provision will be made for payments to the Lenders, including
the Portfolio, in U.S. dollars pursuant to foreign currency swap arrangements.
See "Investment Objective and Policies." Loans to such non-U.S. Borrowers or
U.S. Borrowers may involve risks not typically involved in domestic investment,
including fluctuation in foreign exchange rates, future foreign political and
economic developments, and the possible imposition of exchange controls or other
foreign or U.S. governmental laws or restrictions applicable to such loans.

LEVERAGE. Each of the Fund and the Portfolio may borrow money in amounts up to
33 1/3% of the value of its total assets to finance tender offers, for
temporary, extraordinary or emergency purposes, or for the purpose of financing
additional investments. See "Tender Offers." The Fund also may issue one or more
series of preferred shares, although it has no present intention to do so. The
Portfolio or Fund, as the case may be, may borrow to finance additional
investments or issue a class of preferred shares only when it believes that the
return that may be earned on investments purchased with the proceeds of such
borrowings or offerings will exceed the costs, including debt service and
dividend obligations, associated therewith. However, to the extent such costs
exceed the return

3
<PAGE> 6

on the additional investments, the return realized by the Fund's Common
Stockholders will be adversely affected. Leverage also creates other risks for
holders of Common Stock, including the risk of higher volatility of the net
asset value of the Common Stock.

Any issuance of preferred shares by the Fund or any bank borrowings by the
Fund or Portfolio are subject to and will comply with the requirements of the
1940 Act. Pursuant to the 1940 Act, among other things, the Fund may not issue
preferred shares unless immediately after their issuance the Fund is able to
maintain asset coverage of at least 200%. In the case of bank borrowings, asset
coverage of at least 300% must be maintained.

INVESTMENT MANAGERS. The Portfolio is managed by AIM and the Sub-Advisor. AIM
and the Sub-advisor and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-advisor are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
AIM was organized in 1976 and, together with its subsidiaries, currently advises
approximately 90 investment company portfolios.

The Sub-advisor determines the investment composition of the Portfolio, places
all orders for the purchase and sale of securities and for other transactions,
and oversees the settlement of the Portfolio's securities and other
transactions. The Portfolio pays AIM monthly investment management and
administrative fees at the annual rate of 0.95% of the Portfolio's average net
assets, and AIM pays the Sub-advisor monthly investment sub-advisory and
sub-administrative fees at the annual rate of 0.48% of the Portfolio's average
net assets. See "Management."

The Sub-advisor has appointed INVESCO (NY), Inc. ("INVESCO (NY)") as the
investment sub-sub-advisor with respect to certain of the assets of the
Portfolio. The Sub-advisor pays INVESCO (NY) monthly investment sub-sub-advisory
and sub-sub-administrative fees at the annual rate of 0.48% of the Portfolio's
average assets delegated to it for sub-sub-advisory services. See "Management."

ADMINISTRATOR. AIM provides administrative services to the Fund and the
Portfolio. These include, among other things, furnishing officers and office
space, preparing or assisting in preparing materials for stockholders and
regulatory bodies and overseeing the provision of accounting services. The Fund
pays administration fees at the annual rate of 0.25% of the Fund's average net
assets. AIM has appointed INVESCO (NY) as the Fund's sub-administrator.

DISTRIBUTIONS. The Fund distributes substantially all of its net investment
income to holders of Common Stock by declaring dividends daily and paying them
monthly. Substantially all net capital gains, if any, are distributed at least
annually to holders of Common Stock. See "Dividends and Other Distributions."
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), each stockholder
will be deemed to have elected, unless the stockholder instructs otherwise in
writing, to have all dividends and other distributions, net of any applicable
withholding taxes, automatically reinvested in additional shares of Common
Stock. See "Dividend Reinvestment Plan."

TENDER OFFERS. The Fund's Common Stock is not listed on any exchange and it is
not anticipated that a secondary market will develop. In view of this, the Board
of Directors of the Fund intends to consider each quarter making tender offers
(each, a "Tender Offer") to repurchase all or a portion of the Common Stock of
the Fund from stockholders at a price per share equal to the net asset value per
share of the Common Stock determined at the close of business on the day an
offer terminates. The Board is under no obligation to authorize the making of a
Tender Offer and no assurance can be given that in any particular quarter a
Tender Offer will be made. Further, the Fund will not conduct a Tender Offer for
Fund shares unless the Portfolio simultaneously conducts a tender offer for
Portfolio interests. If a Tender Offer is not made, stockholders may be unable
to sell their shares. Shares of Common Stock that have been held for less than
four years and which are repurchased by the Fund pursuant to Tender Offers will
be subject to an early withdrawal charge of up to 3% of the lesser of the then
current net asset value or the original purchase price of the Common Stock being
tendered. See "Tender Offers" and "Early Withdrawal Charge."

SPECIAL CONSIDERATIONS AND RISK FACTORS. There is no secondary market for the
Fund's Common Stock, and the Fund does not expect a secondary market to develop.
Moreover, A I M Distributors, Inc. ("AIM Distributors" or the "Distributor") and
other selected dealers are prohibited under applicable law from making a market
in the Fund's Common Stock while the Fund is making either a public offering of
or a tender offer to repurchase its Common Stock. To the extent a secondary
market does develop, however, investors should be aware that shares of
closed-end funds frequently trade in the secondary market at a discount from
their net asset values. Should there be a secondary market for the Fund's shares
of Common Stock, the market price of the shares may vary from net asset value
from time to time.

Because of the lack of a secondary market and the early withdrawal charge, the
Fund is designed primarily for long-term investors and should not be considered
a vehicle for trading purposes.

The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio, a separate, non-diversified, closed-end investment
company that has the same investment objective as the Fund. As this structure is
different from many other investment companies that directly acquire and manage
their own portfolios, investors should carefully consider this investment
approach.

Each of the Fund and the Portfolio has registered as a "non-diversified"
investment company so that it will be able to invest more than 5% of its assets
in the obligations of any single issuer, subject to the diversification
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), applicable to the Fund (and which the Portfolio intends to
satisfy). Since the Port-

4
<PAGE> 7

folio may invest a relatively high percentage of its assets in the obligations
of a limited number of issuers, the Fund may be more susceptible than a more
widely diversified fund to any single economic, political or regulatory
occurrence. However, the Portfolio has no current intention of investing more
than 15% of its assets in the obligations of any single Borrower.

Although the Portfolio may, consistent with its fundamental limitations,
invest up to 25% of its total assets in the obligations of Borrowers in any
single industry, the Sub-advisor has no current intention of investing more than
20% of the Portfolio's assets in the obligations of Borrowers in any single
industry. However, because the Fund and the Portfolio regard the issuer of a
Corporate Loan as including the Agent Bank and any Intermediate Participant as
well as the Borrower, the Portfolio may be deemed to be concentrated in
securities of issuers in the industry group consisting of financial institutions
and their holding companies, including commercial banks, thrift institutions,
insurance companies and finance companies. As a result, the Portfolio is subject
to certain risks associated with such institutions, including, among other
things, changes in governmental regulation, interest rate levels and general
economic conditions. See "Investment Objective and Policies -- Description of
Participation Interests and Assignments" and "Investment Restrictions."

The Portfolio may invest all or substantially all of its assets in Corporate
Loans, Corporate Debt Securities or other securities that are rated below
investment grade by Moody's, comparably rated by another NRSRO, or, if unrated,
deemed by the Sub-advisor to be of equivalent quality. However, the Sub-advisor
does not expect to invest in any securities rated lower than B3 by Moody's at
the time of investment. Instruments rated below investment grade by Moody's are
regarded as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
Lower quality instruments are also generally considered to be subject to greater
risk than higher quality instruments with regard to a deterioration of general
economic conditions.

The Corporate Loans, Corporate Debt Securities and other debt obligations in
which the Portfolio may invest are subject to the risk of nonpayment of
scheduled interest or principal payments. In the event that a nonpayment occurs,
the Portfolio may experience a decline in the value of the debt obligations,
resulting in a decline in the net asset value of the Fund's shares of Common
Stock. There is no assurance that the liquidation of collateral underlying
Corporate Loans and Corporate Debt Securities will satisfy the related
Borrowers' obligations in the event of nonpayment of scheduled interest or
principal, or that the collateral could be readily resold.

Corporate Loans and Corporate Debt Securities made in connection with highly
leveraged transactions are subject to greater credit risks than other Corporate
Loans and Corporate Debt Securities in which the Portfolio may invest. These
credit risks include a greater possibility of default or bankruptcy of the
Borrower and the assertion that the pledging of collateral to secure the loan
constituted a fraudulent conveyance or preferential transfer that can be
nullified or subordinated to the rights of other creditors of the Borrower under
applicable law. Highly leveraged Corporate Loans and Corporate Debt Securities
also may be less liquid than other Corporate Loans and Corporate Debt
Securities.

Generally, changes in interest rates may affect the market value of debt
investments, resulting in changes in the net asset value of the shares of funds
investing in such investments. It is expected, however, that a portfolio
consisting primarily of floating and variable rate Corporate Loans, Corporate
Debt Securities, Unsecured Corporate Loans, Unsecured Corporate Debt Securities,
and short-term instruments will experience less significant fluctuations in
value as a result of interest rate changes than would a portfolio of fixed rate
obligations. However, prepayments of principal by Borrowers (whether as a result
of a decline in interest rates or excess cash flow) may require that the
Portfolio replace its Corporate Loan, Corporate Debt Security or other
investment with a lower yielding security, which may adversely affect the net
asset value of the Portfolio.

Some or all of the Corporate Loans and Corporate Debt Securities in which the
Portfolio may invest will be considered to be illiquid, which may impair the
Portfolio's ability to realize the full value of its assets in the event of a
voluntary or involuntary liquidation of such assets. To the extent that such
investments are illiquid, the Portfolio may have difficulty disposing of
portfolio securities and the Fund may in turn have difficulty repurchasing
shares of its Common Stock pursuant to Tender Offers, if any. The Board of
Directors of the Fund will consider the liquidity of the Portfolio's securities
in determining whether a Tender Offer should be made by the Fund and, if so, for
what percentage of the Fund's outstanding shares the Tender Offer should be
made. See "Determination of Net Asset Value" for information with respect to the
valuation of illiquid Corporate Loans.

The Fund's Articles of Incorporation include provisions that could have the
effect of limiting the ability of other entities or persons to acquire control
of the Fund or to change the composition of its Board of Directors and could
have the effect of depriving holders of Common Stock of an opportunity to sell
their shares at a premium over prevailing market prices by discouraging a third
party from seeking to obtain control of the Fund. See "Description of Capital
Stock -- Certain Anti-Takeover Provisions of the Articles of Incorporation."

THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.

5
<PAGE> 8

THE FUND
- --------------------------------------------------------------------------------

TABLE OF FEES AND EXPENSES

The following table is intended to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear, directly or
indirectly.

<TABLE>
<S> <C>
Stockholder Transaction Expenses
Sales Load (as a percentage of offering price)............ None
Dividend Reinvestment Plan Fees........................... None
Maximum Early Withdrawal Charge(1)........................ 3.00%
Annual Fund and Allocated Portfolio Operating Expenses (as a
percentage of net assets attributable to Common Stock)(2)
Investment Management and Administrative Fee.............. 0.95%
Administrative Fee(2)..................................... 0.25%
Other Expenses (after reimbursement)(3)................... 0.30%
----
Total Annual Operating Expenses (after
reimbursement).................................... 1.50%
====
</TABLE>

- ---------------

(1)Calculated based on the lesser of the then current net asset value or the
original price of the shares being tendered. The maximum early withdrawal
charge applies to shares sold to the Fund pursuant to a Tender Offer during
the first year after purchase; the early withdrawal charge declines annually
thereafter, reaching zero after four years. See "Early Withdrawal Charge."

(2)See "Management" for additional information.

(3)"Other Expenses," which include transfer agency, custodial, audit and legal
fees, reflect the commitment of AIM to reimburse Fund expenses (exclusive of
brokerage commissions, taxes, interest, and extraordinary expenses) over
1.50% annually. Without such reimbursement, "Other Expenses" and "Total
Annual Operating Expenses" would be approximately 1.32% and 2.52%,
respectively. See "Management."

EXAMPLE. The following Example demonstrates the projected dollar amount of
total cumulative expense that would be incurred over various periods with
respect to a hypothetical investment in the Fund. These amounts are based upon
payment by the Fund and the Portfolio of operating expenses at the levels set
forth in the above table.

An investor would directly or indirectly pay the following expenses of a
$1,000 investment in the Fund, assuming (i) a 5% annual return and (ii)
reinvestment of all dividends and other distributions at net asset value:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Assuming no tender of Common Stock............... $15 $48 $82 $180
Assuming tender and repurchase of Common Stock on
last day of period and imposition of maximum
applicable Early Withdrawal Charge............. $45 $68 $82 $180
</TABLE>

This Example assumes that the percentage amounts listed under Total Annual
Operating Expenses remain the same in the years shown, except, as to "10 Years,"
for the completion of organizational expense amortization over a five year
period. The above tables and the assumption in the Example of a 5% annual return
and reinvestment at net asset value are required by regulation of the Securities
and Exchange Commission applicable to all closed-end investment companies; the
assumed 5% annual return is not a prediction of, and does not represent, the
projected or actual performance of the Common Stock. Actual expenses and annual
rates of return may be more or less than those assumed for purposes of the
Example. In addition, although the Example assumes reinvestment of all dividends
and other distributions at net asset value, participants in the Plan may receive
shares of the Common Stock obtained at or based on the market price in effect at
the time, which may be at, above or below net asset value.

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES, AND
THE FUND'S AND THE PORTFOLIO'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.

6
<PAGE> 9

- --------------------------------------------------------------------------------

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. The financial statements and notes for the fiscal year ended
December 31, 1997, have been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report thereon also is included in the financial statements
attached to this prospectus. The unaudited financial statements and notes, for
the semi-annual period ended June 30, 1998, are also included in the financial
statements attached to this prospectus.

<TABLE>
<CAPTION>
MAY 1, 1997
(COMMENCEMENT
SIX MONTHS ENDED OF OPERATIONS) TO
JUNE 30, 1998 DECEMBER 31, 1997
---------------- -----------------
(UNAUDITED)
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period...................... 10.02 $ 10.00
-------- --------
Income from investment operations:
Net investment income..................................... 0.35 0.46
Net realized and unrealized gain on investments........... (0.02) 0.02
-------- --------
Net increase from investment operations................ 0.33 0.48
-------- --------
Distributions to shareholders:
From net investment income................................ (0.35) (0.46)
-------- --------
Net asset value, end of period.............................. $ 10.00 $ 10.02
======== ========
Total investment return(c)(b)............................... 3.52% 5.04%
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $216,346 $161,697
Ratio of net investment income to average net assets:
With expense reductions(a)................................ 6.92% 7.26%
Without expense reductions(a)............................. 6.73% 6.24%
Ratio of expenses to average net assets:
With expense reimbursement(a)............................. 1.50% 1.50%
Without expense reimbursement(a).......................... 1.69% 2.52%
Ratio of interest expense to average net assets(a).......... 0.01% 0.15%
Portfolio turnover rate(a).................................. 92% 118%
</TABLE>

- ---------------

(a)
Annualized

(b)
Not annualized

<TABLE>
<CAPTION>
AVERAGE MONTHLY
AVERAGE NUMBER OF AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES AMOUNT OF DEBT
OUTSTANDING AT OUTSTANDING OUTSTANDING PER SHARE
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
---------- -------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Six months ended June 30, 1998........... $ -- $184,107 $19,579,305 $0.009
</TABLE>

Average amount of debt outstanding during the period is computed daily.

- --------------------------------------------------------------------------------

USE OF PROCEEDS

The net proceeds from the sale of the Common Stock offered hereby will be
invested on an ongoing basis in the Portfolio, a separate closed-end,
non-diversified management investment company with the same investment objective
as the Fund. The Portfolio will invest the Fund's net proceeds in accordance
with the Fund's and the Portfolio's investment objective and policies on an
ongoing basis, depending on the availability of Corporate Loans and Corporate
Debt Securities and other relevant conditions. Pending such investment, it is
anticipated that the proceeds will be invested in short-term debt obligations or
instruments. See "Investment Objective and Policies."

7
<PAGE> 10

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

The Fund's and the Portfolio's investment objective is to provide as high a
level of current income and preservation of capital as is consistent with
investment in senior secured Corporate Loans and Corporate Debt Securities that
meet credit standards established by AIM and the Sub-advisor. This is a
fundamental policy of the Fund and may not be changed without a vote of a
majority of the outstanding shares of the Fund. There can be no assurance that
the investment objective of the Fund will be achieved.

All of the Fund's assets will be invested in the Portfolio. Under normal
market conditions, the Portfolio will invest at least 80% of its total assets in
interests in Corporate Loans and Corporate Debt Securities made to or issued by
Borrowers (which may include U.S. and non-U.S. companies), including those that:
(i) have variable rates which adjust to a base rate, such as the LIBOR on set
dates, typically every 30 days but not to exceed one year; and/or (ii) have
interest rates that float at a margin above a generally recognized base lending
rate such as the Prime Rate of a designated U.S. bank. The Portfolio may invest
up to 20% of its total assets in any of the following: (a) senior floating rate
loans made and notes issued on an unsecured basis to Borrowers that meet the
credit standards established by AIM and the Sub-advisor ("Unsecured Corporate
Loans" and "Unsecured Corporate Debt Securities"); (b) secured or unsecured
short-term debt obligations including, but not limited to, U.S. Government and
Government agency securities (some of which may not be backed by the full faith
and credit of the United States), money market instruments (such as certificates
of deposit and bankers' acceptances), corporate and commercial obligations (such
as commercial paper and medium-term notes) and repurchase agreements, none of
which are required to be secured but all of which will be (or counterparties
associated therewith will be) investment grade (i.e., rated Baa, P-3 or higher
by Moody's or BBB, A-3 or higher by Standard & Poor's or, if unrated, determined
to be of comparable quality in the judgment of the Sub-advisor); (c) fixed rate
obligations of U.S. or non-U.S. companies that meet the credit standards
established by AIM and the Sub-advisor and that the Portfolio expects to swap
for a floating rate structure; or (d) cash or cash equivalents. Securities rated
Baa, BBB, P-3 or A-3 are considered to have adequate capacity for payment of
principal and interest, but are more susceptible to adverse economic conditions
and, in the case of securities rated BBB or Baa (or comparable unrated
securities), have speculative characteristics. Such securities or cash will not
exceed 20% of the Portfolio's total assets except (i) during interim periods
pending investment of the net proceeds of public offerings of the Fund's
securities, (ii) pending reinvestment of proceeds of the sale of a security, and
(iii) during temporary defensive periods when, in the opinion of the
Sub-adviser, suitable Corporate Loans and Corporate Debt Securities are not
available for investment by the Portfolio or prevailing market or economic
conditions warrant. Investments in Unsecured Corporate Loans and Unsecured
Corporate Debt Securities will be made on the same basis as investments in
Corporate Loans and Corporate Debt Securities as described herein, except with
respect to collateral requirements. To a limited extent, incidental to and in
connection with its lending activities, the Portfolio also may acquire warrants
and other equity securities.

The Portfolio has no restrictions on portfolio maturity, but it is anticipated
that a majority of the Corporate Loans and Corporate Debt Securities in which it
invests will have stated maturities ranging from three to ten years. However,
Corporate Loans usually will require, in addition to scheduled payments of
interest and principal, the prepayment of the Corporate Loan from excess cash
flow, as discussed above, and may permit the Borrower to prepay at its election.
The degree to which Borrowers prepay Corporate Loans, whether as a contractual
requirement or at their election, cannot be predicted with accuracy, and may be
affected by general business conditions, the financial condition of the Borrower
and competitive conditions among lenders, among other factors. However, it is
anticipated that the Portfolio's Corporate Loans and Corporate Debt Securities
will have an expected average life of three to five years. See "Description of
Corporate Loans and Corporate Debt Securities."

Investment in shares of Common Stock of the Fund offers several benefits. The
Fund offers investors the opportunity to receive a high level of current income
by investing in a professionally managed portfolio comprised primarily of
Corporate Loans, a type of investment typically not available directly to
individual investors. In managing the Portfolio, the Sub-advisor provides the
Portfolio, the Fund and its stockholders with professional credit analysis and
portfolio diversification. The Fund also relieves the investor of the burdensome
administrative details involved in managing a portfolio of such investments, if
available to individual investors. The benefits are at least partially offset by
the expenses involved in operating an investment company. Such expenses
primarily consist of the management and administrative fees and operations
costs.

Generally, the net asset value of the shares of an investment company which
invests primarily in fixed-income securities changes as the general levels of
interest rates fluctuate. When interest rates decline, the value of a
fixed-income portfolio can be expected to decline. The Sub-advisor expects the
Fund's net asset value to be relatively stable during normal market conditions,
because the Portfolio in which the Fund's assets are invested will consist
primarily of floating and variable rate Corporate Loans and Corporate Debt
Securities, of fixed rate Corporate Loans and Corporate Debt Securities hedged
by interest rate swap transactions and of short-term instruments. For these
reasons, the Sub-advisor expects the value of the Portfolio to fluctuate
significantly less as a result of interest rate changes than would a portfolio
of fixed-rate obligations. However, because variable interest rates only reset
periodically, the Fund's net asset value may fluctuate from time to time in the
event of an imperfect correlation between either the interest rates on variable
rate loans in the Portfolio or the variable interest rates on nominal amounts in
the Portfolio's interest rate swap transactions, and prevailing interest rates.
Also, a default on a Corporate Loan or Corporate Security in which the Portfolio
has invested or a sudden and extreme increase in prevailing interest rates may
cause a decline in the Fund's net asset value. Conversely, a sudden and extreme
decline in interest rates could result in an increase in the Fund's net asset
value.

8
<PAGE> 11

Each of the Fund and the Portfolio is classified as non-diversified within the
meaning of the 1940 Act, which means that neither the Fund nor the Portfolio is
limited by such Act in the proportion of its assets that it may invest in
securities of a single issuer. However, the Portfolio's investments will be
limited so as to enable the Fund to qualify as a "regulated investment company"
("RIC") for purposes of the Code. Accordingly, the Portfolio will limit its
investments so that, at the close of each quarter of its taxable year, (i) not
more than 25% of the value of its total assets will be invested in the
securities (including Corporate Loans but excluding U.S. Government securities)
of a single issuer and (ii) with respect to 50% of the value of its total
assets, its investments will consist of cash, U.S. Government securities and
securities of other issuers limited, in respect of any one issuer, to not more
than 5% of the value of its total assets and not more than 10% of the issuer's
outstanding voting securities. To the extent the Portfolio assumes large
positions in the securities of a small number of issuers, the Fund's yield may
fluctuate to a greater extent than that of a diversified company as a result of
changes in the financial condition or in the market's assessment of the issuers.
However, the Portfolio has no current intention of investing more than 15% of
its assets in the obligations of any single Borrower.

DESCRIPTION OF CORPORATE LOANS AND CORPORATE DEBT SECURITIES

The Corporate Loans and Corporate Debt Securities in which the Portfolio
invests primarily consist of obligations of a Borrower undertaken to finance the
growth of the Borrower's business internally or externally, or to finance a
capital restructuring. Corporate Loan and Corporate Debt Securities may also
include senior obligations of a Borrower issued in connection with a
restructuring pursuant to Chapter 11 of the United States Bankruptcy Code
provided that such senior obligations meet the credit standards established by
AIM and the Sub-advisor. It is anticipated that a significant portion of such
Corporate Loans and Corporate Debt Securities may be issued in highly leveraged
transactions such as leveraged buy-out loans, leveraged recapitalization loans
and other types of acquisition financing. Such Corporate Loans and Corporate
Debt Securities present special risks. See "Special Considerations and Risk
Factors." Such Corporate Loans may be structured to include both term loans,
which are generally fully funded at the time of the Portfolio's investment, and
revolving credit facilities, which would require the Portfolio to make
additional investments in the Corporate Loans as required under the terms of the
credit facility. Such Corporate Loans may also include receivables purchase
facilities, which are similar to revolving credit facilities secured by a
Borrower's receivables.

The Portfolio may invest in Corporate Loans and Corporate Debt Securities
which are made to non-U.S. Borrowers, provided that the loans are U.S.
dollar-denominated or otherwise provide for payment in U.S. dollars, and any
such Borrower meets the credit standards established by AIM and the Sub-advisor
for U.S. Borrowers. The Portfolio similarly may invest in Corporate Loans and
Corporate Debt Securities made to U.S. Borrowers with significant non-U.S.
dollar-denominated revenues, provided that the loans are U.S. dollar-denominated
or otherwise provide for payment to the Portfolio in U.S. dollars. In all cases
where the Corporate Loans or Corporate Debt Securities are not denominated in
U.S. dollars, provision will be made for payments to the Lenders, including the
Portfolio, in U.S. dollars pursuant to foreign currency swap arrangements. Loans
to such non-U.S. Borrowers or U.S. Borrowers may involve risks not typically
involved in domestic investment, including fluctuation in foreign exchange
rates, future foreign political and economic developments, and the possible
imposition of exchange controls or other foreign or U.S. governmental laws or
restrictions applicable to such loans. With respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
the Portfolio's investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment position. In
addition, information with respect to non-U.S. Borrowers may differ from that
available with respect to U.S. Borrowers, since foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to U.S.
Borrowers.

The Corporate Loans and Corporate Debt Securities in which the Portfolio
invests will, in most instances, hold the most senior position in the
capitalization structure of the Borrower, and in any case will, in the judgment
of the Sub-advisor, be in the category of senior debt of the Borrower. Each
Corporate Loan and Corporate Debt Security will generally be secured by
collateral the value of which generally will be determined by reference to
financial statements of the Borrower, by an independent appraisal, by obtaining
the market value of such collateral (e.g., cash or securities) if it is readily
ascertainable and/or by other customary valuation techniques considered
appropriate in the judgment of the Sub-advisor. The Sub-advisor generally
expects the value of the collateral securing a Corporate Loan or Corporate Debt
Security to be greater than the value of such Corporate Loan or Corporate Debt
Security. However, the value of such collateral may be equal to or less than the
value of the Corporate Loan or Corporate Debt Security that it secures.
Accordingly, in the event of a default, the Fund may incur a loss. The ability
of the Lender to have access to the collateral may be limited by bankruptcy and
other insolvency laws. Under certain circumstances, the collateral may be
released with the consent of the Agent Bank and Lenders or pursuant to the terms
of the underlying credit agreement with the Borrower or bond indenture. There is
no assurance that the liquidation of the collateral would satisfy the Borrower's
obligation in the event of nonpayment of scheduled interest or principal, or
that the collateral could be readily liquidated. As a result, the Portfolio
might not receive payments to which it is entitled and thereby may experience a
decline in the value of the investment and, possibly, its net asset value.

In the case of highly leveraged loans, a Borrower generally is required to
pledge collateral which may include (i) working capital assets, such as accounts
receivable or inventory, (ii) tangible fixed assets, such as real property,
buildings and equipment, (iii) intangible assets, such as trademarks, copyrights
and patent rights and (iv) security interests in securities of subsidiaries or
affiliates. In the case of Corporate Loans to or Corporate Debt Securities of
privately held companies, the companies' owners may pledge

9
<PAGE> 12

additional security in the form of guarantees and/or other securities that they
own. There may be temporary periods in the course of providing financing to a
Borrower where the collateral for the loan consists of common stock having a
value not less than 200% of the value of the loan on the date the loan is made.
Under such circumstances, the Borrower generally proceeds with a subsequent
transaction which will permit it to pledge assets of a company as collateral for
the loan, although there can be no assurance that the Borrower will be able to
effect such transaction.

The rate of interest payable on floating or variable rate Corporate Loans or
Corporate Debt Securities is established as the sum of a base lending rate plus
a specified margin. These base lending rates generally are LIBOR, the Prime Rate
of a designated U.S. bank, or another base lending rate used by commercial
lenders. The interest rate on Prime Rate-based Corporate Loans and Corporate
Debt Securities floats daily as the Prime Rate changes, while the interest rate
on LIBOR-based Corporate Loans and Corporate Debt Securities is reset
periodically, typically every 30 days to one year. Certain of the floating or
variable rate Corporate Loans and Corporate Debt Securities in which the
Portfolio will invest may permit the Borrower to select an interest rate reset
period of up to one year. A portion of the Portfolio's investments may consist
of Corporate Loans with interest rates that are fixed for the term of the loan.
Investment in Corporate Loans and Corporate Debt Securities with longer interest
rate reset periods or fixed interest rates may increase fluctuations in the
Fund's net asset value as a result of changes in interest rates. However the
Fund will attempt to hedge all of its fixed-rate Corporate Loans and Corporate
Debt Securities against fluctuations in interest rates by entering into interest
rate swap transactions. The Portfolio also will attempt to maintain a portfolio
of Corporate Loans and Corporate Debt Securities that will have a dollar
weighted average period to the next interest rate adjustment of no more than 90
days.

Corporate Loans and Corporate Debt Securities traditionally have been
structured so that Borrowers pay higher margins when they elect LIBOR, in order
to permit lenders to obtain generally consistent yields on Corporate Loans and
Corporate Debt Securities, regardless of whether Borrowers select the LIBOR
option, or the Prime-based option. In recent years, however, the differential
between the lower LIBOR base rates and the higher Prime Rate base rates
prevailing in the commercial bank markets has widened to the point where the
higher margins paid by Borrowers for LIBOR pricing options do not currently
compensate for the differential between the Prime Rate and the LIBOR rates.
Consequently, Borrowers have increasingly selected the LIBOR-based pricing
option, resulting in a yield on Corporate Loans and Corporate Debt Securities
that is consistently lower than the yield would be if Borrowers selected the
Prime Rate-based pricing option. This trend will significantly limit the ability
of the Fund to achieve a net return to stockholders that consistently
approximates the average published prime rate of leading U.S. banks. At the date
of this Prospectus, the Sub-advisor cannot predict any significant change in
this market trend.

The Portfolio may receive and/or pay certain fees in connection with its
lending activities. These fees are in addition to interest payments received and
may include facility fees, commitment fees, commissions and prepayment penalty
fees. When the Portfolio buys a Corporate Loan or Corporate Debt Security it may
receive a facility fee and when it sells a Corporate Loan or Corporate Debt
Security may pay a facility fee. In certain circumstances, the Portfolio may
receive a prepayment penalty fee on the prepayment of a Corporate Loan or
Corporate Debt Security by a Borrower. In connection with the acquisition of
Corporate Loans or Corporate Debt Securities, the Portfolio may also acquire
warrants and other equity securities of the Borrower or its affiliates. The
acquisition of such equity securities will only be incidental to the Portfolio's
purchase of a Corporate Debt Security or an interest in a Corporate Loan.

The Portfolio invests in a Corporate Loan or Corporate Debt Security only if,
in the Sub-advisor's judgment, the Borrower can meet debt service on such loan
or security. In addition, the Sub-advisor considers other factors deemed by it
to be appropriate to the analysis of the Borrower and the Corporate Loan or
Corporate Debt Security. Such factors include financial ratios of the Borrower
such as interest coverage, fixed charge coverage and leverage ratios. In its
analysis of these factors, the Sub-advisor also will be influenced by the nature
of the industry in which the Borrower is engaged, the nature of the Borrower's
assets and the Sub-advisor's assessment of the general quality of the Borrower.
The factors utilized have been reviewed by the Portfolio's Board of Trustees.

The primary consideration in selecting such Corporate Loans and Corporate Debt
Securities for investment by the Portfolio is the creditworthiness of the
Borrower. In evaluating Corporate Loans and Corporate Debt Securities, the
quality ratings assigned to other debt obligations of a Borrower may not be a
determining factor, since they will often be subordinated to the Corporate Loans
or Corporate Debt Securities. Instead, the Sub-advisor performs its own
independent credit analysis of the Borrower, and of the collateral structure for
the loan or security. In making this analysis, the Sub-advisor utilizes any
offering materials and in the case of Corporate Loans, information prepared and
supplied by the Agent Bank, Lender or Participant from whom the Portfolio
purchases its Participation Interest in a Corporate Loan. The Sub-advisor's
analysis will continue on an ongoing basis for any Corporate Loans and Corporate
Debt Securities in which the Portfolio has invested. Although the Sub-advisor
will use due care in making such analysis, there can be no assurance that such
analysis will disclose factors which may impair the value of the Corporate Loan
or Corporate Debt Security.

Corporate Loans and Corporate Debt Securities made in connection with highly
leveraged transactions are subject to greater credit risks than other Corporate
Loans and Corporate Debt Securities in which the Portfolio may invest. These
credit risks include a greater possibility of default or bankruptcy of the
Borrower and the assertion that the pledging of collateral to secure the loan
constituted a fraudulent conveyance or preferential transfer which can be
nullified or subordinated to the rights of other creditors of the Borrower under
applicable law. Highly leveraged Corporate Loans and Corporate Debt Securities
also may be less liquid than other Corporate Loans and Corporate Debt
Securities.

A Borrower also must comply with various restrictive covenants contained in
any Corporate Loan agreement between the Borrower and the lending syndicate
("Corporate Loan Agreement") or in any trust indenture or comparable document in
connection with a

10
<PAGE> 13

Corporate Debt Security ("Corporate Debt Security Document"). Such covenants, in
addition to requiring the scheduled payment of interest and principal, may
include restrictions on dividend payments and other distributions to
stockholders, provisions requiring the Borrower to maintain specific financial
ratios or relationships and limits on total debt. In addition, the Corporate
Loan Agreement or Corporate Debt Security Document may contain a covenant
requiring the Borrower to prepay the Corporate Loan or Corporate Debt Security
with any excess cash flow. Excess cash flow generally includes net cash flow
after scheduled debt service payments and permitted capital expenditures, among
other things, as well as the proceeds from asset dispositions or sales of
securities. A breach of a covenant (after giving effect to any cure period) in a
Corporate Loan Agreement which is not waived by the Agent Bank and the lending
syndicate normally is an event of acceleration; i.e., the Agent Bank has the
right to demand immediate repayment in full of the outstanding Corporate Loan.
Acceleration may also occur in the case of the breach of a covenant in a
Corporate Debt Security Document.

It is expected that a majority of the Corporate Loans and Corporate Debt
Securities held by the Portfolio will have stated maturities ranging from three
to ten years. However, such Corporate Loans and Corporate Debt Securities
usually will require, in addition to scheduled payments of interest and
principal, the prepayment of the Corporate Loan or Corporate Debt Security from
excess cash flow, as discussed above, and may permit the Borrower to prepay at
its election. The degree to which Borrowers prepay Corporate Loans and Corporate
Debt Securities, whether as a contractual requirement or at their election, may
be affected by general business conditions, the financial condition of the
Borrower and competitive conditions among lenders, among other factors.
Accordingly, prepayments cannot be predicted with accuracy. Upon a prepayment,
the Portfolio may receive both a prepayment penalty fee from the prepaying
Borrower and a facility fee on the purchase of a new Corporate Loan or Corporate
Debt Security with the proceeds from the prepayment of the former. Such fees may
help mitigate any adverse impact on the yield on the Portfolio's investments
which may arise as a result of prepayments and the reinvestment of such proceeds
in Corporate Loans or Corporate Debt Securities bearing lower interest rates.

Loans to non-U.S. Borrowers and to U.S. Borrowers with significant non-U.S.
dollar-denominated revenues may provide for conversion of all or part of the
loan from a U.S. dollar-denominated obligation into a foreign currency
obligation at the option of the Borrower. The Portfolio may invest in Corporate
Loans and Corporate Debt Securities which have been converted into non-U.S.
dollar-denominated obligations only when provision is made for payments to the
lenders in U.S. dollars pursuant to foreign currency swap arrangements. Foreign
currency swaps involve the exchange by the lenders, including the Portfolio,
with another party (the "counterparty") of the right to receive the currency in
which the loans are denominated for the right to receive U.S. dollars. The
Portfolio will enter into a transaction subject to a foreign currency swap only
if, at the time of entering into such swap, the outstanding debt obligations of
the counterparty are investment grade, i.e., rated BBB or A-3 or higher by
Standard & Poor's or Baa or P-3 or higher by Moody's or determined to be of
comparable quality in the judgment of the Sub-advisor. The amounts of U.S.
dollar payments to be received by the lenders and the foreign currency payments
to be received by the counterparty are fixed at the time the swap arrangement is
entered into. Accordingly, the swap protects the Portfolio from the fluctuations
in exchange rates and locks in the right to receive payments under the loan in a
predetermined amount of U.S. dollars. If there is a default by the counterparty,
the Portfolio will have contractual remedies pursuant to the swap arrangements;
however, the U.S. dollar value of the Portfolio's right to foreign currency
payments under the loan will be subject to fluctuations in the applicable
exchange rate to the extent that a replacement swap arrangement is unavailable
or the Portfolio is unable to recover damages from the defaulting counterparty.
If the Borrower defaults on or prepays the underlying Corporate Loan or
Corporate Debt Security, the Portfolio may be required pursuant to the swap
arrangements to compensate the counterparty to the extent of fluctuations in
exchange rates adverse to the counterparty. In the event of such a default or
prepayment, an amount of cash or high grade liquid debt securities having an
aggregate net asset value at least equal to the amount of compensation that must
be paid to the counterparty pursuant to the swap arrangements will be maintained
in a segregated account by the Portfolio's custodian.

DESCRIPTION OF PARTICIPATION INTERESTS AND ASSIGNMENTS

A Corporate Loan in which the Portfolio may invest typically is originated,
negotiated and structured by a syndicate of Lenders consisting of commercial
banks, thrift institutions, insurance companies, finance companies or other
financial institutions, which is administered on behalf of the syndicate by an
Agent Bank. The investment of the Portfolio in a Corporate Loan may take the
form of Participation Interests or Assignments. Participation Interests may be
acquired from a Lender or other Participants. If the Portfolio purchases a
Participation Interest either from a Lender or a Participant, the Portfolio will
not have established any direct contractual relationship with the Borrower. The
Portfolio would be required to rely on the Lender or the Participant that sold
the Participation Interest not only for the enforcement of the Portfolio's
rights against the Borrower but also for the receipt and processing of payments
due to the Portfolio under the Corporate Loans. The Portfolio is thus subject to
the credit risk of both the Borrower and a Participant. Lenders and Participants
interposed between the Portfolio and a Borrower, together with Agent Banks, are
referred to herein as "Intermediate Participants."

On the other hand, if the Portfolio purchases an Assignment from a Lender, the
Portfolio will generally become a "Lender" for purposes of the relevant loan
agreement, with direct contractual rights thereunder and under any related
collateral security documents in favor of the Lenders. An Assignment from a
Lender gives the Portfolio the right to receive payments of principal and
interest and other amount directly from the Borrower and to enforce its rights
as a Lender directly against the Borrower. The Portfolio will not act as an
Agent Bank guarantor, sole negotiator or sole structuror with respect to a
Corporate Loan.

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<PAGE> 14

Because it may be necessary to assert through an Intermediate Participant such
rights as may exist against the Borrower, in the event the Borrower fails to pay
principal and interest when due, the Portfolio may be subject to delays,
expenses and risks that are greater than those that would be involved if the
Portfolio could enforce its rights directly against the Borrower. Moreover,
under the terms of a Participation, the Portfolio may be regarded as a creditor
of the Intermediate Participant (rather than of the Borrower), so that the
Portfolio may also be subject to the risk that the Intermediate Participant may
become insolvent. Similar risks may arise with respect to the Agent Bank, as
described below. Further, in the event of the bankruptcy or insolvency of the
Borrower, the obligation of the Borrower to repay the Corporate Loan may be
subject to certain defenses that can be asserted by such Borrower as a result of
improper conduct by the Agent Bank or Intermediate Participant. The Portfolio
will invest in Corporate Loans only if, at the time of investment, all
outstanding debt obligations of the Agent Bank and Intermediate Participants are
investment grade, i.e., rated BBB or A-3 or higher by Standard & Poor's or Baa
or P-3 or higher by Moody's or determined to be of comparable quality in the
judgment of the Sub-advisor.

The Portfolio has no current intention of investing more than 20% of its
assets in the obligations of Borrowers in any single industry. However, because
the Fund and the Portfolio will regard the issuer of a Corporate Loan as
including the Agent Bank and any Intermediate Participant as well as the
Borrower, the Portfolio may be deemed to be concentrated in securities of
issuers in the industry group consisting of financial institutions and their
holding companies, including commercial banks, thrift institutions, insurance
companies and finance companies. As a result, the Portfolio is subject to
certain risks associated with such institutions. Banking and thrift institutions
are subject to extensive governmental regulations which may limit both the
amounts and types of loans and other financial commitments which such
institutions may make and the interest rates and fees which such institutions
may charge. The profitability of these institutions is largely dependent on the
availability and cost of capital funds, and has shown significant recent
fluctuation as a result of volatile interest rate levels. In addition, general
economic conditions are important to the operations of these institutions, with
exposure to credit losses resulting from possible financial difficulties of
borrowers potentially having an adverse effect. Insurance companies are also
affected by economic and financial conditions and are subject to extensive
government regulation, including rate regulation. The property and casualty
companies may be exposed to material risks, including reserve inadequacy, latent
health exposure and inability to collect from their reinsurance carriers. The
financial services area is currently undergoing relatively rapid change as
existing distinctions between financial service segments become less clear. In
this regard, recent business combinations have included insurance, finance and
securities brokerage under single ownership. Moreover, the federal laws
generally separating commercial and investment banking are currently being
studied by Congress.

In a typical Corporate Loan, the Agent Bank administers the terms of the
Corporate Loan Agreement and is responsible for the collection of principal and
interest and fee payments from the Borrower and the apportionment of these
payments to the credit of all lenders which are parties to the Corporate Loan
Agreement. The Portfolio generally will rely on the Agent Bank or an
Intermediate Participant to collect its portion of the payments on the Corporate
Loan. Furthermore, the Portfolio will rely on the Agent Bank to use appropriate
creditor remedies against the Borrower. Typically, under Corporate Loan
Agreements, the Agent Bank is given broad discretion in enforcing the Corporate
Loan Agreement, and is obligated to use only the same care it would use in the
management of its own property. The Borrower compensates the Agent Bank for
these services. Such compensation may include special fees paid on structuring
and funding the Corporate Loan and other fees paid on a continuing basis.

In the event that an Agent Bank becomes insolvent, or has a receiver,
conservator, or similar official appointed for it by the appropriate bank
regulatory authority or becomes a debtor in a bankruptcy proceeding, assets held
by the Agent Bank under the Corporate Loan Agreement should remain available to
holders of Corporate Loans. If, however, assets held by the Agent Bank for the
benefit of the Portfolio were determined by an appropriate regulatory authority
or court to be subject to the claims of the Agent Bank's general or secured
creditors, the Portfolio might incur certain costs and delays in realizing
payment on a Corporate Loan or suffer a loss of principal and/or interest. In
situations involving Intermediate Participants, similar risks may arise as
described above.

Intermediate Participants may have certain obligations pursuant to a Corporate
Loan Agreement, which may include the obligation to make future advances to the
Borrower in connection with revolving credit facilities in certain
circumstances. The Portfolio currently intends to reserve against such
contingent obligations by segregating sufficient investments in high quality,
short-term, liquid instruments. The Portfolio will not invest in Corporate Loans
that would require the Portfolio to make any additional investments in
connection with such future advances if such commitments would exceed 20% of the
Portfolio's total assets or would cause the Portfolio to fail to meet the
diversification requirements described under "Investment Objective and
Policies."

ILLIQUID SECURITIES

Corporate Loans and Corporate Debt Securities are, at present, not readily
marketable and may be subject to restrictions on resale. Although Corporate
Loans and Corporate Debt Securities are transferred among certain financial
institutions, as described above, the Corporate Loans and Corporate Debt
Securities in which the Portfolio invests do not have the liquidity of
conventional investment grade debt securities traded in the secondary market and
may be considered illiquid. As the market for Corporate Loans and Corporate Debt
Securities matures, the Sub-advisor expects that liquidity will improve. The
Portfolio has no limitation on the amount of its investments which are not
readily marketable or are subject to restrictions on resale. Such investments,
which may be considered illiquid, may affect the Fund's ability to realize the
net asset value in the event of a voluntary or involuntary liquidation of its
assets. To the extent that such investments are illiquid, the Portfolio may have
difficulty disposing of securities in order to enable the Fund to repurchase
shares of its Common Stock pursuant to Tender Offers, if any. The Board of
Directors of the Fund will consider the liquidity of

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<PAGE> 15

the Portfolio's investments in determining whether a Tender Offer should be made
by the Fund. See "Net Asset Value" for information with respect to the valuation
of illiquid Corporate Loans and Corporate Debt Securities.

OTHER INVESTMENT POLICIES

The Fund and the Portfolio have adopted certain other policies as set forth
below:

LEVERAGE. Each of the Fund and the Portfolio is authorized to borrow money in
amounts of up to 33 1/3% of the value of its total assets at the time of such
borrowings. Borrowings by the Fund and the Portfolio (commonly known as
"leveraging") create an opportunity for greater total return but, at the same
time, increase exposure to capital risk. In addition, borrowed funds are subject
to interest costs that may offset or exceed the return earned on the borrowed
funds. Neither the Fund nor the Portfolio has any current intention of borrowing
to finance additional investments. See "Special Considerations and Risk
Factors -- Effects of Leverage."

REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to its permitted investments but currently intends to do so only with
member banks of the Federal Reserve System or with primary dealers in U.S.
Government securities. Under a repurchase agreement, the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. The Portfolio's repurchase agreements will
provide that the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement, and will be marked to market daily.
The repurchase date usually is within seven days of the original purchase date.
Repurchase agreements are deemed to be loans under the 1940 Act. In all cases,
the Sub-advisor must be satisfied with the creditworthiness of the other party
to the agreement before entering into a repurchase agreement. In the event of
the bankruptcy (or other insolvency proceeding) of the other party to a
repurchase agreement, the Portfolio might experience delays in recovering its
cash. To the extent that, in the meantime, the value of the securities the
Portfolio purchases may have declined, the Portfolio could experience a loss.

LENDING OF PORTFOLIO SECURITIES. The Portfolio may from time to time lend
securities from its portfolio with a value not exceeding 33 1/3% of its total
assets to banks, brokers and other financial institutions and receive collateral
in cash or securities issued or guaranteed by the U.S. Government. Such
collateral will be maintained at all times in an amount equal to at least 100%
of the current market value of the loaned securities. This limitation is a
fundamental policy, and it may not be changed without the approval of the
holders of a majority of the Portfolio's outstanding voting securities, as
defined in the 1940 Act. The purpose of such loans is to permit the borrower to
use such securities for delivery to purchasers when such borrower has sold
short. If cash collateral is received by the Portfolio, it is invested in
short-term money market securities, and a portion of the yield received in
respect of such investment is retained by the Portfolio. Alternatively, if
securities are delivered to the Portfolio as collateral, the Portfolio and the
borrower negotiate a rate for the loaned premium to be received by the Portfolio
for lending its portfolio securities. In either event, the total yield on the
Portfolio is increased by loans of its securities. The Portfolio will have the
right to regain record ownership of loaned securities to exercise beneficial
rights such as voting rights, subscription rights and rights to dividends,
interest or other distributions. Such loans are terminable at any time. The
Portfolio may pay reasonable finder's, administrative and custodial fees in
connection with such loans. In the event that the borrower defaults on its
obligation to return borrowed securities, because of insolvency or otherwise,
the Portfolio could experience delays and costs in gaining access to the
collateral and could suffer a loss to the extent that the value of the
collateral falls below the market value of the borrowed securities.

"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The Portfolio may also
purchase and sell interests in Corporate Loans and Corporate Debt Securities and
other portfolio securities on a "when issued" and "delayed delivery" basis. No
income accrues to the Portfolio on such interests or securities in connection
with such transactions prior to the date the Portfolio actually takes delivery
of such interests or securities. These transactions are subject to market
fluctuation; the value of the interests in Corporate Loans and Corporate Debt
Securities and other portfolio debt securities at delivery may be more or less
than their purchase price, and yield generally available on such interests or
securities when delivery occurs may be higher than yields on the interests or
securities obtained pursuant to such transactions. Because the Portfolio relies
on the buyer or seller, as the case may be, to consummate the transaction,
failure by the other party to complete the transaction may result in the
Portfolio missing the opportunity of obtaining a price or yield considered to be
advantageous. When the Portfolio is the buyer in such a transaction, however, it
will segregate with its custodian, cash or other liquid assets having an
aggregate value equal to the amount of such purchase commitments until payment
is made. The Portfolio will make commitments to purchase such interest or
securities on such basis only with the intention of actually acquiring these
interests or securities, but the Portfolio may sell such interests or securities
prior to the settlement date if such sale is considered to be advisable. To the
extent the Portfolio engaged in "when issued" and "delayed delivery"
transactions, it will do so for the purpose of acquiring interests or securities
for the Portfolio consistent with the Fund's investment objective and policies
and not for the purpose of investment leverage. No specific limitation exists as
to the percentage of the Portfolio's assets which may be used to acquire
securities on a "when issued" or "delayed delivery" basis.

INTEREST RATE HEDGING TRANSACTIONS. Certain federal income tax requirements
may limit the Portfolio's ability to engage in interest rate hedging
transactions. Gains from transactions in interest rate hedges distributed to
stockholders will be taxable as ordinary income or, in certain circumstances, as
long-term capital gains. See "Taxes."

The Portfolio will enter into interest rate swaps in order to hedge all of its
fixed rate Corporate Loans and Corporate Debt Securities against fluctuations in
interest rates. Interest rate swaps involve the exchange by the Portfolio with
another party of their respective commitments to pay or receive interest, such
as an exchange of fixed rate payments for floating rate payments. For example,
if the

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<PAGE> 16

Portfolio holds a Corporate Loan or Corporate Security with an interest rate
that is reset only once each year, it may swap the right to receive interest at
this fixed rate for the right to receive interest at a rate that is reset every
week. This would enable the Portfolio to offset a decline in the value of the
Corporate Loan or Corporate Debt Security due to rising interest rates, but
would also limit its ability to benefit from falling interest rates.

Inasmuch as these interest rate hedging transactions are entered into for good
faith hedging purposes, the Sub-advisor believes that such obligations do not
constitute senior securities and, accordingly, will not treat them as being
subject to its borrowing restrictions. The Portfolio usually will enter into
interest rate swaps on a net basis, i.e., the two payment streams are netted
out, with the Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of the
Portfolio's obligations over its entitlements with respect to each interest rate
swap will be accrued on a daily basis, and an amount of cash or other liquid
assets having an aggregate net asset value at least equal to the accrued excess
will be segregated by the Portfolio's custodian. If the interest rate swap
transaction is entered into on other than a net basis, the full amount of the
Portfolio's obligations will be accrued on a daily basis, and the full amount of
the Portfolio's obligations will be segregated by the Portfolio's custodian. The
Portfolio will not enter into any interest rate hedging transaction unless the
Sub-advisor considers the credit quality of the unsecured senior debt or the
claims-paying ability of the other party thereto to be investment grade. If
there is a default by the other party to such a transaction, the Portfolio will
have contractual remedies pursuant to the agreements related to the transaction
but such remedies may be subject to bankruptcy and insolvency laws which could
affect the Portfolio's rights as a creditor. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, many portions of the swap market have become
relatively liquid in comparison with other similar instruments traded in the
interbank market. In addition, although the terms of interest rate swaps may
provide for termination, there can be no assurance the Portfolio will be able to
terminate an interest rate swap or to sell or offset interest rate caps or
floors that it has purchased.

The use of interest rate hedges is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio transactions. If the Sub-advisor is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of the Fund would diminish compared with what it would
have been if these investment techniques were not used.

Except as noted above, there is no limit on the amount of interest rate
hedging transactions that may be entered into by the Portfolio. These
transactions do not involve the delivery of securities or other underlying
assets or principal. Accordingly, the risk of loss with respect to interest rate
hedges is limited to the net amount of interest payments that the Portfolio is
contractually obligated to make. If the Corporate Loan underlying an interest
rate swap is prepaid and the Portfolio continues to be obligated to make
payments to the other party to the swap, the Portfolio would have to make such
payments from another source. If the other party to an interest rate swap
defaults, the Portfolio's risk of loss consists of the net amount of interest
payments that the Portfolio contractually is entitled to receive. Since interest
rate transactions are individually negotiated, the Sub-advisor expects to
achieve an acceptable degree of correlation between the Portfolio's rights to
receive interest on Participation Interests and its rights and obligations to
receive and pay interest pursuant to interest rate swaps.

- --------------------------------------------------------------------------------

INVESTMENT RESTRICTIONS

The following are fundamental investment restrictions of the Fund and the
Portfolio and, prior to issuance of any preferred stock, may not be changed
without the approval, respectively, of the holders of a majority of the Fund's
or the Portfolio's outstanding shares of Common Stock (which for this purpose
and under the 1940 Act means the lesser of (i) 67% of the shares of Common Stock
represented at a meeting at which more than 50% of the outstanding shares of
Common Stock are represented or (ii) more than 50% of the outstanding shares).
Subsequent to any issuance of a class of preferred stock, the following
investment restrictions could not be changed without the approval of a majority
of the outstanding shares of Common Stock and of the preferred stock, voting
together as a class, and the approval of a majority of the outstanding shares of
preferred stock, voting separately by class. The Fund and the Portfolio each may
not:

1. Borrow money or issue senior securities, except as permitted by
Section 18 of the 1940 Act.

2. Purchase or sell real estate; provided that the Fund and the
Portfolio may invest in securities secured by real estate or interests
therein or issued by companies which invest in real estate or interests
therein.

3. Underwrite securities of other issuers except insofar as the Fund
or the Portfolio may be deemed an underwriter under the Securities Act of
1933 in selling portfolio securities.

4. Make loans to other persons, except that the Fund and the Portfolio
may invest in loans (including Assignments and Participations, and
including secured or unsecured Corporate Loans), purchase debt securities,
enter into repurchase agreements, and lend its portfolio securities.

5. Invest more than 25% of its total assets in the securities of
issuers in any one industry; provided that this limitation shall not apply
with respect to obligations issued or guaranteed by the U.S. Government or
by its agencies or instrumentalities; and provided further that the Fund
and the Portfolio may each invest more than 25% of its assets in securities
of issuers in the indus-

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<PAGE> 17

try group consisting of financial institutions and their holding companies,
including commercial banks, thrift institutions, insurance companies and
finance companies. For purposes of this restriction, the term "issuer"
includes the Borrower, the Agent Bank and any Intermediate Participant (as
defined under "Investment Objective and Policies Description of
Participation Interests and Assignments").

6. Purchase or sell physical commodities, but the Fund and the
Portfolio each may purchase, sell or enter into financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contracts or derivative instruments.

An additional investment restriction adopted by the Fund and the Portfolio,
which may be changed by their respective Board of Directors or Board of
Trustees, provides that neither the Fund nor the Portfolio may mortgage, pledge,
hypothecate or in any manner transfer, as security for indebtedness, any
securities owned or held by the Fund or the Portfolio except as may be necessary
in connection with hedging techniques involving interest rate transactions,
foreign currency swap transactions relating to non-U.S. dollar-denominated loans
and permitted borrowings by the Fund and the Portfolio.

If a percentage restriction on investment policies or the investment or use of
assets set forth above is adhered to at the time a transaction is effected,
later changes in percentage resulting from changing values will not be
considered a violation.

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SPECIAL CONSIDERATIONS AND RISK FACTORS

EFFECTS OF LEVERAGE. Each of the Fund and the Portfolio may borrow money in
amounts up to 33 1/3% of the value of its total assets to finance tender offers,
for temporary, extraordinary or emergency purposes, or for the purpose of
financing additional investments. See "Tender Offers." The Fund also may issue
one or more series of preferred shares, although it has no present intention to
do so. The Portfolio or Fund, as the case may be, may borrow to finance
additional investments or issue a class of preferred shares only when it
believes that the return that may be earned on investments purchased with the
proceeds of such borrowings or offerings will exceed the costs, including debt
service and dividend obligations, associated therewith. However, to the extent
such costs exceed the return on the additional investments, the return realized
by the Fund's Common Stockholders will be adversely affected.

Capital raised through leverage will be subject to interest costs or dividend
payments which may or may not exceed the interest on the assets purchased. The
Fund and the Portfolio also may be required to maintain minimum average balances
in connection with borrowings or to pay a commitment or other fee to maintain a
line of credit; either of these requirements will increase the cost of borrowing
over the stated interest rate. The issuance of additional classes of preferred
shares involves offering expenses and other costs and may limit the Fund's
freedom to pay dividends on shares of Common Stock or to engage in other
activities. Borrowings and the issuance of a class of preferred stock having
priority over the Fund's Common Stock create an opportunity for greater income
per share of Common Stock, but at the same time such borrowing or issuance is a
speculative technique in that it will increase the Fund's exposure to capital
risk. Such risks may be reduced through the use of borrowings and preferred
stock that have floating rates of interest. Unless the income and appreciation,
if any, on assets acquired with borrowed funds or offering proceeds exceeds the
costs of borrowing or issuing additional classes of securities, the use of
leverage will diminish the investment performance of the Fund compared with what
it would have been without leverage.

The Fund has entered into agreements with two financial institutions ("Banks")
providing for unsecured, discretionary credit facilities ("Facilities"), the
proceeds of which may be used to finance, in part, the payment for shares
tendered in a Tender Offer by the Fund. The Facilities provide for the borrowing
by the Fund of up to the lesser of $150,000,000 and $100,000,000, respectively,
or 33 1/3% of the Fund's total assets, on an unsecured, uncommitted basis. Loans
made under the Facilities bear interest at one of three rates, to be selected at
the option of the Fund: (i) an Adjusted Eurodollar Rate, which is based on LIBOR
plus a reserve percentage established by the Federal Reserve; (ii) a Base Rate,
which is the greater of (a) the annual rate of interest announced from time to
time by the Bank and (b) the federal funds effective rate, as established by the
Federal Reserve, plus 1/2 of 1% per annum; and (iii) a Money Market Rate, which
is quoted by the Bank as the fixed rate of interest at which it is willing to
make a "money market" loan.

Under the 1940 Act, neither the Fund nor the Portfolio is permitted to incur
indebtedness unless immediately after such incurrence the Fund or the Portfolio,
as the case may be, has an asset coverage of 300% of the aggregate outstanding
principal balance of indebtedness. Additionally, under the 1940 Act the Fund may
not declare any dividend or other distribution upon any class of its capital
stock, or purchase any such capital stock, unless the aggregate indebtedness of
the Fund has at the time of the declaration of any such dividend or distribution
or at the time of any such purchase an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be.

The Fund's and the Portfolio's willingness to borrow money for investment
purposes, and the amount each will borrow, will depend on many factors, the most
important of which are investment outlook, market conditions and interest rates.
Successful use of a leveraging strategy depends on the Sub-advisor's ability to
predict correctly interest rates and market movements, and there is no assurance
that a leveraging strategy will be successful during any period in which it is
employed.

CREDIT RISK. Corporate Loans and Corporate Debt Securities may constitute
substantially all of the Portfolio's investments. Corporate Loans and Corporate
Debt Securities are primarily dependent upon the creditworthiness of the
Borrower for payment of inter-

15
<PAGE> 18

est and principal. The nonreceipt of scheduled interest or principal on a
Corporate Loan or Corporate Debt Security may adversely affect the income of the
Portfolio or the value of its investments, which may in turn reduce the amount
of dividends or the net asset value of the shares of the Fund. The Portfolio's
ability to receive payment of principal of and interest on a Corporate Loan or a
Corporate Debt Security also depends upon the creditworthiness of any
institution interposed between the Portfolio and the Borrower. To reduce credit
risk, the Sub-advisor actively manages the Portfolio as described above.

Corporate Loans and Corporate Debt Securities made in connection with
leveraged buy-outs, recapitalizations and other highly leveraged transactions
are subject to greater credit risks than many of the other Corporate Loans and
Corporate Debt Securities in which the Portfolio may invest. These credit risks
include the possibility of a default on the Corporate Loan or Corporate Debt
Security or bankruptcy of the Borrower. The value of such Corporate Loans and
Corporate Debt Securities are subject to a greater degree of volatility in
response to interest rate fluctuations and may be less liquid than other
Corporate Loans and Corporate Debt Securities.

Although Corporate Loans and Corporate Debt Securities in which the Portfolio
invests will generally hold the most senior position in the capitalization
structure of the Borrowers, the capitalization of many Borrowers will include
non-investment grade subordinated debt. During periods of deteriorating economic
conditions, a Borrower may experience difficulty in meeting its payment
obligations under such bonds and other subordinated debt obligations. Such
difficulties may detract from the Borrower's perceived creditworthiness or its
ability to obtain financing to cover short-term cash flow needs and may force
the Borrower into bankruptcy or other forms of credit restructuring.

COLLATERAL IMPAIRMENT. Corporate Loans and Corporate Debt Securities
(excluding Unsecured Corporate Loans and Unsecured Corporate Debt Securities)
will be secured unless (i) the Portfolio's security interest in the collateral
is invalidated for any reason by a court or (ii) the collateral is fully
released under the terms of a loan agreement as the creditworthiness of the
Borrower improves. There is no assurance that the liquidation of collateral
would satisfy the Borrower's obligation in the event of nonpayment of scheduled
interest or principal, or that collateral could be readily liquidated. The value
of collateral generally will be determined by reference to financial statements
of the Borrower, an independent appraisal performed at the request of the Agent
Bank at the time the Corporate Loan was initially made, the market value of such
collateral (e.g., cash or securities) if it is readily ascertainable and/or by
other customary valuation techniques considered appropriate in the judgment of
the Sub-advisor. Collateral is generally valued on the basis of the Borrower's
status as a going concern and such valuation may exceed the immediate
liquidation value of the collateral.

Collateral may include (i) working capital assets, such as accounts receivable
and inventory; (ii) tangible fixed assets, such as real property, buildings and
equipment; (iii) intangible assets, such as trademarks and patent rights (but
excluding goodwill); and (iv) security interests in shares of stock of
subsidiaries or affiliates. To the extent that collateral consists of the stock
of the Borrower's subsidiaries or other affiliates, the Portfolio will be
subject to the risk that this stock will decline in value. Such a decline,
whether as a result of bankruptcy proceedings or otherwise, could cause the
Corporate Loan or Corporate Debt Security to be undercollateralized or
unsecured. In most credit agreements there is no formal requirement to pledge
additional collateral. In the case of Corporate Loans made to non-public
companies, the company's shareholders or owners may provide collateral in the
form of secured guarantees and/or security interests in assets that they own. In
addition, the Portfolio may invest in Corporate Loans guaranteed by, or fully
secured by assets of, such shareholders or owners, even if the Corporate Loans
are not otherwise collateralized by assets of the Borrower; provided, however,
that such guarantees are fully secured. There may be temporary periods when the
principal asset held by a Borrower is the stock of a related company, which may
not legally be pledged to secure a Corporate Loan or Corporate Debt Security. On
occasions when such stock cannot be pledged, the Corporate Loan or Corporate
Debt Security will be temporarily unsecured until the stock can be pledged or is
exchanged for or replaced by other assets, which will be pledged as security for
the Corporate Loan or Corporate Debt Security. However, the Borrower's ability
to dispose of such securities, other than in connection with such pledge or
replacement, will be strictly limited for the protection of the holders of
Corporate Loans.

If a Borrower becomes involved in bankruptcy proceedings, a court may
invalidate the Portfolio's security interest in the Corporate Loan or Corporate
Debt Security collateral or subordinate the Portfolio's rights under the
Corporate Loan or Corporate Debt Security to the interests of the Borrower's
unsecured creditors. Such action by a court could be based, for example, on a
"fraudulent conveyance" claim to the effect that the Borrower did not receive
fair consideration for granting the security interest in the Corporate Loan or
Corporate Debt Security collateral to the Portfolio. For Corporate Loans or
Corporate Debt Securities made in connection with a highly leveraged
transaction, consideration for granting a security interest may be deemed
inadequate if the proceeds of the Corporate Loan or Corporate Debt Security were
not received or retained by the Borrower, but were instead paid to other persons
(such as shareholders of the Borrower) in an amount which left the Borrower
insolvent or without sufficient working capital. There are also other events,
such as the failure to perfect a security interest due to faulty documentation
or faulty official filings, which could lead to the invalidation of the
Portfolio's security interest in Corporate Loan or Corporate Debt Security
collateral. If the Portfolio's security interest in Corporate Loan or Corporate
Debt Security collateral is invalidated or the Corporate Loan or Corporate Debt
Security is subordinated to other debt of a Borrower in bankruptcy or other
proceedings, it is unlikely that the Portfolio would be able to recover the full
amount of the principal and interest due on the Corporate Loan or Corporate Debt
Security.

INVESTMENTS IN LOWER QUALITY SECURITIES. The Portfolio may invest all or
substantially all of its assets in Corporate Loans, Corporate Debt Securities or
other securities that are rated below investment grade by Moody's, comparably
rated by another NRSRO, or, if unrated, deemed by the Sub-advisor to be of
equivalent quality. Debt rated Baa by Moody's is considered by Moody's to have
speculative characteristics. Debt rated Ba or B by Moody's is regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
While such lower quality debt will
16
<PAGE> 19

likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions. Securities
rated Ba and lower are the equivalent of high yield, high risk bonds, commonly
known as "junk bonds," and involve a high degree of risk. The Sub-advisor does
not expect to invest in any securities rated lower than B3 at the time of
investment. In the event of a downgrade in Corporate Loans or Corporate Debt
Securities, the Sub-advisor will consider whether it will dispose of such
Corporate Loan or Corporate Debt Security.

Ratings of debt securities represent the rating agency's opinion regarding
their quality and are not a guarantee of quality. Rating agencies attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit quality in response to subsequent events, so that an
issuer's current financial condition may be better or worse than a rating
indicates. See "Appendix -- Ratings of Securities" for a full discussion of
Moody's ratings.

The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. During an economic downturn or a sustained period of
rising interest rates, issuers of lower quality debt securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing.

PORTFOLIO MANAGEMENT AND OTHER CONSIDERATIONS. In the event of an increase in
short-term rates or other changed market conditions to the point where the
Fund's or the Portfolio's leverage could adversely affect holders of Common
Stock as noted above, or in anticipation of such changes, the Portfolio may
attempt to shorten the average maturity of its investment portfolio, which would
tend to offset the negative impact of leverage on holders of Common Stock.

FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor should be aware that the
Fund, unlike other investment companies that directly acquire and manage their
own portfolios of securities, seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, which is a separate
investment company with an identical investment objective (although the Fund may
temporarily hold a de minimis amount of cash). Therefore, the Fund's interest in
the securities owned by the Portfolio is indirect. In addition to selling an
interest to the Fund, the Portfolio may sell interests to other affiliated and
non-affiliated investment companies or institutional investors. Such investors
will invest in the Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as the Fund due to variations in sales commissions and
other operating expenses. Therefore, investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
in other funds that may invest in the Portfolio. Such differences in returns are
also present in other mutual fund structures, including funds that have multiple
classes of shares.

The Board of Directors of the Fund has considered the advantages and
disadvantages of investing the assets of the Fund in the Portfolio, as well as
the advantages and disadvantages of the two-tier format. The Directors believe
that the structure offers opportunities for substantial growth in the assets of
the Portfolio and affords the potential for economies of scale for the Fund.

The Fund may withdraw (redeem) all or any part of its interest in the
Portfolio only pursuant to tender offers by the Portfolio. The Portfolio's Board
of Trustees presently intends each quarter to consider the making of such tender
offers. However, there can be no assurance that the Portfolio's Board of
Trustees will, in fact, decide to undertake the making of such a tender offer.
See "Tender Offers." If the Fund withdraws all of its assets from the Portfolio,
or the Board of Directors of the Fund determines that the investment objective
of the Portfolio is no longer consistent with the investment objective of the
Fund, the Directors would consider what action might be taken, including
investing the assets of the Fund in another pooled investment entity or
retaining an investment advisor to manage the Fund's assets in accordance with
its investment objective. The Fund's investment performance may be affected by a
withdrawal of all of its assets from the Portfolio. Of course, a complete
withdrawal of Fund assets could be accomplished only pursuant to a Portfolio
tender offer.

Smaller investors in the Portfolio may be adversely affected by the actions of
a larger investor in the Portfolio. For example, if a large investor withdraws a
significant amount of assets from the Portfolio, the remaining investors may
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may hold fewer securities, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured mutual funds that have
large or institutional investors.

Funds that invest all their assets in interests in a separate investment
company are a relatively new development in the investment company industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.

Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund stockholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund stockholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may

17
<PAGE> 20

alone or collectively acquire sufficient voting interests in the Portfolio to
control matters relating to the operation of the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio Loans and noncash assets (as opposed to a cash distribution from
the Portfolio). If Loans and noncash assets are distributed, the Fund could
incur brokerage, tax or other charges in converting them to cash. In addition,
the distribution in kind may result in a less diversified portfolio of
investments and will adversely affect the liquidity of the Fund. Notwithstanding
the above, there are other means for meeting stockholder redemption requests,
such as borrowing.

- --------------------------------------------------------------------------------

PURCHASE OF SHARES

The Fund continuously offers its shares of Common Stock through securities
dealers that have entered into selected dealer agreements with the Distributor.
During any continuous offering of the Fund's Common Stock, shares of the Fund
may be purchased through such selected dealers.

The Fund offers its shares at a price equal to the next determined net asset
value per share without a front-end sales charge. As to purchase orders received
by securities dealers prior to the close of business on the New York Stock
Exchange, Inc. (the "NYSE") (generally, 4:00 p.m., New York time), which
includes orders received after the close of business on the previous day, the
applicable offering price will be based on the net asset value determined as of
15 minutes after the close of business on the NYSE on that day provided the
Distributor in turn receives the order from the securities dealer prior to 30
minutes after the close of business on the NYSE on that day. If the purchase
orders are not received by the Distributor prior to 30 minutes after the close
of business on the NYSE, such orders shall be deemed received on the next
business day. Any order may be rejected by the Distributor or the Fund. The Fund
or the Distributor may suspend the continuous offering of the Fund's shares at
any time in response to conditions in the securities markets or otherwise and
may thereafter resume such offering from time to time. Neither the Distributor
nor the dealers are permitted to withhold placing orders to benefit themselves
by a price change. The Distributor is required to advise the Fund promptly of
all purchase orders and cause payments for shares of Common Stock to be
delivered promptly to the Fund.

Due to the administrative complexities associated with a continuous offering,
administrative errors may result in the Distributor or an affiliate
inadvertently acquiring nominal numbers (in no event in excess of 5% of the
shares of Common Stock) of shares of Common Stock which it may wish to resell.
Such shares of Common Stock will not be subject to any investment restriction
and may be resold pursuant to this Prospectus.

The Distributor compensates selected dealers at a rate of 3.0% of amounts
sold. If the shares remain outstanding after twelve months from the date of
their original purchase, the Distributor will additionally compensate such
dealers quarterly at an annual rate based on a percentage of the value of such
shares sold by such dealers and remaining outstanding, in accordance with the
following schedule:

<TABLE>
<CAPTION>
ANNUAL COMPENSATION AS A
YEAR AFTER DATE PERCENTAGE OF VALUE OF SHARES
OF ORIGINAL PURCHASE OUTSTANDING
-------------------- -----------------------------
<S> <C>
First....................................................... 0.00%
Second...................................................... 0.10%
Third....................................................... 0.15%
Fourth...................................................... 0.20%
Fifth and following......................................... 0.25%
</TABLE>

The compensation paid to selected dealers and the Distributor, including the
compensation paid at the time of purchase, the quarterly payments mentioned
above and the early withdrawal charge, if any, will not in the aggregate exceed
the applicable limit, as determined from time to time by the National
Association of Securities Dealers, Inc. ("NASD").

- --------------------------------------------------------------------------------

TENDER OFFERS

In recognition of the possibility that a secondary market for the Fund's
shares will not exist, the Fund may take actions that will provide liquidity to
stockholders. The Fund may from time to time make Tender Offers, i.e., offers to
repurchase all or a portion of its shares of Common Stock from stockholders at a
price per share equal to the net asset value per share of the Common Stock
determined at the close of business on the day an offer terminates. The Board of
Directors considers each quarter the making of Tender Offers. There can be no
assurance that the Board will decide to undertake a Tender Offer in any
particular quarter. In addition, any partial Tender Offer by the Fund may result
in a proration of the shares repurchased from the Fund's Common Stockholders who
participate in the Tender Offer. Subject to the Fund's investment restriction
with respect to borrowings, the Fund may borrow money to finance the repurchase
of shares pursuant to any Tender Offers. See "Special Considerations and Risk
Factors -- Effects of Leverage" and "Investment Restrictions."

18
<PAGE> 21

The Fund's assets consist primarily of its interest in the Portfolio.
Therefore, in order to finance the repurchase of Fund shares pursuant to Tender
Offers, the Fund may find it necessary to liquidate all or a portion of its
interest in the Portfolio. Because interests in the Portfolio may not be
transferred, the Fund may withdraw a portion of its interest only pursuant to
tender offers by the Portfolio. The Fund will not conduct a Tender Offer for
Fund shares unless the Portfolio simultaneously conducts a tender offer for
Portfolio interests. The Portfolio's Trustees presently intend each quarter to
consider the making of such tender offers. However, there are no assurances that
the Portfolio's Board of Trustees will, in fact, decide to undertake such a
tender offer. The Fund cannot make a Tender Offer larger than a tender offer
made by the Portfolio. The Portfolio will make tender offers, if any, to all of
its investors, including the Fund, on the same terms, which practice may affect
the size of the Portfolio's offers. Subject to the Portfolio's investment
restriction with respect to borrowings, the Portfolio may borrow money or issue
debt obligations to finance its repurchase obligations pursuant to any such
tender offer.

The Fund expects that ordinarily there will be no secondary market for the
Fund's Common Stock and that periodic Tender Offers will be the only source of
liquidity for Fund stockholders. Nevertheless, if a secondary market develops
for the Common Stock of the Fund, the market price of the shares may vary from
net asset value from time to time. Such variance may be affected by, among other
factors, relative demand and supply of shares and the performance of the Fund,
especially as it affects the yield on and net asset value of the Common Stock of
the Fund. A Tender Offer for shares of Common Stock of the Fund at net asset
value is expected to reduce any spread between net asset value and market price
that may otherwise develop. However, there can be no assurance that such action
would result in the Fund's Common Stock trading at a price that equals or
approximates net asset value.

Although the Board of Directors believes that the Tender Offers generally
would be beneficial to holders of the Fund's Common Stock, the acquisition of
shares of Common Stock by the Fund will decrease the total assets of the Fund
and therefore have the likely effect of increasing the Fund's expense ratio
(assuming such acquisition is not offset by the issuance of additional shares of
Common Stock). Furthermore, to the extent the Fund borrows to finance the making
of Tender Offers, interest on such borrowings reduce the Fund's net investment
income.

It is the Board of Directors' announced policy, which may be changed by the
Board, not to repurchase shares pursuant to a Tender Offer if (1) such
repurchases would terminate the Fund's status as a RIC under the Code (which
would make the Fund a taxable entity, causing its income to be taxed at the
corporate level in addition to the taxation of stockholders who receive
dividends from the Fund); (2) the Portfolio would not be able to liquidate
portfolio securities in a manner that is orderly and consistent with the Fund's
investment objective and policies in order to repurchase Common Stock tendered
pursuant to the Tender Offer; or (3) there is, in the Board's judgment, any (a)
legal action or proceeding instituted or threatened challenging the Tender Offer
or otherwise materially adversely affecting the Fund, (b) declaration of a
banking moratorium by federal or state authorities or any suspension of payment
by banks in the United States or New York State, which is material to the Fund,
(c) limitation imposed by federal or state authorities on the extension of
credit by lending institutions, (d) commencement of war, armed hostilities or
other international or national calamity directly or indirectly involving the
United States which is material to the Fund, or (e) other event or condition
which would have a material adverse effect on the Fund or its stockholders if
shares of Common Stock tendered pursuant to the Tender Offer were purchased.
Thus, there can be no assurance that the Board will proceed with any Tender
Offer. The Board of Directors may modify these conditions in light of
circumstances existing at the time. If the Board of Directors determines to
repurchase the shares of Common Stock pursuant to a Tender Offer, such
repurchases could significantly reduce the asset coverage of any borrowing or
outstanding senior securities. The Fund may not repurchase shares of Common
Stock to the extent such repurchases would result in the asset coverage with
respect to such borrowing or senior securities being reduced below the asset
coverage requirement set forth in the 1940 Act. Accordingly, in order to
repurchase all shares of Common Stock tendered, the Fund may have to repay all
or part of any then outstanding borrowing or redeem all or part of any then
outstanding senior securities to maintain the required asset coverage. See
"Special Considerations and Risk Factors -- Effects of Leverage." In addition,
the amount of shares of Common Stock for which the Fund makes any particular
Tender Offer may be limited for the reasons set forth above or in respect of
other concerns related to liquidity of the Portfolio.

In conducting any Tender Offers, the Fund expects to rely on a rule
promulgated by the Securities and Exchange Commission that requires, among other
things, that there not be a widely available secondary market for the Fund's
Common Stock. In the event that circumstances arise under which the Fund does
not conduct the Tender Offers regularly, the Board of Directors would consider
alternative means of providing liquidity for holders of Common Stock. Such
action would include an evaluation of any secondary market that then existed and
a determination of whether such market provided liquidity for holders of Common
Stock. If the Board of Directors determines that such market, if any, fails to
provide liquidity for the holders of Common Stock, the Board expects that it
will consider all then available alternatives to provide such liquidity. Among
the alternatives that the Board of Directors may consider is the listing of the
Fund's Common Stock on a major domestic stock exchange or on the Nasdaq Stock
Market in order to provide such liquidity. The Board of Directors also may
consider causing the Fund to repurchase its shares from time to time in
open-market or private transactions when it can do so on terms that represent a
favorable investment opportunity. In any event, the Board of Directors expects
that it will cause the Fund to take whatever action it deems necessary or
appropriate to provide liquidity for the holders of Common Stock in light of the
facts and circumstances existing at such time.

To consummate a tender offer for the repurchase of interests in the Portfolio
(which may be necessary for the Fund to complete a Tender Offer), the Portfolio
may be required to liquidate portfolio securities, and realize gains or losses,
at a time when the Sub-advisor would otherwise consider it disadvantageous to do
so.

19
<PAGE> 22

Each Tender Offer will be made and stockholders notified in accordance with
the requirements of the Securities Exchange Act of 1934 and the 1940 Act, either
by publication or mailing or both. The offering documents will contain such
information as is prescribed by such laws and the rules and regulations
promulgated thereunder. The repurchase of tendered shares by the Fund is a
taxable event. See "Taxes." The Fund will pay all costs and expenses associated
with the making of any Tender Offer. An Early Withdrawal Charge will be imposed
on most shares accepted for tender that have been held for less than four years.
See "Early Withdrawal Charge."

- --------------------------------------------------------------------------------

EARLY WITHDRAWAL CHARGE

An Early Withdrawal Charge to recover distribution expenses incurred by the
Distributor will be charged against the stockholder's investment account and
paid to the Distributor in connection with most shares of Common Stock held for
less than four years which are accepted by the Fund for repurchase pursuant to a
Tender Offer in the manner described below. The Early Withdrawal Charge will be
imposed on those shares of Common Stock accepted for tender based on an amount
equal to the lesser of the then current net asset value of the shares of Common
Stock or the original purchase price of the shares of Common Stock being
tendered. Accordingly, the Early Withdrawal Charge is not imposed on increases
in the net asset value above the initial purchase price. In addition, the Early
Withdrawal Charge is not imposed on shares derived from reinvestments of
dividends or capital gains distributions. In determining whether an Early
Withdrawal Charge is payable, it is assumed that the acceptance of an offer to
repurchase pursuant to a Tender Offer would be made from the earliest purchase
of shares of Common Stock. The Early Withdrawal Charge imposed will vary
depending on the length of time the Common Stock has been owned since purchase
(separate purchases shall not be aggregated for these purposes), as set forth in
the following table:

<TABLE>
<CAPTION>
EARLY
YEAR OF REPURCHASE WITHDRAWAL
AFTER PURCHASE CHARGE
------------------ ----------
<S> <C>
First....................................................... 3.0%
Second...................................................... 2.5%
Third....................................................... 2.0%
Fourth...................................................... 1.0%
Fifth and following......................................... 0.0%
</TABLE>

In determining whether an Early Withdrawal Charge is applicable to a tender of
shares of Common Stock, the calculation will be determined in the manner that
results in the lowest possible amount being charged. Therefore, it will be
assumed that the tender is first of shares of Common Stock held for over four
years and shares of Common Stock acquired pursuant to reinvestment of dividends
or distributions and then of shares of Common Stock held longest during the
three-year period. The Early Withdrawal Charge will not be applied to dollar
amounts representing an increase in the net asset value since the time of
purchase.

EXAMPLE. Assume an investor purchased 1,000 shares of Common Stock (at a cost
of $10,000) and in the second year after purchase, the net asset value per share
is $10.15 and, during such time, the investor has acquired 100 additional shares
of Common Stock upon dividend reinvestment. If at such time the investor makes
his first redemption of 500 shares of Common Stock (proceeds of $5,075), 100
shares will not be subject to the Early Withdrawal Charge because of dividend
reinvestment. With respect to the remaining 400 shares of Common Stock, the
Early Withdrawal Charge is applied only to the original cost of $10 per share
and not to the increase in net asset value of $0.15 per share. Therefore, $4,000
of the $5,075 redemption proceeds will be charged at a rate of 2.5% (the
applicable rate in the second year after purchase).

- --------------------------------------------------------------------------------

MANAGEMENT

Each of the Fund's Board of Directors and the Portfolio's Board of Trustees
has overall responsibility for the operation of the Fund and the Portfolio,
respectively. Pursuant to such responsibility, each Board has approved contracts
with various financial organizations to provide, among other things, day-to-day
management services required by the Fund and the Portfolio.

INVESTMENT MANAGEMENT

The Investment Management and Administration Contract provides that, subject
to the direction of the Board of Trustees of the Portfolio, AIM is responsible
for the management and administration of the Portfolio. Pursuant to the
Sub-Advisory and Sub-Administration Contract, AIM has delegated its
responsibility for the management and administration of the Portfolio to the
Sub-advisor. The responsibility for making decisions to buy, sell or hold a
particular security rests with the Sub-advisor, subject to review by the Board
of Trustees of the Portfolio and AIM.

In providing investment management for the Portfolio, the Sub-advisor will
consider analyses from various sources, make the necessary investment decisions,
and place orders for transactions accordingly. The Portfolio pays AIM a monthly
fee at an annual rate of 0.95% of the Portfolio's average daily net assets
(i.e., the average daily value of the total assets of the Portfolio, minus the
sum of accrued liabilities of the Portfolio). AIM pays the Sub-advisor a monthly
fee at an annual rate of 0.48% of the Portfolio's average daily
20
<PAGE> 23

net assets. For purposes of these calculations, average daily net assets is
determined at the end of each month on the basis of the average net assets of
the Portfolio for each day during the month.

The investment professional primarily responsible for the day-to-day
management of the Portfolio is as follows:

<TABLE>
<CAPTION>
NAME TITLE BUSINESS EXPERIENCE
---- ----- -------------------
<S> <C> <C>
Anthony R. Clemente...... Portfolio Manager Portfolio Manager since February, 1998. For the
preceding five years, Mr. Clemente was a Vice
President in the Fixed Income Department of
Merrill Lynch Asset Management L.P. and
assisted in the portfolio management of Merrill
Lynch Senior Floating Rate Fund, Inc. and
Merrill Lynch Prime Rate Portfolio.
</TABLE>

Pursuant to the Sub-Sub-Advisory and Sub-Sub-Administration Agreement between
the Sub-advisor and INVESCO (NY), the latter acts as the investment
sub-sub-advisor and sub-sub-administrator of the Portfolio. INVESCO (NY),
located at 50 California Street, San Francisco, CA 94111 and 1166 Avenue of the
Americas, New York, NY 10036, is the investment sub-sub-advisor with respect to
certain of the Portfolio's assets, as determined by the Sub-advisor (the
"Sub-Sub-Advised Assets"). The Sub-Sub-Advised Assets consist of the Portfolio's
cash and cash equivalents and short-term investment grade debt obligations, but
may also include other asset classes. With respect to the Sub-Sub-Advised
Assets, INVESCO (NY) has responsibility for making decisions to buy, sell or
hold a particular security, subject to review by the Board of Trustees of the
Portfolio and AIM. In providing investment sub-sub-advisory services for the
Portfolio, INVESCO (NY) will consider analyses from various sources, make the
necessary investment decisions, and place orders for transactions accordingly.
INVESCO (NY) will also provide all administrative services to the Portfolio,
including assistance in the preparation of filings with the SEC and other
regulatory bodies and supervision of custodial, accounting and other services by
third party service providers. The Sub-advisor (and not the Fund or the
Portfolio) pays INVESCO (NY) a monthly fee for investment sub-sub-advisory and
sub-sub-administration services at the annual rate of 0.48% of the Portfolio's
average daily net assets delegated to it.

Parag Saxena will provide day-to-day management of the Sub-Sub-Advised Assets
of the Portfolio. Mr. Saxena has been a Managing Director of INVESCO (NY) (and
its predecessor, Chancellor Capital Management, Inc.) for the past five years.

The Sub-advisor is a subsidiary of AMVESCAP PLC. As of April 30, 1998, the
Sub-advisor had assets under management totaling approximately $3.1 billion and
the Sub-advisor ranked as the largest institutional investment manager of the
senior secured asset class. INVESCO (NY) is also a subsidiary of AMVESCAP PLC.
The U.S. offices of the Sub-advisor and INVESCO (NY) are located at 1166 Avenue
of the Americas, New York, New York 10036, and 50 California Street, 27th Floor,
San Francisco, California 94111.

On May 29, 1998, Liechtenstein Global Trust AG ("LGT"), the former indirect
parent organization of the Sub-advisor, consummated a purchase agreement with
AMVESCAP PLC pursuant to which AMVESCAP PLC acquired LGT's Asset Management
Division, which included the Sub-advisor, INVESCO (NY) and certain other
affiliates. As a result of this transaction, the Sub-advisor and INVESCO (NY)
each is now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the
sale, the Sub-advisor and its worldwide asset management affiliates provided
investment management and/or administrative services to institutional, corporate
and individual clients around the world since 1969.

AIM, the Sub-advisor and INVESCO (NY) and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM, the
Sub-advisor and INVESCO (NY) are each indirect wholly owned subsidiaries of
AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.

In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM, the Sub-advisor and INVESCO (NY) draw upon the expertise,
personnel, data and systems of other offices, including investment offices in
Atlanta, Boston, Dallas, Denver, Louisville, Miami, Portland (Oregon),
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the Fund, the Sub-advisor employs a team approach, taking advantage of its
investment resources around the world.

The Administration Agreement provides that, subject to the direction of the
Board of Directors of the Fund, AIM will perform certain administrative services
for the Fund. AIM has delegated these administrative duties to INVESCO (NY)
pursuant to the Sub-Administration Agreement. INVESCO (NY) will furnish
corporate officers and clerical staff, provide office space, services and
equipment, prepare or assist in the preparation of reports and proxy materials
to stockholders and filings with the SEC and other regulatory bodies, and
supervise the provision of custodial, accounting and other services by third
party service providers. The Fund pays administration fees at the annualized
rate of 0.25% of its average daily net assets.

Unless earlier terminated as described below, the Portfolio's Investment
Management and Administration Contract, the Portfolio's Sub-Advisory and
Sub-Administration Agreement, the Portfolio's Sub-Sub-Advisory and
Sub-Sub-Administration Agreement, the Fund's Administration Agreement, and the
Fund's Sub-Administration Agreement will remain in effect for two years from the
date of this Prospectus and from year to year thereafter if approved annually
(a) by the Board of Directors/Trustees of the Fund and the Portfolio or by a
majority of the outstanding shares of the Fund and the Portfolio, and (b) by a
majority of the Directors/Trustees who

21
<PAGE> 24

are not parties to such contract or interested persons (as defined in the 1940
Act) of any such party. Such contracts are not assignable and may be terminated
without penalty on 60 days' written notice at the option of either party thereto
or by the vote of the stockholders of the Fund.

INVESCO (NY) also serves as the Fund's and the Portfolio's pricing and
accounting agent. Each of the Fund and the Portfolio pays a monthly fee to
INVESCO (NY) for these services at the annualized rate, respectively, of .02%
and .01% of their average daily net assets.

- --------------------------------------------------------------------------------

DIRECTORS AND EXECUTIVE OFFICERS

The Directors and executive officers of the Fund, their ages and their
principal occupations during the last five years are set forth below. Unless
otherwise indicated, the address of each Executive Officer is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.

<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH PRINCIPAL OCCUPATIONS AND BUSINESS
THE FUND AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
----------------------- ----------------------------------
<S> <C>
Robert H. Graham*, 51 Director, President and Chief Executive Officer, A I M
Director, Chairman of the Board Management Group Inc.; Director and President, A I M
and President Advisors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management Company; and
Director, AMVESCAP PLC.

C. Derek Anderson, 57 President, Plantagenet Capital Management, LLC (an
Director investment partnership); Chief Executive Officer,
220 Sansome Street Plantagenet Holdings, Ltd. (an investment banking firm);
Suite 400 Director, Anderson Capital Management, Inc. since 1988;
San Francisco, CA 94104 Director, PremiumWear, Inc. (formerly Munsingwear, Inc.)(a
casual apparel company) and Director, "R" Homes, Inc. and
various other companies; and Trustee, each of the other
investment companies registered under the 1940 Act, that is
sub-advised or sub-administered by the Sub-advisor.

Frank S. Bayley, 58 Partner, law firm of Baker & McKenzie; Director and
Director Chairman, C.D. Stimson Company (a private investment
Two Embarcadero Center company); and Trustee, each of the other investment
Suite 2400 companies registered under the 1940 Act that is sub-advised
San Francisco, CA 94111 or sub-administered by the Sub-advisor.

Arthur C. Patterson, 54 Managing Partner, Accel Partners (a venture capital firm);
Director Director, Viasoft and PageMart, Inc. (both public software
428 University Avenue companies) and several other privately held software
Palo Alto, CA 94301 communications companies; and Trustee, each of the other
investment companies registered under the 1940 Act that is
sub-advised or sub-administered by the Sub-advisor.

Ruth H. Quigley, 63 Private investor; President, Quigley Friedlander & Co., Inc.
Director (a financial advisory services firm) from 1984 to 1986; and
1055 California Street Trustee, each of the other investment companies registered
San Francisco, CA 94108 under the 1940 Act that is sub-advised or sub-administered
by the Sub-advisor.

John J. Arthur+, 53 Director, Senior Vice President and Treasurer, A I M
Vice President Advisors, Inc.; Vice President and Treasurer, A I M
Management Group Inc., A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and Fund
Management Company.

Kenneth W. Chancey, 53 Senior Vice President -- Mutual Fund Accounting, INVESCO
Vice President and Principal (NY) since 1997; Vice President -- Mutual Fund Accounting,
Accounting Officer INVESCO (NY) from 1992-1997.
50 California Street
San Francisco, CA 94111
</TABLE>

- ---------------

* A director who is an "interested person" of the Fund and A I M Advisors, Inc.
as defined in the 1940 Act.

+ Mr. Arthur and Ms. Relihan are married to each other.
22
<PAGE> 25

<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH PRINCIPAL OCCUPATIONS AND BUSINESS
THE FUND AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
----------------------- ----------------------------------
<S> <C>
Melville B. Cox, 54 Vice President and Chief Compliance Officer, A I M Advisors,
Vice President Inc., A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund Management Company.

Gary T. Crum, 50 Director and President, A I M Capital Management, Inc.;
Vice President Director and Senior Vice President, A I M Management Group
Inc. and A I M Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC.

Robert H. Graham, 51 Director, President and Chief Executive Officer, A I M
Vice President Management Group Inc.; Director and President, A I M
Advisors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management Company; Director,
AMVESCAP PLC.

Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, INVESCO
Vice President and Secretary (NY) from October 1997 until May 29, 1998; Secretary and
50 California Street Chief Legal and Compliance Officer, INVESCO (NY) Asset
San Francisco, CA 94111 Management, Inc., INVESCO (NY), GT Global Investor Services,
Inc. and G.T. Insurance since August 1997; Secretary and
Chief Legal and Compliance Officer, GT Global from August
1997 to April 1998; Executive Vice President of the Asset
Management Division of Liechtenstein Global Trust AG, from
October 1996 to May 1998; Senior Vice President, General
Counsel and Secretary of INVESCO (NY) Asset Management,
Inc., INVESCO (NY), GT Global, GT Global Investor Services,
Inc. and G.T. Insurance from May 1994 to October 1996; and
Senior Vice President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of each of
the Strong Funds from October 1991 to May 1994.

Carol F. Relihan+, 43 Director, Senior Vice President, General Counsel and
Vice President Secretary, A I M Advisors, Inc.; Vice President, General
Counsel and Secretary, A I M Management Group Inc.;
Director, Vice President, General Counsel, Fund Management
Company; Vice President and General Counsel, A I M Fund
Services, Inc.; and Vice President, A I M Capital
Management, Inc. and A I M Distributors, Inc.

Dana R. Sutton, 39 Vice President and Fund Controller, A I M Advisors, Inc.;
Vice President and Assistant and Assistant Vice President and Assistant Treasurer, Fund
Treasurer Management Company.
</TABLE>

- ---------------

+ Mr. Arthur and Ms. Relihan are married to each other.

The Board of Directors of the Fund has an Audit Committee, comprised of Miss
Quigley, and Messrs. Anderson, Bayley and Patterson, which is responsible for
reviewing and evaluating the audit function, including recommending firms to
serve as independent auditors of the Fund. Each of the officers of the Fund is
also an officer of each of the other investment companies registered under the
1940 Act that is sub-advised or sub-administered by INVESCO (NY). The Fund pays
each Director who is not a director, officer or employee of the Sub-advisor or
any affiliated company $5,000 a year, plus $300 for each meeting of the Board
attended by the Director, and reimburses travel and other expenses incurred in
connection with attending Board meetings. Other Directors and officers receive
no compensation or expense reimbursement from the Fund. As of August 10, 1998,
the Directors and officers and their families as a group owned less than 1% of
the outstanding shares of the Fund. The Fund requires no employees since the
Sub-advisor and other third-party service providers perform substantially all of
the services necessary for the Fund's operations.

- --------------------------------------------------------------------------------

PORTFOLIO TRANSACTIONS

Subject to policies established by the Portfolio's Board of Trustees, the
Sub-advisor is responsible for the execution of the Portfolio's transactions and
the selection of brokers and dealers who execute such transactions on behalf of
the Fund. In executing transactions for the Portfolio, the Sub-advisor seeks the
best net results for the Portfolio, taking into account such factors as the
price (including the applicable brokerage commission or dealer spread), size of
the order, difficulty of execution and operational facilities of the firm
involved. Although the Sub-advisor generally seeks reasonable competitive
commission rates and spreads, payment of the lowest commission or spread is not
necessarily consistent with the best net results. The Portfolio has no
obligation to deal with any broker or dealer or group of brokers in the
execution of portfolio transactions.

Consistent with the interests of the Portfolio, the Sub-advisor may select
brokers to execute the Portfolio's portfolio transactions on the basis of the
research and brokerage services they provide to the Sub-advisor for its use in
managing the Portfolio and its other advisory accounts. Such services may
include furnishing analyses, reports and information concerning issuers,
industries, securities,

23
<PAGE> 26

geographic regions, economic factors and trends, portfolio strategy, and
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement). Research and
brokerage services received from such brokers are in addition to, and not in
lieu of, the services required to be performed by the Sub-advisor under the
Sub-Advisory and Sub-Administration Contract (defined above). A commission paid
to such brokers may be higher than that which another qualified broker would
have charged for effecting the same transaction, provided that the Sub-advisor
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-advisor to
the Portfolio and its other clients and that the total commissions paid by the
Portfolio will be reasonable in relation to the benefits received by the
Portfolio over the long term.

Investment decisions for the Portfolio and for other investment accounts
managed or sub-advised by the Sub-advisor are made independently of each other
in light of differing conditions. However, the same investment decision
occasionally may be made for two or more of such accounts including the
Portfolio. In such cases, purchases or sales are allocated as to price or amount
in a manner deemed fair and equitable to all accounts involved. While in some
cases this practice could have a detrimental effect upon the price or value of
the security as far as the Portfolio is concerned, in other cases the
Sub-advisor believes that coordination and the ability to participate in volume
transactions will be beneficial to the Portfolio.

The Portfolio contemplates that, consistent with the policy of obtaining the
best net results, brokerage transactions may be conducted through affiliates of
AIM or the Sub-advisor. The Portfolio's Board of Trustees has adopted procedures
in conformity with Rule 17e-1 under the 1940 Act to ensure that all brokerage
commissions paid to such affiliates are reasonable and fair in the context of
the market in which they are operating. Any such transactions will be effected
and related compensation paid only in accordance with applicable SEC
regulations.

The Portfolio engages in trading when the Sub-advisor has concluded that the
sale of a security owned by the Portfolio and/or the purchase of another
security can enhance principal and/or increase income. A security may be sold to
avoid any prospective decline in market value, or a security may be purchased in
anticipation of a market rise. Consistent with the Portfolio's investment
objective, a security also may be sold and a comparable security purchased
coincidentally in order to take advantage of what is believed to be a disparity
in the normal yield and price relationship between the two securities.

The Portfolio's portfolio turnover rate is not expected to exceed 100%, but
may vary greatly from year to year and will not be a limiting factor when the
Sub-advisor deems portfolio changes appropriate. Although the Portfolio
generally does not intend to trade for short-term profits, the securities held
by the Portfolio will be sold whenever the Sub-advisor believes it is
appropriate to do so, without regard to the length of time a particular security
may have been held. A 100% portfolio turnover rate would occur if the lesser of
the value of purchases or sales of the Portfolio's securities for a year
(excluding purchases of U.S. Treasury and other securities with a maturity at
the date of purchase of one year or less) were equal to 100% of the average
monthly value of the securities, excluding short-term investments, held by the
Portfolio during such year. Higher portfolio turnover involves correspondingly
greater brokerage commissions and other transaction costs that the Portfolio
will bear directly.

- --------------------------------------------------------------------------------

DIVIDENDS AND OTHER DISTRIBUTIONS

The Fund distributes substantially all of its net investment income, which
consists generally of its share of the Portfolio's net investment income,
reduced by interest on the Fund's borrowings and dividends or interest on its
senior securities, if any. Dividends from the Fund's net investment income are
declared daily and paid monthly to holders of Common Stock. Substantially all of
the Fund's share of the Portfolio's net realized capital gains, if any, are
distributed at least annually to Common Stockholders. Shares of Common Stock
accrue dividends as long as they are outstanding (i.e., from the settlement date
of a purchase order to the settlement date of a Tender Offer).

Under the 1940 Act, the Fund is not permitted to incur indebtedness unless
immediately after such incurrence it has an asset coverage of at least 300% of
the aggregate outstanding principal balance of the indebtedness. Additionally,
under the 1940 Act, the Fund may not declare any dividend or other distribution
on any class of its capital stock or purchase any such capital stock unless it
has, at the time of the declaration of any such distribution or at the time of
any such purchase, asset coverage of at least 300% of the aggregate indebtedness
after deducting the amount of such distribution, or purchase price, as the case
may be. This latter limitation -- and a limitation on the Fund's ability to
declare any cash dividends or other distributions on the Common Stock while any
shares of preferred stock are outstanding -- could under certain circumstances
impair its ability to maintain its qualification for taxation as a RIC. See
"Special Considerations and Risk Factors -- Effects of Leverage" and "Taxes."

Dividends and other distributions to Common Stockholders may be automatically
reinvested in shares of Common Stock pursuant to the Fund's Dividend
Reinvestment Plan. See "Dividend Reinvestment Plan." Dividends and other
distributions will be taxable to stockholders whether they are so reinvested in
shares of the Fund or received in cash. See "Taxes."

24
<PAGE> 27

- --------------------------------------------------------------------------------

TAXES

TAXATION OF THE FUND

The Fund intends to continue to qualify for the special tax treatment afforded
RICs under Subchapter M of the Code. To qualify for that treatment, the Fund
must distribute to its stockholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gains, and net gains from certain foreign
currency transactions) and must meet several additional requirements. Among
these requirements are the following: (1) the Fund must derive at least 90% of
its gross income each taxable year from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income derived with respect to its
business of investing in securities or those currencies; and (2) at the close of
each quarter of the Fund's taxable year, (i) at least 50% of the value of its
total assets must be represented by cash and cash items, U.S. Government
securities, and other securities limited, in respect of any one issuer, to an
amount that does not exceed 5% of the value of the Fund's total assets and that
does not represent more than 10% of the issuer's voting securities, and (ii) not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities) of any one issuer.

The Fund, as an investor in the Portfolio, is deemed to own a proportionate
share of the Portfolio's assets, and to earn a proportionate share of the
Portfolio's income, for purposes of determining whether the Fund satisfies the
requirements described above to qualify as a RIC. In each taxable year that it
so qualifies, the Fund (but not its stockholders) will not be subject to federal
income tax on that part of its investment company taxable income and net capital
gain (the excess of net long-term capital gain over net short-term capital
loss), that it distributes to its stockholders.

The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to
the extent it fails to distribute by the end of any calendar year 98% of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.

See the next section for a discussion of the tax consequences to the Fund of
certain transactions engaged in by the Portfolio.

TAXATION OF THE PORTFOLIO

The Portfolio is treated as a partnership for federal income tax purposes and
is not a "publicly traded partnership." As a result, the Portfolio is not
subject to federal income tax; instead, the Fund, as an investor in the
Portfolio, is required to take into account in determining its federal income
tax liability its share of the Portfolio's income, gains, losses, deductions,
and credits, without regard to whether it has received any cash distributions
from the Portfolio. The Portfolio also is not subject to state income or
franchise tax.

Because, as noted above, the Fund is deemed to own a proportionate share of
the Portfolio's assets, and to earn a proportionate share of the Portfolio's
income, for purposes of determining whether the Fund satisfies the requirements
to qualify as a RIC, the Portfolio intends to conduct its operations so that the
Fund will be able to satisfy those requirements.

Distributions to the Fund from the Portfolio (whether pursuant to a partial or
complete withdrawal in connection with a tender offer by the Portfolio or
otherwise) will not result in the Fund's recognition of any gain or loss for
federal income tax purposes, except that (1) gain will be recognized to the
extent any cash that is distributed exceeds the Fund's basis for its interest in
the Portfolio before the distribution, (2) income or gain will be recognized if
the distribution is in liquidation of the Fund's entire interest in the
Portfolio and includes a disproportionate share of any unrealized receivables
held by the Portfolio, and (3) loss will be recognized if a liquidation
distribution consists solely of cash and/or unrealized receivables. The Fund's
basis for its interest in the Portfolio generally will equal the amount of cash
the Fund invests in the Portfolio, increased by the Fund's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash and the
basis of any property the Portfolio distributes to the Fund and (b) the Fund's
share of the Portfolio's losses.

Interest received by the Portfolio, and gains realized thereby may be subject
to income, withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield and/or total return on its securities.
Tax conventions between certain countries and the United States may reduce or
eliminate these taxes, however, and many foreign countries do not impose taxes
on capital gains in respect of investments by foreign investors.

Gains or losses (1) from the disposition of foreign currencies, (2) on the
disposition of a debt security denominated in a foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time
the Portfolio accrues interest or other receivables or expenses or other
liabilities denominated in a foreign currency and the time it actually collects
the receivables or pays the liabilities, generally are treated as ordinary
income or loss. These gains or losses, referred to under the Code as "section
988" gains or losses, may increase or decrease the amount of investment company
taxable income available to the Fund for distribution to its stockholders.

25
<PAGE> 28

The federal income tax rules governing the taxation of interest rate swaps are
not entirely clear and may require the Portfolio to treat payments received
under such arrangements as ordinary income and to amortize payments under
certain circumstances. The Portfolio will limit its activity in this regard in
order to enable the Fund to maintain its qualification as a RIC.

TAXATION OF THE STOCKHOLDERS

Dividends paid by the Fund from its investment company taxable income, whether
received in cash or reinvested in Fund shares pursuant to the Plan, are taxable
to its stockholders as ordinary income to the extent of its earnings and
profits. (Any distributions in excess of the Fund's earnings and profits first
will reduce the adjusted tax basis of a holder's Common Stock and, after that
basis is reduced to zero, will constitute capital gains to the stockholder,
assuming the Common Stock is held as a capital asset.) Distributions, if any,
from the Fund's net capital gain, when designated as such, are taxable to its
stockholders as long-term capital gains, regardless of the length of time they
have owned their Fund shares and whether received by them in cash or reinvested
in Fund shares pursuant to the Plan. Under the Taxpayer Relief Act of 1997
("Act"), different maximum tax rates apply to a noncorporate taxpayer's net
capital gain distribution from 1997 gains depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. Under the IRS
Restructuring and Reform Act of 1998, a noncorporate taxpayer's net capital gain
from 1998 gains are taxed at a minimum rate of 20% (10% for taxpayers in the 15%
marginal tax bracket). The Fund may divide each net capital gain distribution
into a 28% rate gain distribution and a 20% rate gain distribution (in
accordance with its holding periods for the securities it sold that generated
the distributed gain), in which event its stockholders must treat those portions
accordingly.

Following the end of each calendar year, the Fund notifies its stockholders of
the amounts of any dividends and capital gain distributions paid (or deemed
paid) by the Fund during that year. The information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.

If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Distributions
by the Fund generally will not be eligible for the dividends-received deduction
allowed to corporations. Dividends and other distributions declared by the Fund
in, and payable to stockholders of record as of a date in, October, November, or
December of any year will be deemed to have been paid by the Fund and received
by the stockholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to stockholders for the year in which that December 31 falls.

The Fund must withhold 31% from dividends, capital gain distributions, and
proceeds from sales of Common Stock pursuant to a Tender Offer, if any, payable
to any individuals and certain other noncorporate stockholders who have not
furnished to the Fund a correct taxpayer identification number ("TIN") or a
properly completed claim for exemption on Form W-8 or W-9 ("backup
withholding"). Withholding at that rate also is required from dividends and
capital gain distributions payable to such stockholders who otherwise are
subject to backup withholding. When establishing an account, an investor must
certify under penalty of perjury that the investor's TIN is correct and that the
investor is not otherwise subject to backup withholding.

A loss realized on a sale or exchange of shares of the Fund will be disallowed
if other Fund shares are acquired (whether through the reinvestment of
distributions under the Plan or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.

Dividends paid by the Fund to a stockholder who, as to the United States, is a
nonresident alien individual or nonresident alien fiduciary of a trust or
estate, foreign corporation, or foreign partnership ("foreign stockholder") will
be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply if a dividend paid by the Fund to a foreign
stockholder is "effectively connected with the conduct of a U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic stockholders will apply. Distributions of net capital gain generally
are not subject to that withholding tax, except in the case of a foreign
stockholder who is a nonresident alien individual physically present in the
United States for more than 182 days during the taxable year and with respect to
whom the distributions are "effectively connected." Foreign stockholders are
urged to consult their own tax advisers concerning the applicability of this
withholding tax.

TENDER OFFERS

A holder of Common Stock who, pursuant to any Tender Offer, tenders all shares
of Common Stock owned by such stockholder and any shares considered owned
thereby under attribution rules contained in the Code will realize a taxable
gain or loss depending upon such stockholder's basis for the shares. Such gain
or loss will be treated as capital gain or loss if the shares are held as
capital assets and will be long-term or short-term depending on the
stockholder's holding period for the shares; capital gain on shares held by a
noncorporate stockholder for more than one year will be subject to federal
income tax at the rates indicated above.

Different tax consequences may apply to tendering and non-tendering holders of
Common Stock in connection with a Tender Offer, and these consequences will be
disclosed in the related offering documents. For example, if a tendering holder
of Common Stock tenders less than all shares owned by or attributed to such
stockholder, and if the payment to such stockholder does not otherwise qualify
as a sale or exchange, the proceeds received will be treated as a taxable
dividend, a return of capital, or capital gain depending on the

26
<PAGE> 29

Fund's earnings and profits and the stockholder's basis for the tendered shares.
Also, there is a risk that non-tendering holders of Common Stock may be
considered to have received a deemed distribution that may be a taxable dividend
in whole or in part. Holders of Common Stock may wish to consult their tax
advisers prior to tendering.

* * * * *

The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its stockholders. For further information,
reference should be made to the pertinent Code sections and the regulations
promulgated thereunder, which are subject to change by legislative, judicial, or
administrative action either prospectively or retroactively. Investors are urged
to consult their tax advisers regarding specific questions as to federal, state,
local, or foreign taxes. Foreign investors should consider applicable foreign
taxes in their evaluation of an investment in the Fund.

- --------------------------------------------------------------------------------

DIVIDEND REINVESTMENT PLAN

Pursuant to the Plan, each stockholder will be deemed to have elected to have
all dividends and other distributions, net of any applicable withholding taxes,
automatically reinvested in additional shares of Common Stock, newly issued by
the Fund, unless A I M Fund Services, Inc., the Fund's transfer agent, as the
Plan Agent (the "Plan Agent"), is otherwise instructed by the stockholder in
writing. Such dividends and other distributions will be reinvested in shares of
Common Stock at the net asset value per share next determined on the payable
date of such dividend or other distribution. Each stockholder may also elect to
have all dividends and/or other distributions automatically reinvested in Class
B shares of those mutual funds distributed by AIM Distributors (collectively,
the "AIM Funds"). The prospectus of each AIM Fund describes its investment
objectives and policies. Shareholders can obtain without charge, a prospectus by
calling (800)347-4246 and should consider these objectives and policies before
requesting this option.

Automatic reinvestment in shares of a AIM Fund are made at net asset value
without imposition of a sales charge. Reinvestments in a AIM Fund may only be
directed to an account with the identical shareholder registration and account
number. These elections may be changed by a shareholder at any time; to be
effective with respect to a distribution, the shareholder or the shareholder's
broker must contact the Plan Agent by mail or telephone at least 15 business
days prior to the payment date.

Stockholders who do not participate in the Plan will receive all dividends and
other distributions in cash, net of any applicable withholding taxes, paid in
U.S. dollars by check mailed directly to the stockholder by A I M Fund Services,
Inc., as dividend-paying agent. Stockholders who do not wish to have dividends
and other distributions automatically reinvested should notify the Plan Agent at
P.O. Box 4739, Houston, TX 77210-4739. Dividends and other distributions with
respect to shares of Common Stock registered in the name of a broker-dealer or
other nominee (i.e., in "street name") will be reinvested under the Plan unless
such service is not provided by the broker-dealer or nominee or the stockholder
elects to receive dividends and other distributions in cash. A stockholder whose
shares of Common Stock are held by a broker-dealer or nominee that does not
provide a dividend reinvestment service may be required to have his shares of
Common Stock registered in his own name to participate in the Plan. Similarly, a
stockholder may be unable to transfer his account to certain broker-dealers and
continue to participate in the Plan. Investors who own shares of Common Stock
registered in street name should contact the broker or nominee for details
concerning participation in the Plan.

The Plan Agent will maintain all participant accounts in the Plan and furnish
written confirmations of all transactions in the accounts, including information
needed by participants for personal and tax records. Shares of Common Stock in
the account of each participant may be held by the Plan Agent in
non-certificated form in the name of the Plan Agent or the Plan Agent's nominee,
and each stockholder's proxy will include those shares of Common Stock purchased
pursuant to the Plan. Participants in the Plan may withdraw from the Plan upon
written notice to the Plan Agent.

In the case of a stockholder of record, such as a bank, broker-dealer or
nominee, that holds shares of Common Stock for others who are the beneficial
owners, the Plan Agent will administer the Plan on the basis of the number of
shares of Common Stock certified from time to time by the record stockholder as
representing the total amount registered in the stockholder's name and held for
the account of beneficial owners who participate in the Plan.

There will be no charge to participants for reinvesting dividends or other
distributions. The Plan Agent's fees for the handling of reinvestment of
distributions will be paid by the Fund.

All registered holders of shares of Common Stock (other than brokers and
nominees) will be mailed information regarding the Plan, including a form with
which they may elect to terminate participation in the Plan and receive further
dividends and other distributions in cash. An election to terminate
participation in the Plan must be made in writing to the Plan Agent and should
include the stockholder's name and address as they appear on the share
certificate. An election to terminate, until such election is changed, will be
deemed to be an election by a stockholder to take all subsequent distributions
in cash. An election will be effective only for distributions declared and
having a record date at least ten days after the date on which the election is
received.

The receipt of dividends and other distributions in shares of Common Stock
under the Plan will not relieve participants of any income tax (including
withholding taxes) that may be payable on such distributions. See "Taxes."

Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any dividend or other distribution paid subsequent to notice of
the termination sent to the

27
<PAGE> 30

participants in the Plan at least 30 days before the record date for the
distribution. The Plan also may be amended by the Fund or the Plan Agent, but
(except when necessary or appropriate to comply with applicable law, rules or
policies of a regulatory authority) only by at least 30 days' written notice to
participants in the Plan. All correspondence concerning the Plan should be
directed to the Plan Agent, P.O. Box 4739 Houston, TX 77210-4739.

- --------------------------------------------------------------------------------

AUTOMATIC INVESTMENT PLAN

Investors may purchase shares of the Fund's Common Stock through the Automatic
Investment Plan. Under this Plan, an amount specified by the stockholder of $50
or more (or $25 for Individual Retirement Accounts, Code Section 403(b)(7)
custodial accounts and other tax-qualified employer-sponsored retirement
accounts) on a monthly or quarterly basis will be sent to A I M Fund Services,
Inc. from the investor's bank for investment in the Fund. Participants in the
Automatic Investment Plan should not elect to receive dividends or other
distributions from the Fund in cash. Investors should contact their brokers or
A I M Fund Services, Inc. for more information.

- --------------------------------------------------------------------------------

EXCHANGE PRIVILEGE

The Fund may make available to stockholders who tender shares of the Fund's
Common Stock pursuant to a Tender Offer the privilege of exchanging Fund shares
at net asset value for Class B shares of AIM Funds that are subject to a
contingent deferred sales charge. Any such exchange must be effected in
connection with a stockholder's tender of Fund shares in a Tender Offer. No
Early Withdrawal Charge will be imposed on stockholders choosing to exchange
their Fund shares for shares of any such AIM Fund; however, the exchanging
stockholders will be subject to a contingent deferred sales charge on any such
AIM Fund equivalent to the Early Withdrawal Charge on Common Stock of the Fund.
Thus, shares of such AIM Fund may be subject to a contingent deferred sales
charge upon a subsequent redemption from the AIM Fund. The purchase of shares of
such AIM Fund will be deemed to have occurred at the time of the initial
purchase of the Fund's Common Stock. Holders of Class B AIM Fund shares will not
be permitted to exchange those shares for shares of the Fund's Common Stock.

The prospectus for each AIM Fund describes its investment objectives and
policies. Shareholders can obtain, without charge, a prospectus by calling (800)
347-4246 and should consider these objectives and policies carefully before
requesting an exchange. Each exchange must involve proceeds from Common Stock of
the Fund that have a net asset value of at least $500. An exchange is a taxable
event and may result in a taxable gain or loss. See "Taxes -- Tender Offers."

- --------------------------------------------------------------------------------

DETERMINATION OF NET ASSET VALUE

The net asset value per share of Common Stock is determined Monday through
Friday as of 15 minutes after the close of regular trading on the NYSE
(generally, 4:00 p.m., New York time), on each day during which the NYSE is
open. The NYSE is not open on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. For purposes of determining the net asset
value of a share of Common Stock, the Fund's uninvested assets plus its share of
the value of the securities and any cash or other assets (including interest
accumulated but not yet received) held by the Portfolio minus all liabilities
(including accrued expenses) of the Fund and its share of all liabilities
(including accrued expenses) of the Portfolio is divided by the total number of
shares of Common Stock outstanding at such time. Expenses, including the fees
payable to the Sub-advisor, are accrued daily.

The Sub-advisor, subject to guidelines adopted and periodically reviewed by
the Portfolio's Board of Trustees, values the Corporate Loans and Corporate Debt
Securities at fair value, which approximates market value. In valuing a
Corporate Loan or Corporate Debt Security, the Sub-advisor considers, among
other factors, (i) the creditworthiness of the Borrower and any Intermediate
Participants, (ii) the current interest rate, period until next interest rate
reset and maturity of the Corporate Loan or Corporate Debt Security, (iii)
recent prices in the market for instruments of similar quality, rate, period
until next prices in the market for instruments of similar quality, rate, period
until next interest rate reset and maturity. The Sub-advisor believes that
Intermediate Participants selling Corporate Loans or otherwise involved in a
Corporate Loan transaction may tend, in valuing Corporate Loans for their own
accounts, to be less sensitive to interest rate and credit quality changes and,
accordingly, the Sub-advisor may not rely solely on such valuations in valuing
the Corporate Loans for the Fund's account. In addition, because a secondary
trading market in Corporate Loans and Corporate Debt Securities has not yet
fully developed, in valuing Corporate Loans and Corporate Debt Securities, the
Sub-advisor may not rely solely on but may consider prices or quotations
provided by banks, dealers or pricing services with respect to secondary market
transactions in Corporate Loans and Corporate Debt Securities. To the extent
that an active secondary market in Corporate Loans and Corporate Debt Securities
develops to a reliable degree, or exists in respect of other loans or
instruments deemed to be similar to Corporate Loans and Corporate Debt
Securities, the Sub-advisor may rely to an increasing extent on such market
prices and quotations in valuing the Corporate Loans and Corporate Debt
Securities held by the Portfolio.

Other portfolio securities (other than short-term obligations but including
listed issues) may be valued on the basis of prices furnished by one or more
pricing services which determine prices for normal, institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized

28
<PAGE> 31

by institutional traders. In certain circumstances, portfolio securities are
valued at the last sale price on the exchange that is the primary market for
such securities, or the last quoted bid price for those securities for which the
over-the-counter market is the primary market or for listed securities in which
there were no sales during the day. The value of interest rate swaps, caps and
floors is determined in accordance with a formula and then confirmed
periodically by obtaining a bank quotation. Positions in options are valued at
the last sale price on the market where any such option is principally traded.
Obligations with remaining maturities of 60 days or less are valued at amortized
cost unless this method no longer produces fair valuations. Repurchase
agreements are valued at cost plus accrued interest. Rights or warrants to
acquire stock or stock acquired pursuant to the exercise of a right or warrant,
may be valued taking into account various factors such as original cost to the
Portfolio, earnings and net worth of the issuer, market prices for securities of
similar issuers, assessment of the issuer's future prosperity, liquidation value
or third party transactions involving the issuer's securities. Securities for
which there exist no price quotations or valuations and all other assets are
valued at fair value as determined in good faith by or on behalf of the Board of
Trustees of the Portfolio.

- --------------------------------------------------------------------------------

DESCRIPTION OF CAPITAL STOCK

The Fund is authorized to issue 1 billion shares of capital stock, $.001 par
value, all of which is classified as Common Stock. Although it has no current
intention of doing so, the Board of Directors of the Fund is authorized to
classify and reclassify any unissued shares of capital stock from time to time
by setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or terms and conditions of
redemption of such shares by the Fund. The description of the capital stock and
the description under "Description of Capital Stock -- Certain Anti-Takeover
Provisions of the Articles of Incorporation" are subject to the provisions
contained in the Fund's Articles of Incorporation and Bylaws.

COMMON STOCK

Shares of the Common Stock have no preemptive, conversion, exchange or
redemption rights. Each share has equal voting, dividend, distribution and
liquidation rights. The outstanding shares of Common Stock are, and those
offered hereby, when issued, will be, fully paid and nonassessable. Stockholders
are entitled to one vote per share. All voting rights for the election of
directors are noncumulative, which means that the holders of more than 50% of
the shares can elect 100% of the directors then nominated for election if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any directors.

As of the date of this Prospectus, GT Global, Inc. and its affiliates own
approximately 4% of the Fund's outstanding shares of Common Stock.

Shares of the Common Stock will be held in book-entry form unless physical
certificates are requested in writing by a Common Stockholder.

CERTAIN ANTI-TAKEOVER PROVISIONS OF THE ARTICLES OF INCORPORATION

The Fund presently has provisions in its Articles of Incorporation that have
the effect of limiting (i) the ability of other entities or persons to acquire
control of the Fund, (ii) the Fund's freedom to engage in certain transactions,
and (iii) the ability of the Fund's directors or stockholders to amend the
Articles of Incorporation. These provisions of the Articles of Incorporation may
be regarded as "anti-takeover" provisions. Under Maryland law and the Fund's
Articles of Incorporation, the affirmative vote of the holders of at least a
majority of the votes entitled to be cast is required for the consolidation of
the Fund with another corporation, a merger of the Fund with or into another
corporation (except for certain mergers in which the Fund is the successor), a
statutory share exchange in which the Fund is not the successor, a sale or
transfer of all or substantially all of the Fund's assets, the dissolution of
the Fund and any amendment to the Fund's Articles of Incorporation. In addition,
the affirmative vote of the holders of at least 66 2/3% (which is higher than
that required under Maryland law or the 1940 Act) of the outstanding shares of
the Fund's capital stock is required generally to authorize any of the following
transactions or to amend the provisions of the Articles of Incorporation
relating to such transactions:

(i) merger, consolidation or statutory share exchange of the Fund with
or into any other corporation;

(ii) issuance of any securities of the Fund to any person or entity
for cash;

(iii) sale, lease or exchange of all or any substantial part of the
assets of the Fund to any entity or person (except assets having an
aggregate market value of less than $1,000,000); or

(iv) sale, lease or exchange to the Fund, in exchange for securities
of the Fund, of any assets of any entity or person (except assets having an
aggregate fair market value of less than $1,000,000).

A similar vote also would be required for any amendment of the Articles of
Incorporation to convert the Fund to an open-end investment company by making
any class of the Fund's capital stock a "redeemable security," as that term is
defined in the 1940 Act. Such vote would not be required with respect to any of
the foregoing transactions, however, when, under certain conditions, the Board
of Directors approves the transaction, although in certain cases involving
merger, consolidation or statutory share exchange or sale of all or
substantially all of the Fund's assets or the conversion of the Fund to an
open-end investment company, the affirmative vote of

29
<PAGE> 32

the holders of a majority of the outstanding shares of the Fund's capital stock
would nevertheless be required. Reference is made to the Articles of
Incorporation of the Fund, on file with the SEC, for the full text of these
provisions.

The provisions of the Articles of Incorporation described above and the Fund's
right to make a tender offer for its shares could have the effect of depriving
the stockholders of opportunities to sell their shares at a premium over net
asset value by discouraging a third party from seeking to obtain control of the
Fund in a tender offer or similar transaction. The overall effect of these
provisions is to render more difficult the accomplishment of a merger or the
assumption of control. They provide, however, the advantage of potentially
requiring persons seeking control of the Fund to negotiate with its management
regarding the price to be paid and facilitating the continuity of the Fund's
management, investment objectives and policies. The Board of Directors of the
Fund has considered the foregoing anti-takeover provisions and concluded that
they are in the best interest of the Fund and its stockholders.

- --------------------------------------------------------------------------------

YIELD INFORMATION

From time to time the Fund may include its yield and/or total return for
various specified time periods in advertisements or information furnished to
present or prospective stockholders.

The yield of the Fund refers to the income generated by an investment in the
Fund over a stated period. Yield is calculated by annualizing the most recent
monthly distribution and dividing the product by the average maximum offering
price.

The Fund also may quote annual total return and aggregate total return
performance data. Total return quotations for the specified periods will be
computed by finding the rate of return (based on net investment income and any
capital gains or losses on portfolio investments over such periods) that would
equate the initial amount invested to the redeemable value of such investment at
the end of the period.

The calculation of yield and total return does not reflect the imposition of
any Early Withdrawal Charges or the amount of any stockholder's tax liability.

Yield and total return figures are based on the Fund's historical performance
and are not intended to indicate future performance. The Fund's yield is
expected to fluctuate, and its total return will vary depending on market
conditions, the Corporate Loans, Corporate Debt Securities and other securities
comprising the Portfolio's investments, the Fund's and the Portfolio's operating
expenses and the amount of net realized and unrealized capital gains or losses
during the period.

On occasion, the Fund may compare its yield to (1) LIBOR, quoted daily in The
Wall Street Journal, (2) the Prime Rate, quoted daily in The Wall Street Journal
as the base rate on corporate loans at large U.S. money center commercial banks,
(3) one or more averages compiled by Donoghue's Money Fund Report, a widely
recognized independent publication that monitors the performance of money market
mutual funds, (4) the average yield reported by the Bank Rate Monitor National
Index(TM) for money market deposit accounts offered by the 100 leading banks and
thrift institutions in the ten largest standard metropolitan statistical areas,
(5) yield data published by Lipper Analytical Services, Inc., or (6) the yield
on an investment in 90-day Treasury bills on a rolling basis, assuming quarterly
compounding. In addition, the Fund may compare the Prime Rate, the Donoghue's
averages and the other yield data described above to each other. As with yield
quotations, yield comparisons should not be considered indicative of the Fund's
yield or relative performance for any future period.
OTHER INFORMATION
- --------------------------------------------------------------------------------

ORGANIZATION OF THE FUND

The Fund is a continuously offered, non-diversified, closed-end management
investment company. The Fund was incorporated under the name "GT Global Floating
Rate Fund, Inc." in the State of Maryland on December 4, 1996 and is authorized
under Maryland law to do business as "AIM Floating Rate Fund." The Fund has
registered under the 1940 Act. The Fund's principal office is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173, and its telephone number
is 1-800-347-4246.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT AND REGISTRAR

State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts 02171, will serve as custodian of the Fund's assets held in the
United States. A I M Fund Services, Inc. (the "Transfer Agent") will serve as
the Fund's transfer and dividend disbursing agent and registrar.

30
<PAGE> 33

LEGAL MATTERS

Certain legal matters in connection with the Common Stock offered hereby will
be passed on for the Fund by Kirkpatrick & Lockhart LLP, Washington, D.C.

INDEPENDENT ACCOUNTANTS

The Fund's independent accountants are PricewaterhouseCoopers LLP, One Post
Office Square, Boston, Massachusetts 02109. PricewaterhouseCoopers LLP will
conduct an annual audit of the Fund, assist in the preparation of the Fund's
federal and state income tax returns and consult with the Fund as to matters of
accounting, regulatory filings, and federal and state income taxation.

YEAR 2000 COMPLIANCE PROJECT

In providing services to the Fund and the Portfolio, A I M Management Group
Inc. ("AIM Management") and its subsidiaries rely on both internal software
systems as well as external software systems provided by third parties (the
"Software"). Many software systems in use today are unable to distinguish
between the year 2000 from the year 1900. This defect if not cured will likely
adversely affect the services that AIM Management, its subsidiaries and other
service providers to the Fund and the Portfolio provide the Fund and its
stockholders.

To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the fourth quarter of
1998. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be viewed to confirm Year 2000 compliance
upon installation.

FURTHER INFORMATION

Further information concerning the Common Stock and the Fund may be found in
the Registration Statement, on file with the SEC.

31
<PAGE> 34

APPENDIX A
- --------------------------------------------------------------------------------

DESCRIPTION OF DEBT SECURITIES RATINGS

Moody's Investors Service, Inc. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C". Investment grade ratings are the first
four categories: Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Ba -- Bonds which are rated Ba
are judged to have speculative elements; their future cannot be considered as
well-assured. Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings. C -- Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.

Standard & Poor's, a division of The McGraw-Hill Companies, Inc., ("S&P")
rates the securities debt of various entities in categories ranging from "AAA"
to "D" according to quality. Investment grade ratings are the first four
categories:

AAA -- An obligation rated "AAA" has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong. AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong. A -- An obligation rated "A" is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than obligations in higher rated categories. BBB -- An
obligation rated "BBB" exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation. BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and
"C" are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions. BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation. B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation. CCC -- An obligation rated "CCC" is
currently vulnerable to nonpayment, and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation. CC -- An obligation rated "CC" is
currently highly vulnerable to nonpayment. C -- The "C" rating may be used to
cover a situation where a bankruptcy petition has been filed or similar action
has been taken, but payments on this obligation are being continued. D -- An
obligation rated "D" is in payment default. The "D" rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The "D" rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.

A-1
<PAGE> 35

DESCRIPTION OF COMMERCIAL PAPER RATINGS

Moody's employs the designation "Prime-1" to indicate commercial paper having
a superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

S&P ratings of commercial paper are graded into several categories ranging
from "A-1" for the highest quality obligations to "D" for the lowest. Issues in
the "A" category are delineated with numbers 1, 2, and 3 to indicate the
relative degree of safety. A-1 -- This highest category indicates that the
degree of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics will be denoted with a plus sign
(+) designation. A-2 -- Capacity for timely payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."

ABSENCE OF RATING

Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or
issuer.

4. The issue was privately placed, in which case the rating is not
published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.

Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa to Caa. The modifier 1 indicates that the Company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the Company ranks in the
lower end of its generic rating category.

A-2
<PAGE> 36

AIM FLOATING RATE FUND
(D/B/A FOR GT GLOBAL FLOATING RATE FUND, INC.)

FINANCIAL STATEMENTS
<PAGE> 37

GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED

STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Investment income:
Interest income........................................... $8,149,334
Other income.............................................. 94,501
----------
Total investment income................................ 8,243,835
==========
Expenses:
Investment management and administration fees (Note 2).... 1,167,736
Amortization of organization costs (Note 1)............... 21,060
Audit fees................................................ 32,150
Custodian fees (Note 1)................................... 2,130
Directors' and Trustees' fees and expenses (Note 2)....... 22,140
Fund accounting fees (Note 2)............................. 29,243
Legal fees................................................ 142,000
Printing and postage expenses............................. 87,198
Registration and filing fees (Note 1)..................... 40,550
Transfer agent fees (Note 2).............................. 81,450
Other expenses............................................ 29,783
----------
Total expenses before reductions....................... 1,655,440
Expenses reimbursed by Chancellor LGT Asset
Management, Inc. (Note 2)........................... (191,336)
----------
Total net expenses..................................... 1,464,104
----------
Net investment income....................................... 6,779,731
----------
Net realized and unrealized loss on investments: (Note 1)
Net realized loss on investments.......................... (21,638)
----------
Net realized loss during the year...................... (21,638)
----------
Net change in unrealized depreciation of investments...... (345,293)
----------
Net unrealized depreciation during the period.......... (345,293)
----------
Net realized and unrealized loss on investments and foreign
currencies................................................ (366,931)
----------
Net increase in net assets resulting from operations........ $6,412,800
==========
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-1
<PAGE> 38

GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED

STATEMENT OF CHANGES IN NET ASSETS

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1998
-------------
(UNAUDITED)
<S> <C>
Increase (decrease) in net assets
Operations:
Net investment income..................................... $ 6,779,731
Net realized gain (loss) on investments and foreign
currency transactions.................................. (21,638)
Net change in unrealized appreciation (depreciation) of
investments............................................ (345,293)
------------
Net increase in net assets resulting from operations... 6,412,800
------------
Distributions to shareholders: (Note 1)
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.......... 66,790,322
Decrease from capital shares repurchased.................. (11,774,053)
------------
Net increase from capital share transactions........... 55,016,269
------------
Total increase (decrease) in net assets..................... 61,429,069
Net assets:
Beginning of period....................................... 161,697,141
------------
End of period *........................................... $223,126,210
============
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-2
<PAGE> 39

AIM FLOATING RATE FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL FLOATING RATE FUND, INC.)

PORTFOLIO OF INVESTMENTS

JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MOODY'S PRINCIPAL VALUE % OF NET
SENIOR SECURED FLOATING RATE INTERESTS(#)(##) RATING AMOUNT (NOTE 1) ASSETS
--------------------------------------------- ------- ---------- ------------ --------
<S> <C> <C> <C> <C>
Leisure & Tourism (15.7%)
Patriot American Hospitality, Inc.:.......... NR 3.9
Term loan B due 3/31/03................... 5,625,000 $ 5,625,000
Term loan due 3/31/00..................... 1,488,971 1,487,109
Term loan due 3/31/99..................... 1,323,529 1,321,875
KSL Recreation Group, Inc.:.................. B2 2.9
Revolving Credit due 4/30/03.............. 2,395,102 2,384,635
Term loan B due 4/30/06................... 1,944,643 1,949,504
Term loan A due 4/30/05................... 1,944,643 1,947,074
Interval International Corp.:................ B2 2.0
Term loan B due 12/16/05.................. 2,114,375 2,113,064
Term loan C due 12/15/06.................. 2,114,375 2,113,064
The Resort at Summerlin, Inc.:............... B1 1.8
Term loan A due 3/31/04................... 4,000,000 3,970,000
Extended Stay America, Inc.:................. NR 1.7
Term loan B due 12/31/03.................. 3,750,000 3,754,688
ASC-West, Inc.:.............................. B1 1.6
Term loan due 5/31/06..................... 3,571,429 3,569,214
Aladdin Gaming, LLC.:........................ B2 1.1
Term loan C due 2/26/08................... 2,222,222 2,219,444
Term loan B due 8/26/06................... 277,778 277,258
ASC East, Inc.:.............................. B1 0.7
Term loan due 5/31/06..................... 1,428,571 1,427,686
------------
34,159,615
------------
Broadcasting & Publishing (11.4%)
Capstar Broadcasting Corp.:.................. B3 4.6
Term loan B due 5/28/05................... 10,000,000 10,000,000
White Knight Broadcasting, Inc.:............. B1 2.5
Term loan B due 9/30/05................... 5,390,244 5,390,244
21st Century Newspapers, Inc.:............... Ba3 2.3
Term loan due 9/15/05..................... 4,987,500 4,975,031
Comcorp Broadcasting, Inc.:.................. B1 1.4
Term loan B due 9/30/05................... 2,987,805 2,985,952
Affinity Group:.............................. Ba1 0.6
Term loan due 3/31/02..................... 1,000,000 999,380
Revolving Credit due 3/31/02.............. 236,111 235,965
------------
24,586,572
------------
Business & Public Services (7.2%)
Bridge Information Systems, Inc.:............ B1 2.3
Term loan due 5/29/05..................... 5,000,000 5,000,000
Omni Services, Inc.:......................... NR 2.3
Axel loan due 10/30/05.................... 4,950,000 4,962,375
Decision One Corp.:.......................... B1 1.4
Term loan B due 8/6/05.................... 2,977,500 2,932,838
Safety-Kleen Services Inc.:.................. Ba3 1.2
Term loan C due 4/3/05.................... 1,363,636 1,366,200
Term loan B due 4/3/04.................... 1,363,636 1,365,341
------------
15,626,754
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 40
AIM FLOATING RATE FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL FLOATING RATE FUND, INC.)

PORTFOLIO OF INVESTMENTS (CONT'D)

JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MOODY'S PRINCIPAL VALUE % OF NET
SENIOR SECURED FLOATING RATE INTERESTS(#)(##) RATING AMOUNT (NOTE 1) ASSETS
--------------------------------------------- ------- ---------- ------------ --------
<S> <C> <C> <C> <C>
Auto Parts (7.2%)
American Axle & Manufacturing of Michigan,
Inc.:..................................... Ba3 2.3
Term loan due 4/30/06..................... 5,000,000 $ 5,009,400
Federal-Mogul Corp.:......................... Ba2 2.1
Term loan B due 12/31/05.................. 4,500,000 4,505,625
Joan Fabric Corp.:........................... B1 1.4
Term loan B due 6/30/05................... 1,962,632 1,967,538
Term loan C due 6/30/06................... 1,020,000 1,023,825
Cambridge Industries, Inc.:.................. B1 1.4
Term loan B due 6/30/05................... 2,985,000 2,988,731
------------
15,495,119
------------
Health Care Services (7.0%)
Paragon Health Network, Inc.:................ B1 2.3
Term loan B due 3/31/05................... 2,500,000 2,500,000
Term loan C due 3/31/06................... 2,500,000 2,500,000
MedPartners, Inc.:........................... B1 2.3
Term loan B due 6/8/01.................... 5,000,000 4,968,750
Genesis Health Ventures, Inc.:............... Ba3 1.6
Term loan B due 9/30/04................... 1,654,166 1,659,345
Term loan C due 6/30/05................... 1,650,000 1,655,165
The Multicare Companies, Inc.:............... B1 0.8
Term loan B due 9/30/04................... 1,240,625 1,244,508
Term loan C due 6/1/05.................... 412,500 413,791
------------
14,941,559
------------
Consumer Services (6.8%)
Coinmach Laundry Corp.:...................... Ba3 4.6
Term loan B due 6/30/05................... 9,975,000 9,981,284
The Boyds Collection, Ltd.:.................. Ba3 2.2
Term loan B due 4/21/06................... 4,850,000 4,837,875
------------
14,819,159
------------
Chemicals (6.4%)
Huntsman Specialty Chemicals Corp.:.......... Ba2 2.3
Term loan due 3/15/07..................... 2,727,273 2,734,091
Term loan C due 3/15/05................... 2,250,000 2,254,230
Huntsman Corp.:.............................. Ba3 2.3
Term loan B due 6/30/04................... 4,950,000 4,956,188
Sterling Pulp Chemicals (SASK) Ltd.:......... B1 1.8
Term loan B due 6/30/05................... 3,935,996 3,935,996
------------
13,880,505
------------
Office Equipment (4.6%)
Dictaphone Corp.:............................ B3 2.3
Term loan B due 6/30/02................... 2,500,000 2,493,750
Term loan C due 12/31/02.................. 2,500,000 2,481,250
Genicom Corp.:............................... B1 2.3
Term loan B due 9/5/04.................... 4,906,250 4,909,341
------------
9,884,341
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 41
AIM FLOATING RATE FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL FLOATING RATE FUND, INC.)

PORTFOLIO OF INVESTMENTS (CONT'D)

JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MOODY'S PRINCIPAL VALUE % OF NET
SENIOR SECURED FLOATING RATE INTERESTS(#)(##) RATING AMOUNT (NOTE 1) ASSETS
--------------------------------------------- ------- ---------- ------------ --------
<S> <C> <C> <C> <C>
Appliances & Household Durables (4.5%)
The Imperial Home Decor Group:............... Ba3 2.3
Term loan B due 3/13/05................... 3,300,000 $ 3,300,000
Term loan C due 3/13/06................... 1,700,000 1,700,000
Goodman Manufacturing Company, L.P.:......... Ba3 2.2
Term loan C due 9/30/05................... 2,389,087 2,396,565
Term loan B due 9/30/04................... 2,389,087 2,395,060
------------
9,791,625
------------
Transportation -- Shipping (3.6%)
American Commercial Lines:................... Ba2 2.3
Term loan C due 6/30/07................... 2,883,436 2,883,436
Term loan B due 6/30/06................... 2,116,564 2,116,564
Atlas Freighter Leasing, Inc.:............... Ba3 1.3
Term loan due 5/29/04..................... 2,918,108 2,910,813
------------
7,910,813
------------
Plastics & Rubber (3.5%)
Intesys Technologies, Inc.:.................. NR 3.5
Term loan due 6/30/06..................... 7,500,000 7,500,000
------------
Pharmaceuticals (3.2%)
Leiner Health Products Group:................ Ba3 2.1
Term loan C due 12/30/05.................. 4,473,736 4,473,736
Endo Pharmaceuticals, Inc.:.................. B1 1.1
Term loan B due 6/30/04................... 2,452,381 2,455,446
------------
6,929,182
------------
Paper/Packaging (2.7%)
Crown Paper Co.:............................. Ba3 1.4
Term loan due 8/23/03..................... 2,969,466 2,991,737
Stone Container International Services,
Inc.:..................................... Ba3 1.3
Term loan E due 10/1/03................... 2,913,238 2,916,880
------------
5,908,617
------------
Coal (2.6%)
P & L Coal Holdings Corp.:................... NR 1.4
Term loan B due 6/9/06.................... 3,000,000 3,009,390
Centennial Resources, Inc.:.................. B2 1.2
Term loan B due 3/31/04................... 1,966,667 1,809,333
Term loan A due 3/31/02................... 850,000 782,000
------------
5,600,723
------------
Wireless Communications (2.3%)
Commnet Cellular, Inc.:...................... B1 2.3
Term loan D due 9/30/07................... 3,252,003 3,254,082
Term loan C due 3/31/07................... 1,161,440 1,161,800
Term loan B due 9/30/06................... 586,527 586,527
------------
5,002,409
------------
Retailers -- Food (2.3%)
Star Markets, Inc.:.......................... Ba3 2.3
Term Loan C due 12/31/02.................. 4,954,088 4,957,209
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 42
AIM FLOATING RATE FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL FLOATING RATE FUND, INC.)

PORTFOLIO OF INVESTMENTS (CONT'D)

JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

REPURCHASE AGREEMENT
- -----------------------------------------------
Dated June 30, 1998, with State Street Bank &
Trust Co., due July 1, 1998, for an
effective yield of 5.70%, collateralized
by $9,000,000 U.S. Treasury Notes, 5.875%
due 1/31/99 (market value of collateral is
$9,236,250 including accrued interest).
(cost $9,051,000)......................... 9,051,000 4.2
------------ -----

TOTAL INVESTMENTS (cost $214,718,102)*......... 214,494,390 99.1
Other Assets and Liabilities................... 1,852,089 0.9
------------ -----

NET ASSETS..................................... $216,346,479 100.0
============ =====
</TABLE>

(##) Senior secured floating rate interests often require prepayments from
excess cash flow or permit the borrower to repay 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.

* For Federal income tax purposes, cost is $214,718,102 and appreciation
(depreciation) is as follows:

<TABLE>
<S> <C>
Unrealized appreciation: $ 237,068
Unrealized depreciation: (460,780)
---------
Net unrealized appreciation: $(223,712)
=========
</TABLE>

Abbreviation:
NR -- Not rated

The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 43

AIM FLOATING RATE FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL FLOATING RATE FUND, INC.)

STATEMENT OF ASSETS AND LIABILITIES

JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Assets:
Investments at value (cost $214,718,102) (Note 1)......... $214,494,390
U.S. currency............................................. 241
Interest receivable....................................... 1,771,710
Receivable for Fund shares sold........................... 1,208,733
Receivable from A I M Advisors, Inc. (Note 2)............. 191,336
Unamortized organizational costs (Note 1)................. 162,784
Receivable for securities sold............................ 59,839
Miscellaneous receivable.................................. 45,610
------------
Total assets........................................... 217,934,643
------------
Liabilities:
Payable for distribution.................................. 658,451
Deferred facility fees (Note 1)........................... 408,090
Payable for investment management and administration fees
(Note 2)............................................... 383,966
Payable for professional fees............................. 73,701
Payable for securities purchased.......................... 19,913
Payable for transfer agent fees (Note 2).................. 16,045
Payable for Directors' and Trustees' fees and expenses
(Note 2)............................................... 7,306
Payable for registration and filing fees.................. 6,090
Payable for fund accounting fees (Note 2)................. 5,224
Payable for custodian fees................................ 5,077
Payable for printing and postage expenses................. 3,064
Other accrued expenses.................................... 1,137
------------
Total liabilities...................................... 1,588,064
------------
Minority interest (Note 1)................................ 100
------------
Net assets.................................................. $216,346,479
============
Net asset value and offering price per share ($216,346,479
Divided by 21,626,238 shares outstanding).............. $ 10.00
============
Net assets consist of:
Paid in capital (Note 4).................................. $216,441,274
Accumulated net realized gain on investments (Note 1)..... 128,917
Net unrealized depreciation of investments................ (223,712)
------------
Total -- representing net assets applicable to shares of
common stock outstanding.................................. $216,346,479
============
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-7
<PAGE> 44

AIM FLOATING RATE FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL FLOATING RATE FUND, INC.)

STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Investment income:
Interest income........................................... $8,149,334
Facility fees earned...................................... 94,501
Interest expense (Note 1)................................. (11,594)
----------
Total investment income................................ 8,232,241
----------
Expenses:
Investment management and administration fees (Note 2).... 1,167,736
Professional fees......................................... 174,150
Printing and postage expenses............................. 87,198
Transfer agent fees (Note 2).............................. 81,450
Registration and filing fees.............................. 40,550
Fund accounting fees (Note 2)............................. 29,243
Directors' and Trustees' fees and expenses (Note 2)....... 22,140
Amortization of organization costs (Note 1)............... 21,060
Custodian fees............................................ 2,130
Other expenses............................................ 29,783
----------
Total expenses before reimbursement.................... 1,655,440
Expenses reimbursed by A I M Advisors, Inc. (Note 2)... (191,336)
----------
Total net expenses..................................... 1,464,104
----------
Net investment income....................................... 6,768,137
----------
Net realized and unrealized loss on investments: (Note 1)
Net realized loss on investments.......................... (21,638)
Net unrealized depreciation on investments................ (345,293)
----------
Net realized and unrealized loss on investments............. (366,931)
----------
Net increase in net assets resulting from operations........ $6,401,206
==========
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-8
<PAGE> 45

AIM FLOATING RATE FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL FLOATING RATE FUND, INC.)

STATEMENT OF CHANGES IN NET ASSETS

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MAY 1, 1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS) TO
ENDED DECEMBER 31,
JUNE 30, 1998 1997
------------- -----------------
(UNAUDITED)
<S> <C> <C>
Increase in net assets
Operations:
Net investment income..................................... $ 6,768,137 $ 5,351,450
Net realized gain (loss) on investments................... (21,638) 150,555
Net change in unrealized appreciation (depreciation) of
investments............................................ (345,293) 121,581
------------ ------------
Net increase in net assets resulting from operations... 6,401,206 5,623,586
------------ ------------
Distributions to shareholders: (Note 1)
From net investment income................................ (6,768,137) (5,351,450)
------------ ------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.......... 66,790,322 168,538,536
Decrease from capital shares repurchased.................. (11,774,053) (7,213,531)
------------ ------------
Net increase from capital share transactions........... 55,016,269 161,325,005
------------ ------------
Total increase in net assets................................ 54,649,338 161,597,141
Net assets:
Beginning of period....................................... 161,697,141 100,000
------------ ------------
End of period *........................................... $216,346,479 $161,697,141
============ ============
*Includes undistributed net investment income of.......... $ -- $ --
============ ============
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-9
<PAGE> 46

AIM FLOATING RATE FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL FLOATING RATE FUND, INC.)

STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Cash Provided by Operating Activities:
Net increase in net assets resulting from operations...... $ 6,401,206
Increase in receivables................................ (661,957)
Increase in payables................................... 425,161
Net realized and unrealized gain on investments........ 366,931
Increase in deferred facility fees..................... 219,094
Decrease in unamortized organization costs............. 21,060
---------------
Net cash provided by operating activities............ 6,771,495
---------------
Cash Used for Investing Activities:
Proceeds from principal payments and sales of senior
secured floating rate interests........................ 81,672,678
Purchases of senior secured floating rate interests....... (130,309,838)
Purchases of short-term investments....................... (2,069,611,000)
Proceeds from sales and maturities of short-term
investments............................................ 2,062,163,000
---------------
Net cash used in investing activities................ (56,085,160)
---------------
Cash Provided by Financing activities:
Proceeds from capital shares sold and reinvested.......... 64,889,819
Disbursements from capital shares repurchased............. (11,774,053)
Dividends paid to shareholders............................ (3,802,002)
Proceeds from bank line of credit......................... 38,416,000
Repayment of proceeds from bank line of credit............ (38,416,000)
---------------
Net cash provided by financing activities......... 49,313,764
---------------
Net increase in cash...................................... 99
Cash at Beginning of Period............................... 142
---------------
Cash at End of Period..................................... $ 241
===============
Non-Cash Financing Activities:
Value of capital shares issued in reinvestment of
dividends paid to shareholders......................... $ 2,966,135
===============
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-10
<PAGE> 47

AIM FLOATING RATE FUND -- CONSOLIDATED
(FORMERLY GT GLOBAL FLOATING RATE FUND, INC.)

FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MAY 1, 1997
(COMMENCEMENT
SIX MONTHS OF OPERATIONS) TO
ENDED DECEMBER 31,
JUNE 30, 1998 1997
------------- -----------------
(UNAUDITED)
<S> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $ 10.02 $ 10.00
-------- --------
Income from investment operations:
Net investment income..................................... 0.35 0.46
Net realized and unrealized gain (loss) on investments.... (0.02) 0.02
-------- --------
Net increase from investment operations................ 0.33 0.48
-------- --------
Distributions to shareholders:
From net investment income................................ (0.35) (0.46)
-------- --------
Net asset value, end of period.............................. $ 10.00 $ 10.02
======== ========
Total investment return (c)................................. 3.52%(b) 5.04%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $216,346 $161,697
Ratio of net investment income to average net assets:
With expense reimbursement (Note 2)....................... 6.92%(a) 7.26%(a)
Without expense reimbursement............................. 6.73%(a) 6.24%(a)
Ratio of operating expense to average net assets:
With expense reimbursement (Note 2)....................... 1.50%(a) 1.50%(a)
Without expense reimbursement............................. 1.69%(a) 2.52%(a)
Ratio of interest expense to average net assets............. 0.01%(a) 0.15%(a)
Portfolio turnover rate..................................... 92%(a) 118%(a)
</TABLE>

- ---------------

(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.

The accompanying notes are an integral part of the financial statements.
F-11
<PAGE> 48

AIM FLOATING RATE FUND
(FORMERLY GT GLOBAL FLOATING RATE FUND, INC.)

NOTES TO
FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Floating Rate Fund (the "Fund" formerly, GT Global Floating Rate Fund, Inc.)
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, 1998, all of the
beneficial interest in the Portfolio was owned either by the Fund or INVESCO
(NY), Inc., ("INVESCO (NY)"), the Portfolio's investment sub-sub-advisor and the
Fund's sub-sub-administrator, which has a nominal ($100) investment in the
Portfolio.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.

(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 INVESCO Senior Secured Management, Inc.,
(the "Sub-Adviser" formerly, Chancellor LGT Senior Secured Management, Inc.)

When possible, A I M Advisors, Inc., ("AIM" or the "Manager") or Sub-Adviser
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 Sub-Adviser, 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 Sub-Adviser 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.

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.

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) 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.

(D) 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.

(E) 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.

F-12
<PAGE> 49

(F) 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 straightline
basis over a five-period period.

(G) 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.

(H) 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.

(I) INVESTMENT INCOME
Investment income is recorded on an accrual basis. Where a high level of
uncertainty exists as to collection of income on securities, income is 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.

(J) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allow the Fund and certain other funds
to borrow, on a first come, first serve basis, an aggregate maximum amount of
$250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of the
Fund's total assets. On June 30, 1998, the Fund had no loans outstanding.

For the period ended June 30, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $2,799,958 with a weighted average interest rate of 6.21%. Interest expense
for the period ended June 30, 1998, was $11,594.

2. RELATED PARTIES
The Manager is the investment manager and administrator for the Fund and
Portfolio, and INVESCO Senior Secured Management, Inc. (formerly, Chancellor LGT
Senior Secured Management, Inc.) is the Portfolio's investment sub-adviser and
sub-administrator ("Sub-Adviser"), and INVESCO (NY), Inc. (formerly Chancellor
LGT Asset Management, Inc.) is the Portfolio's sub-sub-adviser and
sub-sub-administrator. As of the close of business on May 29, 1998,
Liechtenstein Global Trust AG ("LGT"), the former indirect parent organization
of Chancellor LGT Asset Management, Inc. ("Chancellor LGT") and Chancellor LGT
Senior Secured Management, Inc. ("Senior Secured"), consummated a purchase
agreement with AMVESCAP PLC pursuant to which AMVESCAP PLC acquired LGT's Asset
Management Division, which included Chancellor LGT, Senior Secured and certain
other affiliates. As a result of this transaction, Chancellor LGT was renamed
INVESCO (NY), Inc., Senior Secured was renamed INVESCO Senior Secured
Management, Inc., and each of them is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. In connection with this transaction, the Manager, an indirect
wholly-owned subsidiary of AMVESCAP PLC, became the investment manager and
administrator of the Fund and Portfolio, INVESCO Senior Secured Asset
Management, Inc. became the sub-advisor and sub-administrator of the Portfolio,
and INVESCO (NY), Inc. became the sub-adviser and sub-administrator of the Fund,
and the sub-sub-adviser and sub-sub-administrator of the Portfolio, and AIM
Distributors, Inc. ("AIM Distributors") became the Fund's distributor. All of
the changes became effective as of the close of business on May 29, 1998.

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. The
Fund pays administration fees at the annualized rate of .25% of its average
daily net assets to Invesco (NY).

AIM Distributors, an affiliate of the Manager, serves as the Fund's distributor.
For the period ended May 29, 1998, GT Global, Inc. ("GT Global") served as the
Fund's distributor.

Certain redemptions of common shares made within four years of purchase are
subject to an early withdrawal charge, in accordance with the Fund's current
prospectus. For the period ended June 30, 1998, AIM Distributors and GT Global
collected early withdrawal charges in the amounts of $77,636 and $77,982,
respectively for the Fund.

The Manager and AIM Distributors have undertaken 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
and AIM Distributors, is the transfer agent of the Fund. 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 is also
reimbursed by the Fund for its out-of-pocket expenses for such items as postage,
forms, telephone charges, stationery and office supplies.

F-13
<PAGE> 50

The Manager is the pricing and accounting agent for the Fund and Portfolio. The
Fund and Portfolio pay a monthly fee for these services to the Manager at the
annualized rate, respectively of .02% and .01% of their average daily net
assets.

The Fund pays each of its Trustees who is not an employee, officer or director
of the Manager, AIM Distributors or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Trustee. The
Portfolio pays each of its Trustees who is not an employee, officer or director
of the Manager, AIM Distributors or GT Services $500 per year plus $150 for each
meeting of the board or any committee thereof attended by the Trustees.

3. PURCHASES AND SALES OF SECURITIES
For the period ended June 30, 1998, purchases and sales of investment securities
by the Portfolio, other than U.S. government obligations and short-term
investments, aggregated $130,329,751 and $81,577,130, respectively. There were
no purchases or sales of U.S. government obligations by the Portfolio for the
period ended June 30, 1998.

4. CAPITAL SHARES
At June 30, 1998, 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
SIX MONTHS ENDED (COMMENCEMENT
JUNE 30, 1998 OF OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1997
------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................. 6,374,377 $63,824,187 16,621,817 $166,317,980
Shares issued in connection
with reinvestment of
distributions.............. 295,413 2,966,135 221,712 2,220,556
---------- ----------- ---------- ------------
6,669,790 66,790,322 16,843,529 168,538,536
Shares repurchased.......... (1,177,089) (11,774,053) (719,992) (7,213,531)
---------- ----------- ---------- ------------
Net increase................ 5,492,701 $55,016,269 16,123,537 $161,325,005
========== =========== ========== ============
</TABLE>

5. AFFILIATED SHAREHOLDER
As of June 30, 1998, AIM Advisors, Inc., AIM Distributors and their affiliates
owned approximately 6.88% of the Fund's outstanding shares of Common Stock.

6. UNFUNDED LOAN INTEREST
As of June 30, 1998, the Fund had unfunded loan commitments of $3,909,603, which
would be extended at the option of the borrower, pursuant to the following loan
agreements:

<TABLE>
<CAPTION>
UNFUNDED
BORROWER COMMITMENTS
-------- -----------
<S> <C>
Affinity Group............................. $1,013,889
Extended Stay America Inc.................. 1,250,000
KLS Recreation Group, Inc.................. 1,645,714
</TABLE>

7. 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.

8. INTERMEDIATE LOAN PARTICIPANTS
The portfolio invests primarily in senior secured corporate loans from US or
non-US companies ("Borrowers"). The investment of the Portfolio may take the
form of participation interests or assignments. When the Portfolio purchases a
participation interest from a syndicate of lenders ("Lenders"), one or more of
which administers the loan on behalf of all the Lenders (the "Agent Bank"), the
Portfolio would be required to rely on the Lender that sold the participation
interest not only for the enforcement of the Portfolio's rights against the
Borrower but also for the receipt and processing of payments due to the
Portfolio under the participation. As such, the Portfolio is subject to the
credit risk of the Borrower, the Agent Bank, and Lender who sold the
participation interest.

F-14
<PAGE> 51

GT GLOBAL FLOATING RATE FUND, INC.

REPORT OF INDEPENDENT ACCOUNTANTS

- --------------------------------------------------------------------------------

To the Shareholders and Board of Directors of
GT Global Floating Rate Fund, Inc.:

We have audited the accompanying statement of assets and liabilities of GT
Global Floating Rate Fund, Inc., (the "Fund") including the portfolio of
investments, as of December 31, 1997, the related statement of operations, the
statements of changes in net assets and the financial highlights for the period
from May 1, 1997 (commencement of operations) to December 31, 1997. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and financial
intermediaries. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Floating Rate Fund, Inc. as of December 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
period from May 1, 1997 (commencement of operations) to December 31, 1997, in
conformity with generally accepted accounting principles.

/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
February 17, 1998

F-15
<PAGE> 52

GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED

PORTFOLIO OF INVESTMENTS

DECEMBER 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MOODY'S PRINCIPAL VALUE % OF NET
SENIOR SECURED FLOATING RATE INTERESTS(#)(##) RATING(###) AMOUNT (NOTE 1) ASSETS
--------------------------------------------- ----------- --------- ------------ --------
<S> <C> <C> <C> <C>
Services (35.1%)
Star Markets, Inc.:.......................... Ba3 -- -- 3.7
Retailers - Food
Term loan C due 12/31/02.................. -- 6,000,000 $ 6,000,000 --
KSL Recreation Group, Inc.:.................. B2 -- -- 3.3
Leisure & Tourism
Term loan B due 4/30/06................... -- 1,964,286 1,971,652 --
Term loan A due 4/30/05................... -- 1,964,286 1,969,196 --
Revolving credit due 4/30/03.............. -- 1,432,654 1,432,654 --
Bridge Information Systems, Inc.:............ B1 -- -- 3.1
Business & Public Services
Term loan B due 12/31/04.................. -- 5,000,000 5,000,000 --
Price Communications Cellular Holdings,
Inc.:..................................... Ba3 -- -- 3.1
Wireless Communications
Term loan B due 9/30/06................... -- 2,790,000 2,791,757 --
Term loan A due 9/30/05................... -- 2,210,000 2,207,238 --
21st Century Newspapers, Inc.:............... B1 -- -- 3.1
Broadcasting & Publishing
Term loan due 9/15/05..................... -- 5,000,000 4,993,750 --
Omni Services, Inc.:......................... NR -- -- 3.1
Business & Public Services
Axel loan due 10/30/05.................... -- 4,975,000 4,975,000 --
Hard Rock Hotels, Inc.:...................... B1 -- -- 2.4
Leisure & Tourism
Term loan B due 9/30/04................... -- 1,500,000 1,501,875 --
Term loan C due 9/30/05................... -- 1,500,000 1,501,875 --
Term loan A due 9/30/03................... -- 1,000,000 1,001,250 --
ASC-West, Inc.:.............................. B1 -- -- 2.2
Leisure & Tourism
Term loan due 5/31/06..................... -- 3,571,429 3,569,643 --
Comcorp Broadcasting, Inc.:.................. B1 -- -- 1.9
Broadcasting & Publishing
Term loan B due 9/30/05................... -- 3,048,780 3,044,970 --
Outdoor Systems, Inc.:....................... Ba2 -- -- 1.9
Business & Public Services
Term loan due 6/30/04..................... -- 3,000,000 3,003,750 --
Atlas Freighter Leasing, Inc.:............... Ba3 -- -- 1.9
Transportation - Shipping
Term loan due 5/29/04..................... -- 3,000,000 3,000,000 --
Decision One Corp.:.......................... B1 -- -- 1.8
Business & Public Services
Term loan B due 8/6/05.................... -- 2,992,500 2,996,241 --
White Knight Broadcasting, Inc.:............. B1 -- -- 1.2
Broadcasting & Publishing
Term loan B due 9/30/05................... -- 1,951,220 1,948,780 --
Coinmach Laundry Corp.:...................... Ba3 -- -- 0.8
Consumer Services
Term loan B due 12/31/03.................. -- 1,436,170 1,436,170 --
ASC East, Inc.:.............................. B1 -- -- 0.8
Leisure & Tourism
Term loan due 5/31/06..................... -- 1,428,571 1,427,857 --
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-16
<PAGE> 53
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED

PORTFOLIO OF INVESTMENTS (CONT'D)

DECEMBER 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MOODY'S PRINCIPAL VALUE % OF NET
SENIOR SECURED FLOATING RATE INTERESTS(#)(##) RATING(###) AMOUNT (NOTE 1) ASSETS
--------------------------------------------- ----------- --------- ------------ --------
<S> <C> <C> <C> <C>
Services (Continued)
Affinity Group:.............................. Ba3 -- -- 0.8
Leisure & Tourism
Term loan due 3/31/02..................... -- 1,062,500 $ 1,057,188 --
Revolving Credit due 3/31/02.............. -- 205,000 203,975 --
------------
57,034,821
------------
Materials/Basic Industry (15.0%)
Huntsman Corp.:.............................. Ba3 -- -- 3.1
Chemicals
Term loan B due 6/30/04................... -- 5,000,000 5,006,250 --
Huntsman Specialty Chemicals Corp.:.......... Ba2 -- -- 3.1
Chemicals
Term loan due 3/15/07..................... -- 2,727,273 2,727,273 --
Term loan C due 3/15/05................... -- 2,250,000 2,254,230 --
Sterling Pulp Chemicals (SASK) Ltd.:......... B1 -- -- 2.5
Chemicals
Term loan B due 6/30/05................... -- 3,967,996 3,963,036 --
Acme Metals, Inc.:........................... B1 -- -- 2.2
Metals - Steel
Term loan due 12/1/05..................... -- 3,500,000 3,495,625 --
Stone Container International Services,
Inc.:..................................... Ba3 -- -- 2.2
Paper/Packaging
Term loan E due 10/1/03................... -- 3,482,500 3,491,206 --
Crown Paper Co.:............................. Ba3 -- -- 1.9
Paper/Packaging
Term loan B due 8/23/03................... -- 2,984,733 2,977,271 --
------------
23,914,891
------------
Capital Goods (14.2%)
Dictaphone Corp.:............................ B3 -- -- 3.1
Office Equipment
Term loan C due 12/31/02.................. -- 2,500,000 2,500,000 --
Term loan B due 6/30/02................... -- 2,500,000 2,496,875 --
Genicom Corp.:............................... B1 -- -- 3.0
Office Equipment
Term loan B due 9/5/04.................... -- 4,968,750 4,971,880 --
United Defense Investors, Inc.:.............. Ba3 -- -- 2.6
Aerospace/Defense
Term loan B due 10/6/05................... -- 2,033,043 2,043,208 --
Term loan C due 10/6/06................... -- 1,972,782 1,982,646 --
Telex Communications, Inc.:.................. Ba3 -- -- 2.2
Electrical Plant/Equipment
Term loan B due 11/6/04................... -- 3,500,000 3,500,000 --
Les, Inc.:................................... Ba3 -- -- 1.8
Environmental
Term loan B due 5/15/04................... -- 1,492,500 1,503,694 --
Term loan C due 5/15/05................... -- 1,492,500 1,503,694 --
Amphenol Corp.:.............................. Ba3 -- -- 1.5
Electrical Plant/Equipment
Term loan B due 10/3/06................... -- 2,390,625 2,410,061 --
------------
22,912,058
------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-17
<PAGE> 54
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED

PORTFOLIO OF INVESTMENTS (CONT'D)

DECEMBER 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MOODY'S PRINCIPAL VALUE % OF NET
SENIOR SECURED FLOATING RATE INTERESTS(#)(##) RATING(###) AMOUNT (NOTE 1) ASSETS
--------------------------------------------- ----------- --------- ------------ --------
<S> <C> <C> <C> <C>
Health Care (12.2%)
Paragon Health Network, Inc.:................ B1 -- -- 3.0
Health Care Services
Term loan B due 3/31/05................... -- 2,500,000 $ 2,496,875 --
Term loan C due 3/31/06................... -- 2,500,000 2,496,875 --
Genesis Health Ventures, Inc.:............... Ba3 -- -- 2.1
Health Care Services
Term loan B due 9/30/04................... -- 1,662,500 1,668,735 --
Term loan C due 6/30/05................... -- 1,661,111 1,667,340 --
Dade International, Inc.:.................... B1 -- -- 1.8
Medical Technology & Supplies
Term loan C due 12/31/03.................. -- 1,705,311 1,707,443 --
Term loan B due 12/31/02.................. -- 1,034,854 1,036,146 --
Sterling Diagnostic Imaging, Inc.:........... B1 -- -- 1.5
Medical Technology & Supplies
Term loan B due 6/30/05................... -- 2,500,000 2,501,574 --
Endo Pharmaceuticals, Inc.:.................. B1 -- -- 1.5
Pharmaceuticals
Term loan B due 6/30/04................... -- 2,500,000 2,500,625 --
Leiner Health Products Group:................ Ba3 -- -- 1.2
Pharmaceuticals
Term loan C due 12/30/05.................. -- 1,990,000 1,990,000 --
The Multicare Companies, Inc.:............... B1 -- -- 1.1
Health Care Services
Term loan B due 9/30/04................... -- 1,246,875 1,251,551 --
Term loan C due 6/1/05.................... -- 415,278 416,835 --
------------
19,733,999
------------
Consumer Durables (11.2%)
Goodman Manufacturing Company, L.P.:......... Ba3 -- -- 3.1
Appliances & Household Durables
Term loan B due 9/30/04................... -- 2,500,000 2,503,125 --
Term loan C due 9/30/05................... -- 2,500,000 2,503,125 --
American Axle & Manufacturing of Michigan,
Inc.:..................................... Ba3 -- -- 3.1
Auto Parts
Term loan due 4/30/06..................... -- 5,000,000 5,006,250 --
Cambridge Industries, Inc.:.................. B1 -- -- 1.8
Auto Parts
Term loan B due 6/30/05................... -- 3,000,000 3,003,750 --
Joan Fabric Corp.:........................... B1 -- -- 1.8
Auto Parts
Term loan B due 6/30/05................... -- 1,973,684 1,976,151 --
Term loan C due 6/30/06................... -- 1,026,316 1,027,599 --
Manchester Tank & Equipment Co.:............. Ba3 -- -- 1.4
Appliances & Household Durables
Term loan B1 due 8/23/04.................. -- 2,281,382 2,275,679 --
------------
18,295,679
------------
Consumer Non-Durables (5.5%)
Del Monte Corp.:............................. B2 -- -- 4.0
Food
Term loan B due 3/31/05................... -- 6,375,000 $ 6,390,938 --
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-18
<PAGE> 55
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED

PORTFOLIO OF INVESTMENTS (CONT'D)

DECEMBER 31, 1997
- --------------------------------------------------------------------------------

TOTAL SENIOR SECURED FLOATING RATE INTERESTS
(cost $156,936,118).......................... 157,057,699 97.1
------------ -----

REPURCHASE AGREEMENT
- -----------------------------------------------
Dated December 31, 1997, with State Street
Bank & Trust Co., due January 2, 1998, for
an effective yield of 5.80%,
collateralized by $1,670,000 Fannie Mae
Collateralized Mortgage Obligation, 7.00%,
due 8/25/19 (market value of collateral is
$1,636,600, including accrued interest)
(cost $1,603,000)......................... 1,603,000 1.0
------------ -----

TOTAL INVESTMENTS (cost $158,539,118)*......... 158,660,699 98.1
Other Assets and Liabilities................... 3,036,442 1.9
------------ -----

NET ASSETS..................................... $161,697,141 100.0
============ =====
</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 repay 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.
(###) Ratings of issues shown have not been audited by Coopers & Lybrand L.L.P.
* For Federal income tax purposes, cost is $158,539,118 and appreciation
(depreciation) is as follows:

<TABLE>
<S> <C>
Unrealized appreciation: $214,071
Unrealized depreciation: (92,490)
--------
Net unrealized appreciation: $121,581
========
</TABLE>

Abbreviation:
NR -- Not rated

The accompanying notes are an integral part of the financial statements.
F-19
<PAGE> 56

GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED

STATEMENT OF ASSETS
AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Assets:
Investments at value (cost $158,539,118) (Note 1)......... $158,660,699
U.S. currency............................................. 142
Receivable for Fund shares sold........................... 2,274,365
Interest receivable....................................... 1,326,686
Unamortized organizational costs (Note 1)................. 183,844
Receivable for investments sold........................... 155,387
Miscellaneous receivable.................................. 20,013
------------
Total assets........................................... 162,621,136
------------
Liabilities:
Payable for distribution.................................. 556,765
Deferred facility fees (Note 1)........................... 188,995
Payable for professional fees............................. 87,099
Payable for printing and postage expenses................. 36,921
Payable for investment management and administration fees
(Note 2)............................................... 12,686
Payable for transfer agent fees (Note 2).................. 11,407
Payable for fund accounting fees (Note 2)................. 3,888
Payable for custodian fees................................ 3,097
Payable for Directors' and Trustees' fees and expenses
(Note 2)............................................... 2,170
Payable for registration and filing fees.................. 300
Other accrued expenses.................................... 20,567
------------
Total liabilities...................................... 923,895
------------
Minority interest (Note 1)................................ 100
------------
Net assets.................................................. $161,697,141
============
Net asset value per share ($161,697,141 / 16,133,537 shares
outstanding).............................................. $ 10.02
============
Net assets consist of:
Paid in capital (Note 4).................................. $161,425,005
Accumulated net realized gain on investments (Note 1)..... 150,555
Net unrealized appreciation of investments................ 121,581
------------
Total -- representing net assets applicable to capital
shares outstanding........................................ $161,697,141
============
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-20
<PAGE> 57

GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED

STATEMENT OF OPERATIONS

MAY 1, 1997 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Investment income:
Interest income........................................... $6,533,620
Interest expense.......................................... (110,001)
Facility fees earned (Note 1)............................. 33,021
----------
Total investment income................................ 6,456,640
----------
Expenses:
Investment management and administration fees (Note 2).... 872,601
Professional fees......................................... 495,515
Registration and filing fees.............................. 216,417
Printing and postage expenses............................. 115,125
Transfer agent fees (Note 2).............................. 67,450
Directors' and Trustees' fees and expenses (Note 2)....... 30,459
Amortization of organization costs (Note 1)............... 28,506
Fund accounting fees (Note 2)............................. 21,982
Custodian fees............................................ 4,490
Other expenses............................................ 7,989
----------
Total expenses before reductions....................... 1,860,534
Expenses reimbursed by Chancellor LGT Asset
Management, Inc..................................... (755,344)
----------
Total net expenses..................................... 1,105,190
----------
Net investment income....................................... 5,351,450
----------
Net realized and unrealized gain on investments: (Note 1)
Net realized gain on investments.......................... 150,555
Net unrealized appreciation of investments................ 121,581
----------
Net realized and unrealized gain on investments............. 272,136
----------
Net increase in net assets resulting from operations........ $5,623,586
==========
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-21
<PAGE> 58

GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED

STATEMENT OF CHANGES IN NET ASSETS

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MAY 1, 1997
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31, 1997
-----------------
<S> <C>
Increase in net assets
Operations:
Net investment income..................................... $ 5,351,450
Net realized gain on investments.......................... 150,555
Net change in unrealized appreciation of investments...... 121,581
------------
Net increase in net assets resulting from operations... 5,623,586
------------
Distributions to shareholders: (Note 1) From net investment
income.................................................... (5,351,450)
------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.......... 168,538,536
Decrease from capital shares repurchased.................. (7,213,531)
------------
Net increase from capital share transactions........... 161,325,005
------------
Total increase in net assets................................ 161,597,141
Net assets:
Beginning of period....................................... 100,000
------------
End of period*............................................ $161,697,141
============
* Includes undistributed net investment income of........... $ --
============
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-22
<PAGE> 59

GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED

STATEMENT OF CASH FLOWS

MAY 1, 1997 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Cash Provided by Operating Activities:
Net increase in net assets resulting from operations...... $ 5,623,586
Adjustments to reconcile net increase in net assets
resulting from operations to net cash provided by
operating activities:
Increase in receivables................................ (1,346,699)
Decrease in unamortized organizational costs........... 28,506
Net realized and unrealized gain on investments........ (272,136)
Increase in payables................................... 522,650
Deferred facility fees................................. 188,995
-------------
Net cash provided by operating activities............ 4,744,902
-------------
Cash Used for Investing Activities:
Proceeds from principal payments and sales of senior
secured floating rate interests........................ 88,648,228
Purchases senior secured floating rate interests.......... (245,589,178)
Purchases of short-term investments....................... (240,820,000)
Proceeds from sales and maturities of short-term
investments............................................ 239,217,000
-------------
Net cash used for investing activities............... (158,543,950)
-------------
Cash Provided by Financing activities:
Proceeds from capital shares sold......................... 164,043,615
Redemptions from capital shares repurchased............... (7,213,531)
Proceeds from bank line of credit......................... 45,391,534
Repayment of bank line of credit.......................... (45,391,534)
Dividends paid to shareholders............................ (3,130,894)
-------------
Net cash provided by financing activities............ 153,699,190
-------------
Net decrease in cash...................................... (99,858)
Cash, beginning of the period............................. 100,000
-------------
Cash, end of the period................................... $ 142
=============
Non-Cash Financing Activities:
Capital shares issued in reinvestment of dividends paid to
shareholders........................................... $ 2,220,556
=============
</TABLE>

The accompanying notes are an integral part of the financial statements.
F-23
<PAGE> 60

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
DECEMBER 31, 1997
-----------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $ 10.00
--------
Income from investment operations:
Net investment income..................................... 0.46
Net realized and unrealized gain on investments........... 0.02
--------
Net increase from investment operations................ 0.48
--------
Distributions to shareholders:
From net investment income................................ (0.46)
--------
Net asset value, end of period.............................. $ 10.02
========
Total investment return(c).................................. 5.04%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $161,697
Ratio of net investment income to average net assets:
With expense reductions................................... 7.26%(a)
Without expense reductions................................ 6.24%(a)
Ratio of expenses to average net assets:
With expense reimbursement by Chancellor LGT Asset
Management, Inc. (Note 2).............................. 1.50%(a)
Without expense reimbursement by Chancellor LGT Asset
Management, Inc........................................ 2.52%(a)
Ratio of interest expense to average net assets............. 0.15%
Portfolio turnover rate..................................... 118%(a)
</TABLE>

- ---------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.

The accompanying notes are an integral part of the financial statements.
F-24
<PAGE> 61

GT GLOBAL FLOATING RATE FUND, INC.

NOTES TO
FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------

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 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 December 31, 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.

(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.

(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.

F-25
<PAGE> 62

(E) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or excise tax on income
and capital gains.

(F) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income are declared daily and
paid or reinvested monthly. Income and capital gain distributions are determined
in accordance with Federal income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Portfolio and timing differences.

(G) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund or Portfolio in connection with its organization,
its registration with the Securities and Exchange Commission and with various
states aggregated $212,350. These expenses are being amortized on a straightline
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 ("GT Funds") advised or administered by
Chancellor LGT Asset Management, Inc., has a line of credit with BankBoston and
State Street Bank & Trust Company. The arrangements with the banks allow the
Fund, along with the GT Funds, to borrow an aggregate maximum amount of
$250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of its
total assets.

During the period from May 1, 1997 (commencement of operations) to December 31,
1997, the weighted average outstanding daily balance of bank loans (based on the
number of days the loans were outstanding) was $1,674,967 with a weighted
average interest rate of 6.25%.

(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
Investment 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 ratable 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 the
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
F-26
<PAGE> 63

fee of $2.25. GT Services also is reimbursed by the Funds for its out-of-pocket
expenses for such items as postage, forms, telephone charges, stationery and
office supplies.

Chancellor LGT is the pricing and accounting agent for the Fund and Portfolio.
Each of the Fund and the Portfolio pays a monthly fee for these services to
Chancellor LGT at the annualized rate, respectively of .02% and .01% of their
average daily net assets.

The Fund pays each of its Directors who is not an employee, officer or director
of the Manager or any of its affiliated companies $5,000 per year plus $300 for
each meeting of the board attended by the Director and reimburses travel and
other expenses incurred in connection with attending board meetings. The
Portfolio pays each of its Trustees who is not an employee, officer, or director
of the Manager or any of its affiliated companies $500 per year plus $150 for
each meeting of the board or any committee thereof attended by the Trustee.

3. PURCHASES AND SALES OF SECURITIES
During the period from May 1, 1997 (commencement of operations) to December 31,
1997, purchases and sales of investments by the Portfolio, other than U.S.
government obligations and short-term investments, aggregated $245,594,061 and
$88,803,615, respectively. There were no purchases or sales of U.S. government
obligations by the Portfolio for the period ended December 31, 1997.

4. CAPITAL SHARES
At December 31, 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 DECEMBER 31, 1997
----------------------------
SHARES AMOUNT
---------- ------------
<S> <C> <C>
Shares sold............... 16,621,817 $166,317,980
Shares issued in
connection with
reinvestment of
distributions........... 221,712 2,220,556
---------- ------------
16,843,529 168,538,536
Shares repurchased........ (719,992) (7,213,531)
---------- ------------
Net increase.............. 16,123,537 $161,325,005
========== ============
</TABLE>

5. AFFILIATED SHAREHOLDER
As of year end December 31, 1997, LGT Asset Management, Inc. ("LGTAM"), GT
Global and their affiliates own approximately 12.5% of the Fund's outstanding
shares of Common Stock.

6. UNFUNDED LOAN INTEREST
As of December 31, 1997, the Fund had unfunded loan commitments of $5,247,604,
which could be extended at the option of the borrower, pursuant to the following
loan agreements:

<TABLE>
<CAPTION>
UNFUNDED
BORROWER COMMITMENTS
- -------- -----------
<S> <C>
KSL Recreation Group, Inc.............. $1,138,775
Affinity Group......................... 1,045,000
Coinmach Laundry Corp.................. 3,063,830
</TABLE>

9. SUBSEQUENT EVENT
On January 30, 1998, Liechtenstein Global Trust ("LGT") and AMVESCAP PLC
("AMVESCAP") entered into an agreement by which AMVESCAP will acquire LGT's
Asset Management Division, including Chancellor LGT Senior Secured Management,
Inc. and Chancellor LGT Asset Management, Inc. AMVESCAP is the holding company
of the AIM and INVESCO asset management businesses.

F-27
<PAGE> 64

[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--

Investment Manager
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173

Sub-Advisor
INVESCO Senior Secured Management, Inc.
1166 Avenue of the Americas
New York, NY 10036

Sub-Sub-Advisor
INVESCO (NY), Inc.
50 California Street, 27th Floor
San Francisco, CA 94111

Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739

Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739

Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110

Independent Accountants

PricewaterhouseCoopers LLP

One Post Office Square

Boston, MA 02109

For more complete information about funds in The AIM Family of Funds--Registered
Trademark--, including charges and expenses, please call your financial
consultant and request a free prospectus. Please read the prospectus carefully
before you invest or send money.

FLR-PRO-1

<PAGE> 65

AIM FLOATING RATE FUND

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(1) Financial Statements:

Report of Independent Accountants

Statement of Assets and Liabilities

(2) Exhibits:

<TABLE>
<C> <S>
(a) -- Articles of Incorporation, dated December 4, 1996, of the
Registrant were filed electronically as an Exhibit to
Registrant's Initial Registration Statement under 33 Act
No. 333-17425 on December 6, 1996 and are hereby
incorporated by reference.
(b) -- By-Laws, dated December 4, 1996, of the Registrant were
filed electronically as an Exhibit to Registrant's
Initial Registration Statement under 33 Act No. 333-17425
on December 6, 1996 and are hereby incorporated by
reference.
(c) -- Voting Trust Agreements -- None.
(d) -- Instruments Defining Rights of Shareholders were filed
electronically as an Exhibit to Registrant's Pre-
Effective Amendment No. 2 under 33 Act No. 333-17425 on
March 24, 1997 and are hereby incorporated by reference.
(e) -- Dividend Reinvestment Plan was filed electronically as an
Exhibit to Registrant's Pre-Effective Amendment No. 2
under 33 Act No. 333-17425 on March 24, 1997 and is
hereby incorporated by reference.
(f) -- Constituent Instruments Defining the Rights of the
Holders of Debt -- None.
(g)(1) -- Investment Management and Administration Contract, dated
May 29, 1998, between Floating Rate Portfolio and A I M
Advisors, Inc. is filed herewith electronically.
(2) -- Sub-Advisory and Sub-Administration Contract, dated May
29, 1998, between A I M Advisors, Inc. and INVESCO Senior
Secured Management, Inc. is filed herewith
electronically.
(3) -- Sub-Sub-Advisory and Sub-Sub-Administration Contract,
dated May 29, 1998, between INVESCO Senior Secured
Management, Inc. and INVESCO (NY), Inc. is filed herewith
electronically.
(4) -- Administration Contract, dated May 29, 1998, between
Registrant and A I M Advisors, Inc. is filed herewith
electronically.
(5) -- Sub-Administration Contract, dated May 29, 1998, between
Registrant, A I M Advisors, Inc. and INVESCO (NY), Inc.
is filed herewith electronically.
(h)(1) -- Distribution Agreement, dated May 29, 1998, between
Registrant and A I M Distributors, Inc. is filed herewith
electronically.
(2) -- Form of Selected Dealer Agreement was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 2 under 33 Act No. 333-37243
on May 27, 1998 and is hereby incorporated by reference.
(3) -- Form of Bank Agency Agreement was filed electronically as
an Exhibit to Registrant's Post-Effective Amendment No. 2
under 33 Act No. 333-37243 on May 27, 1998 and is hereby
incorporated by reference.
(i) -- Directors' or Officers' Bonus, Profit Sharing and Pension
Contracts -- None.
(j) -- Custodian Contract, dated April 30, 1997, between
Registrant and State Street Bank and Trust Company is
filed herewith electronically.
(k)(1) -- Transfer Agency Contract, dated April 30, 1997, between
Registrant and GT Global Investor Services, Inc. is filed
herewith electronically.
</TABLE>

C-1
<PAGE> 66

<TABLE>
<C> <S>
(2) -- Fund Accounting and Pricing Agent Agreement, dated April 30, 1997, between Registrant, Floating
Rate Portfolio and Chancellor LGT Asset Management, Inc. is filed herewith electronically.
(l) -- Consent of Kirkpatrick & Lockhart LLP is filed herewith electronically.
(m) -- Consent of Non-Resident Director, Officer, Investment Advisor or Expert -- None.
(n) -- Consent of PricewaterhouseCoopers LLP is filed herewith electronically.
(o) -- Financial Statements -- None.
(p) -- Initial Capital Agreements -- None.
(q) -- Retirement Plans -- None.
(r) -- Financial Data Schedule -- None.
</TABLE>

ITEM 25. MARKETING ARRANGEMENTS

See the Distribution Agreement filed as Exhibit (h)(1) to this Registration
Statement.

ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses to be incurred in connection with
the offering described in this Registration Statement:

<TABLE>
<S> <C>
Securities and Exchange Commission Fees..................... $n/a*
National Association of Securities Dealers, Inc. Fees....... n/a*
Printing and Engraving Expenses............................. n/a*
Legal Fees.................................................. n/a*
Accounting Expenses......................................... n/a*
Blue Sky Filing Fees and Expenses........................... n/a*
Miscellaneous Expenses...................................... n/a*
----
Total............................................. $n/a*
====
</TABLE>

- ---------------

* This registration statement is being filed for the purpose of updating
information herein and no additional shares are being registered or offered
hereby. See the cover page of this registration statement.

ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL

None.

ITEM 28. NUMBER OF HOLDERS OF SECURITIES

State in substantially the tabular form indicated, as of a specified date
within 90 days prior to the date of filing, the number of record holders of each
class of securities of the Registrant.

<TABLE>
<CAPTION>
NUMBER OF RECORD
SHAREHOLDERS AS
OF
TITLE OF CLASS JULY 24, 1998
-------------- ----------------
<S> <C>
Shares of Common Stock, par value $0.001 per share.......... 6,383
</TABLE>

ITEM 29. INDEMNIFICATION

Article Twelfth of the Fund's Articles of Incorporation, previously filed as
Exhibit 1 to Registration Statement No. 333-17425, and Article IX of the Fund's
Bylaws, previously filed as Exhibit 2 to Registration Statement No. 333-17425,
provide that the Fund shall indemnify its present and past directors, officers,
employees and agents, and persons who are serving or have served at the Fund's
request in similar capacities for other entities to the maximum extent permitted
by applicable law (including Maryland law and the 1940 Act). Section 2-418(b) of
the Maryland General Corporation Law ("Maryland Code") permits the Fund to
indemnify its directors unless it is established that the act or omission of the
director was material to the matter giving rise to the proceeding, and (a) the
act or omission was committed in bad faith or was the result of active and
deliberate dishonesty; or (b) the director actually received an improper
personal benefit in money, property or services; or (c) in the case of any
criminal proceeding, the director had reasonable cause to believe the act or
omission was unlawful. Indemnification may be made against judgments, penalties,
fines, settlements and reasonable expenses incurred by the director in
connection with a proceeding, in accordance with the Maryland Code. Pursuant to
Section 2-418(j)(1) and Section 2-418(j)(2) of the Maryland Code, the Fund is
permitted to indemnify its officers, employees and agents to the same extent as
its directors. The provisions set forth above apply insofar as consistent with
Section 17(h) of the 1940
C-2
<PAGE> 67

Act, which prohibits indemnification of any director or officer of the Fund
against any liability to the Fund or its shareholders to which such director or
officer otherwise would be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.

Insofar as indemnification for liability arising under the Securities Act of
1933 ("1933 Act") may be permitted to directors, officers and controlling
persons of the Fund, pursuant to the foregoing provisions, or otherwise, the
Fund has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for a director, officer or controlling
person of the Fund in the successful defense of any action, suit or proceeding
or payment pursuant to any insurance policy is asserted against the Fund by such
director, officer or controlling person in connection with the securities being
registered, the Fund will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

See the material under the heading "Management" and the heading "Directors and
Executive Officers" in the Prospectus filed as part of this Registration
Statement. Information as to the Directors and Officers of AIM, the Sub-advisor
and INVESCO (NY) is included in their Forms ADV (File Nos. 801-12313 and
801-10254, respectively), filed with the Commission, which information is
incorporated herein by reference.

ITEM 31. LOCATION OF ACCOUNTS AND RECORDS

The accounts and records of the Fund will be maintained at the office of the
Fund's custodian at 1776 Heritage Drive, North Quincy, Massachusetts 02171,
except that the Fund's corporate records (its articles of incorporation, by-laws
and minutes of the meetings of its Board of Directors and shareholders) will be
maintained at the offices of INVESCO (NY) at 50 California Street, 27th Floor,
San Francisco, California 94111 and/or AIM at 11 Greenway Plaza, Suite 100,
Houston, TX 77046.

ITEM 32. MANAGEMENT SERVICES

None.

ITEM 33. UNDERTAKINGS

(1) Registrant undertakes to suspend the offering of its shares until it
amends its Prospectus if:

(a) subsequent to the effective date of this Registration Statement,
the net asset value per share declines more than 10% from its net asset
value per share as of the effective date of the Registration Statement; or

(b) The net asset value increases to an amount greater than its net
proceeds as stated in the Prospectus.

(2) Registrant hereby undertakes:

(a) to file, during any period in which offers or sales are being
made, a post-effective amendment to the registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the 1933 Act; (ii)
to reflect in the prospectus any facts or events after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(b) that, for the purposes of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of those securities at that time shall be deemed to be the initial
bona fide offering thereof; and

(c) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(3) Registrant hereby undertakes that:

(a) For the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant under Rule 497(h)
under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and

(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

C-3
<PAGE> 68

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Francisco, and the State of California, on
this 1st day of September 1998.

GT GLOBAL FLOATING RATE FUND, INC.
(d/b/a AIM FLOATING RATE FUND)

By: /s/ ROBERT H. GRAHAM
-------------------------------
Robert H. Graham
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities on the 1st day of September, 1998.

/s/ ROBERT H. GRAHAM President, Director and
- ------------------------------------- Chairman of the Board
Robert H. Graham (Principal Executive Officer)

/s/ KENNETH W. CHANCEY Vice President and
- ------------------------------------- Principal Accounting Officer
Kenneth W. Chancey

C. Derek Anderson* Director
Arthur C. Patterson* Director
Frank S. Bayley* Director
Ruth H. Quigley* Director

*By: /s/ MICHAEL A. SILVER
--------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney filed herewith
<PAGE> 69
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, and the State of California, on this
1st day of September 1998.

AIM FLOATING RATE FUND

By: /s/ ROBERT H. GRAHAM
-------------------------------
Robert H. Graham
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities on the 1st day of September, 1998.

/s/ ROBERT H. GRAHAM President, Trustee and
- ------------------------------------- Chairman of the Board
Robert H. Graham (Principal Executive Officer)

/s/ KENNETH W. CHANCEY Vice President and
- ------------------------------------- Principal Accounting Officer
Kenneth W. Chancey

C. Derek Anderson* Trustee
Arthur C. Patterson* Trustee
Frank S. Bayley* Trustee
Ruth H. Quigley* Trustee

*By: /s/ MICHAEL A. SILVER
--------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney filed herewith
<PAGE> 70
SIGNATURES

Floating Rate Portfolio has duly caused this Registration Statement of
GT Global Floating Rate Fund, Inc. (d/b/a AIM Floating Rate Fund) to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, and the State of California, on this 1st day of September, 1998.

FLOATING RATE PORTFOLIO

By: /s/ ROBERT H. GRAHAM
---------------------
Robert H. Graham
President

This Registration Statement of GT Global Floating Rate Fund, Inc.
(d/b/a AIM Floating Rate Fund) has been signed below by the following persons
in the capacities on the 1st day of September, 1998.

/s/ ROBERT H. GRAHAM
- ------------------------- President, Trustee and
Robert H. Graham Chairman of the Board
(Principal Executive Officer)

/s/ KENNETH W. CHANCEY
- ------------------------- Vice President and
Kenneth W. Chancey Principal Accounting Officer

C. Derek Anderson* Trustee
Arthur C. Patterson* Trustee
Frank S. Bayley* Trustee
Ruth H. Quigley* Trustee

*By: /s/ MICHAEL A. SILVER
-----------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney filed herewith

<PAGE> 71
SIGNATURES

Floating Rate Portfolio has duly caused this Registration Statement of AIM
Floating Rate Fund to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Francisco, and the State of California, on
this 1st day of September, 1998.

FLOATING RATE PORTFOLIO

By: /s/ ROBERT H. GRAHAM
------------------------------
Robert H. Graham
President

This Registration Statement of AIM Floating Rate Fund has been signed
below by the following persons in the capacities on the 1st day of September,
1998.

/s/ ROBERT H. GRAHAM President, Trustee and
- -------------------------- Chairman of the Board
Robert H. Graham (Principal Executive Officer)

/s/ KENNETH W. CHANCEY Vice President and
- -------------------------- Principal Accounting Officer
Kenneth W. Chancey

C. Derek Anderson* Trustee
Arthur C. Patterson* Trustee
Frank S. Bayley* Trustee
Ruth H. Quigley* Trustee

*By: /s/ MICHAEL A. SILVER
-------------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney filed herewith

<PAGE> 72

AIM FLOATING RATE FUND

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------- --------------------
<S> <C>
(g)(1) Investment Management and Administration Contract, dated May
29, 1998, between A I M Advisors, Inc. and Floating Rate
Portfolio
(2) Sub-Advisory and Sub-Administration Contract, dated May 29,
1998, between A I M Advisors, Inc. and INVESCO Senior
Secured Management, Inc.
(3) Sub-Sub-Advisory and Sub-Sub-Administration Contract, dated
May 29, 1998, between INVESCO Senior Secured Management,
Inc. and INVESCO (NY), Inc.
(4) Administration Contract, dated May 29, 1998, between
Registrant and A I M Advisors, Inc.
(5) Sub-Administration Agreement, dated May 29, 1998, between
Registrant and A I M Advisors, Inc. and INVESCO (NY), Inc.
(h)(1) Distribution Agreement, dated May 29, 1998, between
Registrant and A I M Distributors, Inc.
(j) Custodian Agreement, dated April 30, 1997, between
Registrant and State Street Bank and Trust Company
(k)(1) Transfer Agency Agreement, dated April 30, 1997, between
Registrant and GT Global Investor Services, Inc.
(2) Fund Accounting and Pricing Agent Agreement , dated April
30, 1997, between Registrant, Floating Rate Portfolio and
Chancellor LGT Asset Management, Inc.
(l) Consent of Kirkpatrick & Lockhart LLP
(n) Consent of PricewaterhouseCoopers LLP
</TABLE>

<PAGE> 1
EXHIBIT(g)(1)

FLOATING RATE PORTFOLIO
INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT
BETWEEN
FLOATING RATE PORTFOLIO
AND
A I M ADVISORS, INC.

Contract made as of May 29, 1998, between Floating Rate Portfolio
("Portfolio"), a Delaware business trust, and A I M Advisors, Inc. (the
"Adviser"), a Delaware corporation.

WHEREAS the Portfolio is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as a closed-end management investment company;
and

WHEREAS the Portfolio desires to retain Adviser as investment manager
and administrator to furnish certain administrative, investment advisory and
portfolio management services to the Portfolio, and Adviser is willing to
furnish such services;

NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:

1. Appointment. The Portfolio hereby appoints Adviser as investment manager and
administrator for the period and on the terms set forth in this Contract.
Adviser accepts such appointment and agrees to render the services herein set
forth, for the compensation herein provided.

2. Duties as Investment Manager.

(a) Subject to the supervision of the Portfolio's Board of Trustees
("Board"), Adviser will provide a continuous investment program for the
Portfolio, including investment research and management with respect to all
securities and investments and cash equivalents of the Portfolio. Adviser will
determine from time to time what securities and other investments will be
purchased, retained or sold by the Portfolio, and the brokers and dealers
through whom trades will be executed.

(b) Adviser agrees that in placing orders with brokers and dealers it
will attempt to obtain the best net results in terms of price and execution.
Consistent with this obligation Adviser may, in its discretion, purchase and
sell portfolio securities to and from brokers and dealers who sell shares of the
Portfolio or provide the Portfolio's or Adviser's other clients with research,
analysis, advice and similar services. Adviser may pay to brokers and dealers,
in return for research and analysis, a higher commission or spread than may be
charged by other brokers and dealers, subject to Adviser's determining in good
faith that such commission or spread is reasonable in terms either of the
particular transaction or of the overall responsibility of Adviser to the
Portfolio and its other clients and that the total commissions or spreads paid
by the Portfolio will be reasonable in relation to the benefits to

<PAGE> 2
the Portfolio over the long term. In no instance will portfolio securities be
purchased from or sold to Adviser or any affiliated person thereof except in
accordance with the federal securities laws and the rules and regulations
thereunder and any exemptive orders currently in effect. Whenever Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Portfolio and one or more other accounts advised by Adviser, such orders
will be allocated as to price and amount among all such accounts in a manner
believed to be equitable to each account. The Portfolio recognizes that in some
cases this procedure may adversely affect the results obtained for the
Portfolio.

(c) Adviser will oversee the maintenance of all books and records with
respect to the securities transactions of the Portfolio, and will furnish the
Board with such periodic and special reports as the Board reasonably may
request. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
Adviser hereby agrees that all records which it maintains for the Portfolio are
the property of the Portfolio, agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records which it maintains for the Portfolio
and which are required to be maintained by Rule 31a-1 under the 1940 Act, and
further agrees to surrender promptly to the Portfolio any records which it
maintains for the Portfolio upon request by the Portfolio.

3. Duties as Administrator. Adviser will administer the affairs of the
Portfolio subject to the supervision of the Board and the following
understandings:

(a) Adviser will supervise all aspects of the operations of the
Portfolio, including the oversight of transfer agency and custodial services,
except as hereinafter set forth; provided, however, that nothing herein
contained shall be deemed to relieve or deprive the Board of its responsibility
for control of the conduct of the affairs of the Portfolio.

(b) At Adviser's expense, Adviser will provide the Portfolio with such
corporate, administrative and clerical personnel (including officers of the
Portfolio) and services as are reasonably deemed necessary or advisable by the
Board.

(c) Adviser will arrange, but not pay, for the periodic preparation,
updating, filing and dissemination (as applicable) of the Portfolio's proxy
material, tax returns and required reports with or to the Portfolio's
shareholders, the Securities and Exchange Commission and other appropriate
federal or state regulatory authorities.

(d) Adviser will provide the Portfolio with, or obtain for it, adequate
office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items.

4. Further Duties. In all matters relating to the performance of this Contract,
Adviser will act in conformity with the Agreement and Declaration of Trust,
By-Laws and Registration Statement of the Portfolio and with the instructions
and directions of the Board and will
<PAGE> 3
comply with the requirements of the 1940 Act, the rules thereunder, and all
other applicable federal and state laws and regulations.

5. Delegation of Adviser's Duties as Investment Manager and Administrator. With
respect to the Portfolio, Adviser may enter into one or more contracts
("Sub-Advisory or Sub-Administration Contract") with a Sub-Adviser or
Sub-Administrator in which Adviser delegates to such sub-adviser or
sub-administrator the performance of any or all of the services specified in
Paragraphs 2 and 3 of this Contract, provided that: (i) each Sub-Advisory and
Sub-Administration Contract imposes on the sub-adviser or sub-administrator
bound thereby all the duties and conditions to which Adviser is subject with
respect to the services under Paragraphs 2, 3 and 4 of this Contract; (ii) each
Sub-Advisory and Sub-Administration Contract meets all requirements of the 1940
Act and rules thereunder, and (iii) Adviser shall not enter into a Sub-Advisory
or Sub-Administration Contract unless it is approved by the Board prior to
implementation.

6. Services Not Exclusive. The services furnished by Adviser hereunder are not
to be deemed exclusive and Adviser shall be free to furnish similar services to
others so long as its services under this Contract are not impaired thereby.
Nothing in this Contract shall limit or restrict the right of any director,
officer or employee of Adviser, who may also be a Trustee, officer or employee
of the Portfolio, to engage in any other business or to devote his or her time
and attention in part to the management or other aspects of any other business,
whether of a similar nature or a dissimilar nature.

7. Expenses.

(a) During the term of this Contract, the Portfolio will bear all
expenses, not specifically assumed by Adviser.

(b) Expenses borne by the Portfolio will include but not be limited to
the following: (i) all direct charges relating to the purchase and sale of
portfolio securities, including the cost (including brokerage commissions, if
any) of securities purchased or sold by the Portfolio and any losses incurred in
connection therein; (ii) fees payable to and expenses incurred on behalf of the
Portfolio by Adviser under this Contract; (iii) investment consulting fees and
related costs; (iv) expenses of organizing the Portfolio; (v) costs incurred in
connection with the issuance, sale or repurchase of the Portfolio's shares of
beneficial interest; (vi) filing fees and expenses relating to the registration
and qualification for the Portfolio's shares and the Portfolio under federal
and/or state securities laws and maintaining such registrations and
qualifications; (vii) expenses of preparing and filing reports and other
documents with governmental and regulatory agencies; (viii) fees and salaries
payable to the Portfolio's Trustees who are not parties to this Contract or
interested persons of any such party ("Independent Trustees"); (ix) all expenses
incurred in connection with the Independent Trustees' services, including travel
expenses; (x) taxes (including any income or franchise taxes) and governmental
fees; (xi) costs of any liability, uncollectible items of deposit and other
insurance and fidelity bonds; (xii) any costs, expenses or losses arising out of
a liability of or claim for damages or other relief asserted against the
Portfolio
<PAGE> 4
for violation of any law; (xiii) interest charges; (xiv) legal, accounting and
auditing expenses, including legal fees of special counsel for the Independent
Trustees; (xv) charges of custodians, transfer agents, pricing agents and
other agents; (xvi) costs of preparing share certificates; (xvii) expenses of
setting in type, printing and mailing prospectuses and supplements thereto,
reports, notices and proxy materials for existing shareholders; (xviii)
expenses of obtaining and maintaining securities exchange listing of the
Portfolio's shares of beneficial interest; (xix) any extraordinary expenses
(including fees and disbursements of counsel, costs of actions, suits or
proceedings to which the Portfolio is a party and the expenses the Portfolio
may incur as a result of its legal obligation to provide indemnification to its
officers, Trustees, employees and agents) incurred by the Portfolio; (xx) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (xxi) costs of mailing and tabulating
proxies and costs of meetings of shareholders, the Board and any committees
thereof; (xxii) the cost of investment company literature and other
publications provided by the portfolio to its Trustees and officers; and
(xxiii) costs of mailing, stationery and communications equipment.

(c) Adviser will assume the cost of any compensation for services
provided to the Portfolio received by the officers of the Portfolio and by the
Trustees of the Portfolio who are not Independent Trustees.

(d) The payment or assumption by Adviser of any expense of the
Portfolio that Adviser is not required by this Contract to pay or assume shall
not obligate Adviser to pay or assume the same or any similar expense of the
Portfolio on any subsequent occasion.

8. Compensation.

(a) For the services provided to the Portfolio under this Contract, the
Portfolio shall pay the Adviser an annual fee, payable monthly, based upon the
average daily net assets of the Portfolio as forth in Appendix A attached
hereto. Such compensation shall be paid solely from the assets of the Portfolio.

(b) The fee shall be computed weekly and paid monthly to Adviser on or
before the last business day of the next succeeding calendar month.

(c) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.

9. Limitation of Liability of Adviser and Indemnification. Adviser shall not be
liable and the Portfolio shall indemnify Adviser and its directors, officers and
employees, for any costs or liabilities arising from any error of judgment or
mistake of law or any loss suffered by the Portfolio in connection with the
matters to which this Contract relates except a loss

<PAGE> 5
resulting from willful misfeasance, bad faith or gross negligence on the part of
Adviser in the performance by Adviser of its duties or from reckless disregard
by Adviser of its obligations and duties under this Contract. Any person, even
though also an officer, partner, employee, or agent of Adviser, who may be or
become an officer, Trustee, employee or agent of the Portfolio shall be deemed,
when rendering services to the Portfolio or acting with respect to any business
of the Portfolio, to be rendering such service to or acting solely for the
Portfolio and not as an officer, partner, employee, or agent or one under the
control or direction of Adviser even though paid by it.

10. Duration and Termination.

(a) This Contract shall become effective upon the date here above
written, provided that this Contract shall not take effect with respect to the
Portfolio unless it has first been approved (i) by a vote of a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by vote of a majority of the Portfolio's
outstanding voting securities.

(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, with respect to the Portfolio this Contract shall continue
automatically for successive periods not to exceed twelve months each, provided
that such continuance is specifically approved at least annually (i) by a vote
of a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or by vote of
a majority of the outstanding voting securities of the Portfolio.

(c) Notwithstanding the foregoing, with respect to the Portfolio this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Portfolio on sixty days' written notice to Adviser or by
Adviser at any time, without the payment of any penalty, on sixty days' written
notice to the Portfolio. This Contract will automatically terminate in the event
of its assignment.

11. Amendment of this Contract. No provision of this Contract may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, and no amendment of this Contract shall be effective
until approved by vote of a majority of the Portfolio's outstanding voting
securities, when required by the 1940 Act.

12. Governing Law. This Contract shall be construed in accordance with the laws
of the State of Delaware (without regard to Delaware conflict or choice of law
provisions) and the 1940 Act. To the extent that the applicable laws of the
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.

13. License Agreement. The Portfolio shall have the non-exclusive right to use
the name "AIM" to designate the Portfolio or any current or future series of
shares only so long as
<PAGE> 6
A I M Advisors, Inc. serves as investment manager or adviser to the Portfolio
with respect to such series of shares.

14. Limitation of Shareholder Liability. It is expressly agreed that the
obligations of the Portfolio hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Portfolio
personally, but shall only bind the assets and property of the Portfolio, as
provided in the Portfolio's Agreement and Declaration of Trust. The execution
and delivery of this Contract have been authorized by the Trustees of the
Portfolio and shareholders of the Portfolio, and this Contract has been executed
and delivered by an authorized officer of the Portfolio acting as such; neither
such authorization by such Trustees and shareholders nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the assets and property of the Portfolio, as provided in the
Portfolio's Agreement and Declaration of Trust.

15. Miscellaneous. The captions in this Contract are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this Contract
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Contract shall not be affected thereby. This Contract
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors. As used in this Contract, the terms "majority of
the outstanding voting securities," "interested person," assignment," "broker,"
"dealer," "investment adviser," "national securities exchange," "net assets,"
"prospectus," "sale," "sell" and "security" shall have the same meaning as such
terms have in the 1940 Act, subject to such exemption as may be granted by the
Securities and Exchange Commission by any rule, regulation or order. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
Contract is made less restrictive by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.

Attest: FLOATING RATE PORTFOLIO

By:/s/ MICHAEL A. SILVER By:/s/ HELGE K. LEE
------------------------------ ------------------------------
Name: Michael A. Silver Name: Helge K. Lee
Title: Assistant Secretary Title: Vice President and Secretary

Attest: A I M ADVISORS, INC.
By:/s/ KATHLEEN J. PFLUEGER By:/s/ CAROL F. RELIHAN
------------------------------ ------------------------------
Name: Kathkeen J. Pflueger Name: Carol F. Relihan
Title: Assistant Secretary Title: Senior Vice President

<PAGE> 7

APPENDIX A
TO

INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT
OF
FLOATING RATE PORTFOLIO

The Portfolio shall pay the Adviser, out of the assets of the
Portfolio, as full compensation for all services rendered and all facilities
furnished hereunder, a management fee of 0.95% of the Portfolio's average daily
net assets for the calendar year, computed in the manner used for the
determination of the Portfolio's net asset value.

<PAGE> 1
EXHIBIT(g)(2)

FLOATING RATE PORTFOLIO

SUB-ADVISORY AND SUB-ADMINISTRATION CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO SENIOR SECURED MANAGEMENT, INC.

Contract made as of May 29, 1998, between A I M Advisors, Inc., a
Delaware corporation ("Adviser"), and Invesco Senior Secured Management, Inc., a
New York corporation ("Sub-Adviser").

WHEREAS Adviser has entered into an Investment Management and
Administration Contract with Floating Rate Portfolio ("Portfolio"), a closed-end
management investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"); and

WHEREAS Adviser desires to retain Sub-Adviser as sub-adviser and sub-
administrator to furnish certain advisory and administrative services to the
Portfolio, and Sub-Adviser is willing to furnish such services;

NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:

1. Appointment. Adviser hereby appoints Sub-Adviser as sub-adviser and
sub-administrator of the Portfolio for the period and on the terms set forth in
this Contract. Sub-Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.

2. Duties as Sub-Adviser.

(a) Subject to the supervision of the Portfolio's Board of Trustees
("Board") and Adviser, the Sub-Adviser will provide a continuous investment
program for the Portfolio, including investment research and management, with
respect to all securities and investments and cash equivalents of the Portfolio.
The Sub-Adviser will determine from time to time what securities and investments
will be purchased, retained or sold by the Portfolio, and the brokers and
dealers through whom trades will be executed.

(b) The Sub-Adviser agrees that, in placing orders with brokers and
dealers, it will attempt to obtain the best net results in terms of price and
execution. Consistent with this obligation, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities from and to brokers and
dealers who provide the Portfolio's, Adviser's, or Sub-Adviser's other clients
with research, analysis, advice and similar services. The Sub-Adviser may pay,
in return for such services research and analysis, a higher commission or spread
than may

<PAGE> 2

be charged by other brokers and dealers, subject to the Sub-Adviser's
determining in good faith that such commission or spread is reasonable in terms
either of the particular transaction or of the overall responsibility of the
Sub-Adviser to the Portfolio and its other clients and that the total
commissions or spreads paid by the Portfolio will be reasonable in relation to
the benefits to the Portfolio over the long term. In no instance will Portfolio
securities be purchased from or sold to the Sub-Adviser, or any affiliated
person thereof, except in accordance with the federal securities laws and the
rules and regulations thereunder and any exemptive orders currently in effect.
Whenever the Sub-Adviser simultaneously places orders to purchase or sell the
same security on behalf of the Portfolio and one or more other accounts advised
by the Sub-Adviser, such orders will be allocated as to price and amount among
all such accounts in a manner believed to be equitable to each account. The
Portfolio recognizes that in some cases this procedure may adversely affect the
results obtained for the Portfolio.

(c) The Sub-Adviser will maintain all books and records with respect to
the securities transactions of the Portfolio, and will furnish the Board and
Adviser with such periodic and special reports as the Board or Adviser
reasonably may request. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Sub-Adviser hereby agrees that all records which it maintains
for the Portfolio are the property of the Portfolio, agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act any records which it
maintains for the Portfolio and which are required to be maintained by Rule 31a-
1 under the 1940 Act, and further agrees to surrender promptly to the Portfolio
any records which it maintains for the Portfolio upon request by the Portfolio.

3. Duties as Sub-Administrator. Sub-Adviser will administer the affairs
of the Portfolio subject to the supervision of the Portfolio's Board of Trustees
("Board"), the Adviser, and the following understandings:

(a) Sub-Adviser will supervise all aspects of the operations of the
Portfolio, including the oversight of transfer agency and custodial services
except as hereinafter set forth; provided, however, that nothing herein
contained shall be deemed to relieve or deprive the Board of its responsibility
for control of the conduct of the affairs of the Portfolio.

(b) At Sub-Adviser's expense, Sub-Adviser will provide the Portfolio
with such corporate, administrative and clerical personnel (including officers
of the Portfolio) and services as are reasonably deemed necessary or advisable
by the Board.

(c) Sub-Adviser will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the
Portfolio's prospectus, proxy material, tax returns and required reports with or
to the Portfolio's shareholders, the Securities and Exchange Commission and
other appropriate federal or state regulatory authorities.

<PAGE> 3

(d) Sub-Adviser will provide the Portfolio with, or obtain for it,
adequate office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items.

4. Further Duties. In all matters relating to the performance of this
Contract, Sub-Adviser will act in conformity with the Agreement and Declaration
of Trust, By-Laws and Registration Statement of the Portfolio and with the
instructions and directions of the Board and will comply with the requirements
of the 1940 Act, the rules thereunder, and all other applicable federal and
state laws and regulations.

5. Delegation of Sub-Adviser's Duties as Sub-Adviser and
Sub-Administrator. With respect to the Portfolio, Sub-Adviser may enter into one
or more contracts ("Sub-Sub-Advisory or Sub-Sub-Administration Contracts") with
a sub-sub-adviser or sub-sub-administrator in which Sub-Adviser delegates to
such sub-sub-adviser or sub-sub-administrator the performance of any or all of
the services specified in Paragraphs 2 and 3 of this Contract, provided that:
(i) each Sub-Sub-Advisory and Sub-Sub-Administration Contract imposes on the
sub-sub-adviser or sub-sub-administrator bound thereby all the duties and
conditions to which Sub-Adviser is subject with respect to the services under
Paragraphs 2, 3 and 4 of this Contract; (ii) each Sub-Sub-Advisory and
Sub-Sub-Administration Contract meets all requirements of the 1940 Act and rules
thereunder, and (iii) Adviser shall not enter into a Sub-Sub-Advisory or
Sub-Sub-Administration Contract unless it is approved by the Board prior to
implementation.

6. Services Not Exclusive. The services furnished by Sub-Adviser
hereunder are not to be deemed exclusive and Sub-Adviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Sub-Adviser, who may also be a
Trustee, officer or employee of the Portfolio, to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.

7. Expenses.

(a) During the term of this Contract, the Portfolio will bear all
expenses not specifically assumed by Sub-Adviser.

<PAGE> 4

for the Portfolio's shares and the Portfolio under federal and/or state
securities laws and maintaining such registrations and qualifications; (vii)
expenses of preparing and filing reports and other documents with governmental
and regulatory agencies; (viii) fees and salaries payable to the Portfolio's
Trustees who are not parties to this Contract or interested persons of any such
party ("Independent Trustees"); (ix) all expenses incurred in connection with
the Independent Trustees' services, including travel expenses; (x) taxes
(including any income or franchise taxes) and governmental fees; (xi) costs of
any liability, uncollectible items of deposit and other insurance and fidelity
bonds; (xii) any costs, expenses or losses arising out of a liability of or
claim for damages or other relief asserted against the Portfolio for violation
of any law; (xiii) interest charges; (xiv) legal, accounting and auditing
expenses, including legal fees of special counsel for the Independent Trustees;
(xv) charges of custodians, transfer agents, pricing agents and other agents;
(xvi) costs of preparing share certificates; (xvii) expenses of setting in type,
printing and mailing prospectuses and supplements thereto, reports, notices and
proxy materials for existing shareholders; (xviii) expenses of obtaining and
maintaining securities exchange listing of the Portfolio's shares of beneficial
interest; (xix) any extraordinary expenses (including fees and disbursements of
counsel, costs of actions, suits or proceedings to which the Portfolio is a
party and the expenses the Portfolio may incur as a result of its legal
obligation to provide indemnification to its officers, Trustees, employees and
agents) incurred by the Portfolio; (xx) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (xxi) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xxii) the cost
of investment company literature and other publications provided by the
Portfolio to its Trustees and officers; and (xxiii) costs of mailing, stationery
and communications equipment.

(c) Sub-Adviser will assume the cost of any compensation for services
provided to the Portfolio received by the officers of the Portfolio and by the
Trustees of the Portfolio who are not Independent Trustees.

(d) The payment or assumption by Sub-Adviser of any expense of the
Portfolio that Sub-Adviser is not required by this Contract to pay or assume
shall not obligate Sub-Adviser to pay or assume the same or any similar expense
of the Portfolio on any subsequent occasion.

8. Compensation.

(a) For the services provided to the Portfolio under this Contract,
Adviser will pay Sub-Adviser a fee, computed daily and paid monthly, as set
forth in Appendix A hereto.

(b) The fee shall be computed weekly and paid monthly to Sub-Adviser on
or before the last business day of the next succeeding calendar month.

(c) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the

<PAGE> 5

beginning of such month to the date of termination, as the case may be, shall be
prorated according to the proportion which such period bears to the full month
in which such effectiveness or termination occurs.

9. Limitation of Liability of Sub-Adviser and Indemnification.
Sub-Adviser shall not be liable for any costs or liabilities arising from any
error of judgment or mistake of law or any loss suffered by the Portfolio in
connection with the matters to which this Contract relates except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Sub-Adviser in the performance by Sub-Adviser of its duties or from reckless
disregard by Sub-Adviser of its obligations and duties under this Contract. Any
person, even though also an officer, partner, employee, or agent of Sub-Adviser,
who may be or become a Trustee, officer, employee or agent of the Portfolio,
shall be deemed, when rendering services to the Portfolio or acting with respect
to any business of the Portfolio to be rendering such service to or acting
solely for the Portfolio and not as an officer, partner, employee, or agent or
one under the control or direction of Sub-Adviser even though paid by it.

10. Duration and Termination.

(a) This Contract shall become effective upon the date hereabove
written, provided that this Contract shall not take effect unless it has first
been approved (i) by a vote of a majority of the Independent Trustees, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by vote of a majority of the Portfolio's outstanding voting securities.

(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated this Contract shall continue automatically for successive periods not
to exceed twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or by vote of a majority of the outstanding
voting securities of the Portfolio.

(c) Notwithstanding the foregoing, this Contract may be terminated at
any time, without the payment of any penalty, by vote of the Board or by a vote
of a majority of the outstanding voting securities of the Portfolio on sixty
days' written notice to Sub-Adviser or by Sub-Adviser at any time, without the
payment of any penalty, on sixty days' written notice to the Portfolio. This
Contract will automatically terminate in the event of its assignment.

11. Amendment. No provision of this Contract may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Contract shall be effective
until approved by vote of a majority of the Portfolio's outstanding voting
securities, when required by the 1940 Act.

<PAGE> 6

12. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Delaware (without regard to Delaware conflict or choice
of law provisions) and the 1940 Act. To the extent that the applicable laws of
the State of Delaware conflict with the applicable provisions of the 1940 Act,
the latter shall control.

13. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person,"
"assignment," "broker," "dealer," "investment adviser," "national securities
exchange," "net assets," "prospectus," "sale," "sell" and "security" shall have
the same meaning as such terms have in the 1940 Act, subject to such exemption
as may be granted by the Securities and Exchange Commission by any rule,
regulation or order. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Contract is made less restrictive by a rule, regulation
or order of the Securities and Exchange Commission, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.

A I M ADVISORS, INC.

Attest:/s/KATHLEEN J. PFLUEGER By:/s/CAROL F. RELIHAN
------------------------ -----------------------------------
Name: Kathleen J. Pflueger Name: Carol F. Relihan
Title: Assistant Secretary Title: Senior Vice President & Secretary

INVESCO SENIOR SECURED MANAGEMENT, INC.

Attest:/s/MICHAEL A. SILVER By:/s/ANTHONY CLEMENTE
------------------------ -----------------------------------
Michael A. Silver Name: Anthony Clemente
Title: Managing Director

<PAGE> 7

APPENDIX A
TO
SUB-ADVISORY AND SUB-ADMINISTRATION CONTRACT

The Adviser shall pay the Sub-Adviser, as full compensation for all
services rendered and all facilities furnished hereunder, a sub-advisory fee of
0.48% of the Portfolio's average daily net assets for the calendar year,
computed in the manner used for the determination of the Portfolio's net asset
value.

<PAGE> 1
EXHIBIT(g)(3)

FLOATING RATE PORTFOLIO

SUB-SUB-ADVISORY AND SUB-SUB-ADMINISTRATION CONTRACT
BETWEEN
INVESCO SENIOR SECURED MANAGEMENT, INC.
AND
INVESCO (NY), INC.

Contract made as of May 29, 1998, between INVESCO Senior Secured
Management, Inc., a New York corporation ("Sub-Adviser"), and INVESCO (NY),
INC., a California corporation ("Secondary Sub-Adviser").

WHEREAS Sub-Adviser has entered into a Sub-Advisory and
Sub-Administration Contract with A I M Advisors, Inc. ("Adviser") with respect
to Floating Rate Portfolio ("Portfolio"), a closed-end management investment
company registered under the Investment Company Act of 1940, as amended ("1940
Act"); and

WHEREAS Sub-Adviser desires to retain Secondary Sub-Adviser as
sub-sub-adviser and sub-sub-administrator to furnish certain advisory and
administrative services to the Portfolio, and Secondary Sub-Adviser is willing
to furnish such services;

NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:

1. Appointment. Sub-Adviser hereby appoints Secondary Sub-Adviser as
sub-sub-adviser and sub-sub-administrator of the Portfolio for the period and on
the terms set forth in this Contract. Secondary Sub-Adviser accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided.

2. Duties as Sub-Sub-Adviser.

(a) Subject to the supervision of the Portfolio's Board of Trustees
("Board"), Adviser, and the Sub-Adviser, the Secondary Sub-Adviser will provide
a continuous investment program for the Portfolio, including investment research
and management, for a portion of the investments of the Portfolio to be
determined by the Sub-Adviser (the "Sub-Sub-Advised Assets"). The Secondary
Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold with respect to the
Sub-Sub-Advised Assets of the Portfolio. The Secondary Sub-Adviser will be
responsible for placing purchase and sell orders for such investments and for
other related transactions. The Secondary Sub-Adviser will provide services
under this Agreement in accordance with the Portfolio's investment objectives,
policies and restrictions as stated in the Portfolio's registration statement.

(b) The Secondary Sub-Adviser agrees that, in placing orders with
brokers and dealers, it will attempt to obtain the best net result, in terms of
price and execution.

<PAGE> 2

Consistent with this obligation, the Secondary Sub-Adviser may, in its
discretion, purchase and sell portfolio securities from and to brokers and
dealers who provide the Portfolio's, Adviser's, Sub-Adviser's or Secondary
Sub-Adviser's other clients with research, analysis, advice and similar
services. The Secondary Sub-Adviser may pay to brokers and dealers, in return
for such research and analysis services, a higher commission or spread than may
be charged by other brokers and dealers, subject to the Secondary Sub-Adviser
determining in good faith that such commission or spread is reasonable in terms
either of the particular transaction or of the overall responsibility of the
Secondary Sub-Adviser to the Portfolio and its other clients and that the total
commissions or spreads paid by the Portfolio will be reasonable in relation to
the benefits to the Portfolio over the long term. In no instance will Portfolio
securities be purchased from or sold to the Secondary Sub-Adviser, or any
affiliated person thereof, except in accordance with the federal securities laws
and the rules and regulations thereunder and any exemptive orders currently in
effect. Whenever the Secondary Sub-Adviser simultaneously places orders to
purchase or sell the same security on behalf of the Portfolio and one or more
other accounts advised by the Secondary Sub-Adviser, such orders will be
allocated as to price and amount among all such accounts in a manner believed to
be equitable to each account. The Portfolio recognizes that in some cases this
procedure may adversely affect the results obtained for the Portfolio.

(c) The Secondary Sub-Adviser will maintain all books and records with
respect to the securities transactions of the Portfolio, and will furnish the
Board, Adviser, and Sub-Adviser with such periodic and special reports as the
Board, Adviser, or Sub-Adviser reasonably may request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Secondary Sub-Adviser hereby
agrees that all records which it maintains for the Portfolio are the property of
the Portfolio, agrees to preserve for the periods prescribed by Rule 31a-2 under
the 1940 Act any records which it maintains for the Portfolio and which are
required to be maintained by Rule 31a-1 under the 1940 Act, and further agrees
to surrender promptly to the Portfolio any records which it maintains for the
Portfolio upon request by the Portfolio.

(d) The Secondary Sub-Adviser will provide the Board, the Adviser, and
the Sub-Adviser on a regular basis with economic and investment analyses and
reports and make available to the Board, the Adviser, and the Sub-Adviser upon
request any economic, statistical and investment services normally available to
institutional or other customers of the Secondary Sub-Adviser.

3. Duties as Sub-Sub-Administrator. Secondary Sub-Adviser will
administer the affairs of the Portfolio subject to the supervision of the
Portfolio's Board of Trustees ("Board"), the Adviser, the Sub-Adviser, and the
following understandings:

(a) Secondary Sub-Adviser will supervise all aspects of the operations
of the Portfolio, including the oversight of transfer agency and custodial
services except as hereinafter set forth; provided, however, that nothing herein
contained shall be deemed to relieve or deprive the Board of its responsibility
for control of the conduct of the affairs of the Portfolio.

<PAGE> 3

(b) At Secondary Sub-Adviser's expense, Secondary Sub-Adviser will
provide the Portfolio with such corporate, administrative and clerical personnel
(including officers of the Portfolio) and services as are reasonably deemed
necessary or advisable by the Board.

(c) Secondary Sub-Adviser will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the
Portfolio's prospectus, proxy material, tax returns and required reports with or
to the Portfolio's shareholders, the Securities and Exchange Commission and
other appropriate federal or state regulatory authorities.

(d) Secondary Sub-Adviser will provide the Portfolio with, or obtain
for it, adequate office space and all necessary office equipment and services,
including telephone service, heat, utilities, stationery supplies and similar
items.

4. Further Duties. In all matters relating to the performance of this
Contract, Secondary Sub-Adviser will act in conformity with the Agreement and
Declaration of Trust, By-Laws and Registration Statement of the Portfolio and
with the instructions and directions of the Board and will comply with the
requirements of the 1940 Act, the rules thereunder, and all other applicable
federal and state laws and regulations.

5. Services Not Exclusive. The services furnished by Secondary Sub-
Adviser hereunder are not to be deemed exclusive and Secondary Sub-Adviser shall
be free to furnish similar services to others so long as its services under this
Contract are not impaired thereby. Nothing in this Contract shall limit or
restrict the right of any director, officer or employee of Secondary Sub-
Adviser, who may also be a Trustee, officer or employee of the Portfolio, to
engage in any other business or to devote his or her time and attention in part
to the management or other aspects of any other business, whether of a similar
nature or a dissimilar nature.

6. Expenses.

(a) During the term of this Contract, the Portfolio will bear all
expenses not specifically assumed by Secondary Sub-Adviser.

<PAGE> 4
reports and other documents with governmental and regulatory agencies; (viii)
fees and salaries payable to the Portfolio's Trustees who are not parties to
this Contract or interested persons of any such party ("Independent Trustees");
(ix) all expenses incurred in connection with the Independent Trustees'
services, including travel expenses; (x) taxes (including any income or
franchise taxes) and governmental fees; (xi) costs of any liability,
uncollectible items of deposit and other insurance and fidelity bonds; (xii) any
costs, expenses or losses arising out of a liability of or claim for damages or
other relief asserted against the Portfolio for violation of any law; (xiii)
interest charges; (xiv) legal, accounting and auditing expenses, including legal
fees of special counsel for the Independent Trustees; (xv) charges of
custodians, transfer agents, pricing agents and other agents; (xvi) costs of
preparing share certificates; (xvii) expenses of setting in type, printing and
mailing prospectuses and supplements thereto, reports, notices and proxy
materials for existing shareholders; (xviii) expenses of obtaining and
maintaining securities exchange listing of the Portfolio's shares of beneficial
interest; (xix) any extraordinary expenses (including fees and disbursements of
counsel, costs of actions, suits or proceedings to which the Portfolio is a
party and the expenses the Portfolio may incur as a result of its legal
obligation to provide indemnification to its officers, Trustees, employees and
agents) incurred by the Portfolio; (xx) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (xxi) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xxii) the cost
of investment company literature and other publications provided by the
Portfolio to its Trustees and officers; and (xxiii) costs of mailing, stationery
and communications equipment.

(c) Secondary Sub-Adviser will assume the cost of any compensation for
services provided to the Portfolio received by the officers of the Portfolio and
by the Trustees of the Portfolio who are not Independent Trustees.

(d) The payment or assumption by Secondary Sub-Adviser of any expense
of the Portfolio that Secondary Sub-Adviser is not required by this Contract to
pay or assume shall not obligate Secondary Sub-Adviser to pay or assume the same
or any similar expense of the Portfolio on any subsequent occasion.

7. Compensation.

(a) For the services provided to the Portfolio under this Contract,
Sub-Adviser will pay Secondary Sub-Adviser a fee, computed weekly and paid
monthly, as set forth in Appendix A hereto.

(b) The fee shall be computed weekly and paid monthly to Secondary Sub-
Adviser on or before the last business day of the next succeeding calendar
month.

<PAGE> 5
the proportion which such period bears to the full month in which such
effectiveness or termination occurs.

8. Limitation of Liability of Secondary Sub-Adviser and
Indemnification. Secondary Sub-Adviser shall not be liable for any costs or
liabilities arising from any error of judgment or mistake of law or any loss
suffered by the Portfolio in connection with the matters to which this Contract
relates except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of Secondary Sub-Adviser in the performance by Secondary
Sub-Adviser of its duties or from reckless disregard by Secondary Sub-Adviser of
its obligations and duties under this Contract. Any person, even though also an
officer, partner, employee, or agent of Secondary Sub-Adviser, who may be or
become a Trustee, officer, employee or agent of the Portfolio, shall be deemed,
when rendering services to the Portfolio or acting with respect to any business
of the Portfolio to be rendering such service to or acting solely for the
Portfolio and not as an officer, partner, employee, or agent or one under the
control or direction of Secondary Sub-Adviser even though paid by it.

9. Duration and Termination.

(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, with respect to the Portfolio, this Contract shall continue
automatically for successive periods not to exceed twelve months each, provided
that such continuance is specifically approved at least annually (i) by a vote
of a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or by vote of
a majority of the outstanding voting securities of the Portfolio.

(c) Notwithstanding the foregoing, this Contract may be terminated at
any time, without the payment of any penalty, by vote of the Board or by a vote
of a majority of the outstanding voting securities of the Portfolio on sixty
days' written notice to Secondary Sub-Adviser or by Secondary Sub-Adviser at
any time, without the payment of any penalty, on sixty days' written notice to
the Portfolio. This Contract will automatically terminate in the event of its
assignment.

10. Amendment. No provision of this Contract may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Contract shall be effective
until approved by vote of a majority of the Portfolio's outstanding voting
securities, when required by the 1940 Act.
<PAGE> 6

11. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Delaware (without regard to Delaware conflict or choice
of law provisions) and the 1940 Act. To the extent that the applicable laws of
the State of Delaware conflict with the applicable provisions of the 1940 Act,
the latter shall control.

12. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person,"
"assignment," "broker," "dealer," "investment adviser," "national securities
exchange," "net assets," "prospectus," "sale," "sell" and "security" shall have
the same meaning as such terms have in the 1940 Act, subject to such exemption
as may be granted by the Securities and Exchange Commission by any rule,
regulation or order. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Contract is made less restrictive by a rule, regulation
or order of the Securities and Exchange Commission, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.

INVESCO SENIOR SECURED MANAGEMENT, INC.

Attest: /s/ MICHAEL A. SILVER By: /s/ ANTHONY CLEMENTE
------------------------ --------------------------------------
Michael A. Silver Name: Anthony Clemente
Title: Managing Director

INVESCO (NY), INC.

Attest: /s/ MICHAEL A. SILVER By: /s/ HELGE K. LEE
------------------------ --------------------------------------
Michael A. Silver Name: Helge K. Lee
Assistant Secretary Title: Chief Legal and Compliance Officer
and Secretary

<PAGE> 7

APPENDIX A
TO
SUB-SUB-ADVISORY AND SUB-SUB-ADMINISTRATION CONTRACT

The Sub-Adviser shall pay the Secondary Sub-Adviser, as full compensation for
all services rendered and all facilities furnished hereunder, a sub-sub-advisory
fee of 0.48% of the portion of the Portfolio's average daily net assets for the
calendar year that is delegated to the Secondary Sub-Adviser. The Portfolio's
average daily net assets shall be computed in the manner used for the
determination of the Portfolio's net asset value.

<PAGE> 1
EXHIBIT(g)(4)

ADMINISTRATION CONTRACT
BETWEEN
GT GLOBAL FLOATING RATE FUND, INC.
AND
A I M ADVISORS, INC.

Contract made as of May 29, 1998, between GT Global Floating Rate Fund,
Inc., a Maryland corporation, d/b/a AIM Floating Rate Fund ("Fund"), and A I M
Advisors, Inc., a Delaware corporation ("AIM").

WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as a closed-end management investment company,
and intends to offer for public sale shares of its Common Stock; and

WHEREAS the Fund desires to retain AIM as administrator to furnish
certain administrative services to the Fund, and AIM is willing to furnish such
services;

NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:

1. APPOINTMENT. The Fund hereby appoints AIM as administrator of the
Fund for the period and on the terms set forth in this Contract. AIM accepts
such appointment and agrees to render the services herein set forth, for the
compensation herein provided.

2. DUTIES AS ADMINISTRATOR. AIM will administer the affairs of the Fund
subject to the supervision of the Fund's Board of Directors ("Board") and the
following understandings:

(a) AIM will supervise all aspects of the non-investment
operations of the Fund, including the oversight of transfer agency, custodial,
pricing and accounting services, except as hereinafter set forth; provided,
however, that nothing herein contained shall be deemed to relieve or deprive the
Board of its responsibility for control of the conduct of the affairs of the
Fund.

(b) At AIM's expense, AIM will provide the Fund with such
corporate, administrative and clerical personnel (including officers of the
Fund) and services as are reasonably deemed necessary or advisable by the Board.

(c) AIM will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of the Fund's
prospectus, proxy material, tax returns and required reports with or to the
Fund's shareholders, the Securities and Exchange Commission and other
appropriate federal or state regulatory authorities.

<PAGE> 2

(d) AIM will provide the Fund with, or obtain for it, adequate
office space and all necessary office equipment and services, including
telephone service, heat, utilities, stationery supplies and similar items.

3. FURTHER DUTIES. In all matters relating to the performance of this
Contract, AIM will act in conformity with the Articles of Incorporation, Bylaws
and Registration Statement of the Fund and with the instructions and directions
of the Board and will comply with the requirements of the 1940 Act, the rules
thereunder, and all other applicable federal and state laws and regulations.

4. DELEGATION OF AIM'S DUTIES AS ADMINISTRATOR. With respect to the
Fund, AIM may enter into one or more contracts (each a "Sub-Administration
Contract") with a sub-administrator pursuant to which AIM delegates to such
sub-administrator the performance of any or all of the services specified in
Paragraphs 2 and 3 of this Contract, provided that (i) each Sub-Administration
Contract imposes on the sub-administrator bound thereby all the duties and
conditions to which AIM is subject with respect to the services under Paragraphs
2 and 3 of this Contract; (ii) each Sub-Administration Contract meets all
requirements of the 1940 Act and rules thereunder; and (iii) AIM shall not enter
into a Sub-Administration Contract unless it is approved by the Board prior to
implementation.

5. SERVICES NOT EXCLUSIVE. The services furnished by AIM hereunder are
not to be deemed exclusive and AIM shall be free to furnish similar services to
others so long as its services under this Contract are not impaired thereby.
Nothing in this Contract shall limit or restrict the right of any director,
officer or employee of AIM, who may also be a Director, officer or employee of
the Fund, to engage in any other business or to devote his or her time and
attention in part to the management or other aspects of any other business,
whether of a similar nature or a dissimilar nature.

6. EXPENSES.

(a) During the term of this Contract, the Fund will bear all
expenses incurred in its operations which are not specifically assumed by AIM.

2
<PAGE> 3

(vi) expenses of preparing and filing reports and other documents with
governmental and regulatory agencies (vii) fees and salaries payable to the
Fund's Directors who are not parties to this Contract or interested persons of
any such party ("Independent Directors"); (viii) all expenses incurred in
connection with the Independent Directors' services, including travel expenses;
(ix) taxes (including any income or franchise taxes) and governmental fees; (x)
costs of any liability, uncollectible items of deposit and other insurance and
fidelity bonds; (xi) any costs, expenses or losses arising out of a liability of
or claim for damages or other relief asserted against the Fund for violation of
any law; (xii) interest charges; (xiii) legal, accounting and auditing expenses,
including legal fees of special counsel for the Independent Directors; (xiv)
charges of custodians, transfer agents, pricing agents and other agents; (xv)
costs of preparing share certificates; (xvi) expenses of setting in type,
printing and mailing prospectuses and supplements thereto, statements of
additional information, reports and proxy materials for existing shareholders;
(xvii) expenses of obtaining and maintaining securities exchange listing of the
Fund's shares; (xviii) any extraordinary expenses (including fees and
disbursements of counsel, costs of actions, suits or proceedings to which the
Fund is a party and the expenses the Fund may incur as a result of its legal
obligation to provide indemnification to its officers, Directors, employees and
agents) incurred by the Fund; (xix) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (xx) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xxi) the cost
of investment company literature and other publications provided by the Fund to
its Directors and officers; and (xxii) costs of mailing, stationery and
communications equipment.

(c) AIM will assume the cost of any compensation for services
provided to the Fund received by the officers and by the Directors of the Fund
who are not Independent Directors.

(d) The payment or assumption by AIM of any expense of the
Fund that AIM is not required by this Contract to pay or assume shall not
obligate AIM to pay or assume the same or any similar expense of the Fund on any
subsequent occasion.

7. COMPENSATION.

(a) For the services provided under this Contract, the Fund
will pay AIM an annual fee, payable monthly, at the annualized rate of 0.25% of
the Fund's average daily net assets.

(b) The fee shall be computed weekly and paid monthly to AIM
on or before the last business day of the next succeeding calendar month.

<PAGE> 4
month, the fee for the period from the effective date to the end of the month or
from the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.

8. LIMITATION OF LIABILITY OF AIM AND INDEMNIFICATION. AIM shall not be
liable, and the Fund shall indemnify AIM and its directors, officers and
employees, for any costs or liabilities arising from any error of judgment or
mistake of law or any loss suffered by the Fund in connection with the matters
to which this Contract relates except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of AIM in the performance by AIM of
its duties or from reckless disregard by AIM of its obligations and duties under
this Contract. Any person, even though also an officer, partner, employee, or
agent of AIM, who may be or become a Director, officer, employee or agent of the
Fund, shall be deemed, when rendering services to the Fund or acting with
respect to any business of the Fund to be rendering such service to or acting
solely for the Fund and not as an officer, partner, employee, or agent or one
under the control or direction of AIM even though paid by it.

9. DURATION AND TERMINATION.

(a) This Contract shall become effective upon the date hereabove
written, provided that this Contract shall not take effect with respect to the
Fund unless it has first been approved by a vote of a majority of the Company's
Directors.

(c) Notwithstanding the foregoing, with respect to the Fund this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on sixty days' written notice to AIM or by AIM at any
time, without the payment of any penalty, on sixty days' written notice to the
Fund. This Contract will automatically terminate in the event of its assignment.

10. AMENDMENT. No provision of this Contract may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.

4
<PAGE> 5
11. GOVERNING LAW. This Contract shall be construed in accordance with
the laws of the State of Delaware (without regard to Delaware conflict or choice
of law provisions) and the 1940 Act. To the extent that the applicable laws of
the State of Delaware conflict with the applicable provisions of the 1940 Act,
the latter shall control.

12. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person,"
"assignment," "broker," "dealer," "investment adviser," "national securities
exchange," "net assets," "prospectus," "sale," "sell" and "security" shall have
the same meaning as such terms have in the 1940 Act, subject to such exemption
as may be granted by the Securities and Exchange Commission by any rule,
regulation or order. Where the effect of a requirement of the 1940 Act reflected
in any provision of this Contract is made less restrictive by a rule, regulation
or order of the Securities and Exchange Commission, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.

GT GLOBAL FLOATING RATE
Attest: FUND, INC.

/s/ MICHAEL A. SILVER By: /s/ HELGE K. LEE
- ---------------------------- ---------------------------------
Michael A. Silver Helge K. Lee
Assistant Secretary Vice President and Secretary

Attest: A I M ADVISORS, INC.

/s/ KATHLEEN J. PFLUEGER By: /s/ CAROL F. RELIHAN
- ---------------------------- ---------------------------------
Name: Kathleen J. Pflueger Name: Carol F. Relihan
Title: Assistant Secretary Title: Senior Vice President

<PAGE> 1
EXHIBIT(g)(5)

SUB-ADMINISTRATION CONTRACT
AMONG
GT GLOBAL FLOATING RATE FUND, INC.,
A I M ADVISORS, INC.
AND
INVESCO (NY), INC.

Contract made as of May 29, 1998, among GT Global Floating Rate Fund,
Inc., a Maryland corporation, d/b/a AIM Floating Rate Fund ("Fund"), A I M
Advisors, Inc., a Delaware corporation ("AIM"), and INVESCO (NY), INC., a
California corporation ("INVESCO (NY)").

WHEREAS AIM has entered into an Administration Contract with the Fund,
a closed-end management investment company registered under the Investment
Company Act of 1940, as amended ("1940 Act"); and

WHEREAS AIM desires to retain INVESCO (NY) as sub-administrator to
furnish certain administrative services to the Fund, and INVESCO (NY) is
willing to furnish such services;

NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, it is agreed among the parties hereto as follows:

1. APPOINTMENT. AIM hereby appoints INVESCO (NY) as
sub-administrator of the Fund for the period and on the terms set forth in this
Contract. INVESCO (NY) accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.

2. DUTIES AS ADMINISTRATOR. INVESCO (NY) will administer the
affairs of the Fund subject to the supervision of the Fund's Board of Directors
("Board") and AIM and the following understandings:

(a) INVESCO (NY) will supervise all aspects of the
non-investment operations of the Fund, including the oversight of transfer
agency, custodial, pricing and accounting services, except as hereinafter set
forth; provided, however, that nothing herein contained shall be deemed to
relieve or deprive the Board of its responsibility for control of the conduct
of the affairs of the Fund.

(b) At INVESCO (NY)'s expense, INVESCO (NY) will provide
the Fund with such corporate, administrative and clerical personnel (including
officers of the Fund) and services as are reasonably deemed necessary or
advisable by the Board.

(c) INVESCO (NY) will arrange, but not pay, for the
periodic preparation,
<PAGE> 2
updating, filing and dissemination (as applicable) of the Fund's prospectus,
proxy material, tax returns and required reports with or to the Fund's
shareholders, the Securities and Exchange Commission and other appropriate
federal or state regulatory authorities.

(d) INVESCO (NY) will provide the Fund with, or obtain
for it, adequate office space and all necessary office equipment and services,
including telephone service, heat, utilities, stationery supplies and similar
items.

3. FURTHER DUTIES. In all matters relating to the performance of
this Contract, INVESCO (NY) will act in conformity with the Articles of
Incorporation, Bylaws and Registration Statement of the Fund and with the
instructions and directions of the Board and will comply with the requirements
of the 1940 Act, the rules thereunder, and all other applicable federal and
state laws and regulations.

4. SERVICES NOT EXCLUSIVE. The services furnished by INVESCO
(NY) hereunder are not to be deemed exclusive and INVESCO (NY) shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of INVESCO (NY), who may also be a
Director, officer or employee of the Fund, to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.

5. EXPENSES.

(a) During the term of this Contract, the Fund will bear
all expenses incurred in its operations which are not specifically assumed by
INVESCO (NY).

(b) Expenses borne by the Fund will include but not be
limited to the following: (i) the cost (including brokerage commissions, if
any) of securities purchased or sold by the Fund and any losses incurred in
connection therewith; (ii) fees payable to and expenses incurred on behalf of
the Fund by INVESCO (NY) under this Contract; (iii) expenses of organizing the
Fund; (iv) costs incurred in connection with the issuance, sale or repurchase
of the Fund's shares; (v) filing fees and expenses relating to the registration
and qualification of the Fund's shares under federal and/or state securities
laws and maintaining such registrations and qualifications; (vi) expenses of
preparing and filing reports and other documents with governmental and
regulatory agencies (vii) fees and salaries payable to the Fund's Directors who
are not parties to this Contract or interested persons of any such party
("Independent Directors"); (viii) all expenses incurred in connection with the
Independent Directors' services, including travel expenses; (ix) taxes
(including any income or franchise taxes) and governmental fees; (x) costs of
any liability, uncollectible items of deposit and other insurance and fidelity
bonds; (xi) any costs, expenses or losses arising out of a liability of or claim
for damages or other relief asserted against the Fund for violation of any law;
(xii) interest charges; (xiii) legal, accounting and auditing

- 2 -
<PAGE> 3
expenses, including legal fees of special counsel for the Independent Directors;
(xiv) charges of custodians, transfer agents, pricing agents and other agents;
(xv) costs of preparing share certificates; (xvi) expenses of setting in type,
printing and mailing prospectuses and supplements thereto, statements of
additional information, reports and proxy materials for existing shareholders;
(xvii) expenses of obtaining and maintaining securities exchange listing of the
Fund's shares; (xviii) any extraordinary expenses (including fees and
disbursements of counsel, costs of actions, suits or proceedings to which the
Fund is a party and the expenses the Fund may incur as a result of its legal
obligation to provide indemnification to its officers, Directors, employees and
agents) incurred by the Fund; (xix) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (xx) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xxi) the cost
of investment company literature and other publications provided by the Fund to
its Directors and officers; and (xxii) costs of mailing, stationery and
communications equipment.

(c) INVESCO (NY) will assume the cost of any compensation
for services provided to the Fund received by the officers and by the Directors
of the Fund who are not Independent Directors.

(d) The payment or assumption by INVESCO (NY) of any
expense of the Fund that INVESCO (NY) is not required by this Contract to pay
or assume shall not obligate INVESCO (NY) to pay or assume the same or any
similar expense of the Fund on any subsequent occasion.

6. COMPENSATION. INVESCO (NY) will not be paid any special
compensation for the services provided under this Contract.

7. LIMITATION OF LIABILITY OF INVESCO (NY) AND INDEMNIFICATION.
INVESCO (NY) shall not be liable, and the Fund shall indemnify INVESCO (NY) and
its directors, officers and employees, for any costs or liabilities arising
from any error of judgment or mistake of law or any loss suffered by the Fund
in connection with the matters to which this Contract relates except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part
of INVESCO (NY) in the performance by INVESCO (NY) of its duties or from
reckless disregard by INVESCO (NY) of its obligations and duties under this
Contract. Any person, even though also an officer, partner, employee, or agent
of INVESCO (NY), who may be or become a Director, officer, employee or agent of
the Fund, shall be deemed, when rendering services to the Fund or acting with
respect to any business of the Fund to be rendering such service to or acting
solely for the Fund and not as an officer, partner, employee, or agent or one
under the control or direction of INVESCO (NY) even though paid by it.

8. DURATION AND TERMINATION.

- 3 -
<PAGE> 4

(a) This Contract shall become effective upon the date
hereabove written, provided that this Contract shall not take effect with
respect to the Fund unless it has first been approved by a vote of a majority
of the Company's Directors.

(c) Notwithstanding the foregoing, this Contract may be
terminated at any time, without the payment of any penalty, by vote of the
Board or by a vote of a majority of the outstanding voting securities of the
Fund on sixty days' written notice to AIM and INVESCO (NY), or by AIM or
INVESCO (NY) at any time, without the payment of any penalty, on sixty days'
written notice to the Fund. This Contract will automatically terminate in the
event of its assignment or in the event of termination of the Administration
Contract between the Fund and AIM

9. AMENDMENT. No provision of this Contract may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.

10. GOVERNING LAW. This Contract shall be construed in accordance
with the laws of the State of Delaware (without regard to Delaware conflict or
choice of law provisions) and the 1940 Act. To the extent that the applicable
laws of the State of Delaware conflict with the applicable provisions of the
1940 Act, the latter shall control.

11. MISCELLANEOUS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be
affected thereby. This Contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Contract, the terms "majority of the outstanding voting securities,"
"interested person," "assignment," "broker," "dealer," "investment adviser,"
"national securities exchange," "net assets," "prospectus," "sale," "sell" and
"security" shall have the same meaning as such terms have in the 1940 Act,
subject to such exemption as may be granted by the Securities and Exchange
Commission by any rule, regulation or order. Where the

- 4 -
<PAGE> 5
effect of a requirement of the 1940 Act reflected in any provision of this
Contract is made less restrictive by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.

- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.

Attest: GT GLOBAL FLOATING
RATE FUND, INC.

/s/MICHAEL A. SILVER By: /s/KENNETH W. CHANCEY
- --------------------------- ---------------------------------------
Michael A. Silver Kenneth W. Chancey
Assistant Secretary Vice President, Principal Accounting
Officer and (Acting) CFO

Attest: A I M ADVISORS, INC.

/s/KATHLEEN J. PFLUEGER By: /s/CAROL F. RELIHAN
- --------------------------- ---------------------------------------
Name: Kathleen J. Pflueger Name: Carol F. Relihan
Title: Assistant Secretary Title: Senior Vice President

Attest: INVESCO (NY), INC.

/s/MICHAEL A. SILVER By: /s/HELGE K. LEE
- --------------------------- ---------------------------------------
Michael A. Silver Helge K. Lee
Chief Legal and Compliance Officer
and Secretary

- 6 -

<PAGE> 1
EXHIBIT(h)(1)

DISTRIBUTION AGREEMENT
BETWEEN
GT GLOBAL FLOATING RATE FUND, INC.
AND
AIM DISTRIBUTORS, INC.

THIS AGREEMENT made this 29th day of May, 1998, by and between GT Global
Floating Rate Fund, Inc., a Maryland corporation, d/b/a AIM Floating Rate Fund
(the "Fund"), and A I M Distributors, Inc., a Delaware corporation (the
"Distributor").

W I T N E S S E T H:

In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto agree as follows:

FIRST: The Fund hereby appoints the Distributor as its exclusive agent
for the sale of its shares of common stock (the "Shares") to the public directly
and through investment dealers and financial institutions in the United States
and throughout the world.

SECOND: The Fund shall not sell any Shares except through the
Distributor and under the terms and conditions set forth in paragraph FOURTH
below. Notwithstanding the provisions of the foregoing sentence, however:

(A) the Fund may issue Shares to any other investment company or
personal holding company, or to the shareholders thereof, in exchange for all or
a majority of the shares or assets of any such company; and

(B) the Fund may issue Shares at net asset value to the Fund's
shareholders in connection with the reinvestment of dividends and other
distributions.

<PAGE> 2

THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the Shares and agrees that it will use its best efforts to sell
such Shares; provided, however, that:

(A) the Distributor may, and when requested by the Fund shall, suspend
its efforts to effectuate such sales at any time when, in the opinion of the
Distributor or of the Fund, no sales should be made because of market or other
economic considerations or abnormal circumstances of any kind; and

(B) the Fund may withdraw the offering of the Shares (i) at any time
with the consent of the Distributor, or (ii) without such consent when so
required by the provisions of any statute or of any order, rule or regulation of
any governmental body having jurisdiction. It is mutually understood and agreed
that the Distributor does not undertake to sell any specific amount of the
Shares. The Fund shall have the right to specify minimum amounts for initial and
subsequent orders for the purchase of Shares.

FOURTH:

(A) The public offering price of the Shares (the "offering price")
shall be the net asset value per share of the Fund. Net asset value per share
shall be determined in accordance with the provisions of the Fund's then current
prospectus. The Distributor may establish a schedule of early withdrawal charges
to be imposed at the time of repurchase of the Shares, and such schedule shall
be disclosed in the Fund's current prospectus. Such schedule of early withdrawal
charges may reflect variations in or waivers of such charges, either generally
to the public or to any specified class of shareholders and/or in connection
with any specified class of transactions, in accordance with applicable rules
and regulations and exemptive relief granted by the Securities and Exchange
Commission, and as set forth in the Fund's current prospectus. The Distributor
shall apply any scheduled variation in or waiver of early withdrawal charges
uniformly to all shareholders and /or all transactions belonging to a specified
class.

-2-
<PAGE> 3

(B) The compensation for the services of the Distributor hereunder
shall be the early withdrawal charges, if any, which are collected on the Shares
as set forth in the Fund's prospectus.

(C) The Distributor may pay to investment dealers and other financial
institutions through whom the Shares are sold, such sales commissions and
shareholder servicing fees as the Distributor may specify from time to time.
Payment of any such sales commissions and shareholder servicing fees shall be
the sole obligation of the Distributor.

FIFTH: The Distributor shall act as agent of the Fund in connection
with the sale of the Shares. Except with respect to such sales, the Distributor
shall act as principal in all matters relating to the promotion of the sale of
Shares and shall enter into all of its own engagements, agreements and contracts
as principal on its own account. The Distributor shall enter into agreements
with investment dealers and financial institutions selected by the Distributor,
authorizing such investment dealers and financial institutions to offer and sell
Shares to the public upon the terms and conditions set forth therein, which
shall not be inconsistent with the provisions of this Agreement. Each agreement
shall provide that the investment dealer and financial institution shall act as
a principal, and not as an agent, of the Fund.

SIXTH: The Fund shall bear:

(A) the expenses of qualification of the Shares for sale in connection
with such public offerings in such states as shall be selected by the
Distributor, and of continuing the qualification therein until the Distributor
notifies the Fund that it does not wish such qualification continued; and

(B) all legal expenses in connection with the foregoing.

-3-

<PAGE> 4

SEVENTH: The Distributor shall bear the expenses of printing from the
final proof and distributing the Fund's prospectuses (including supplements
thereto) relating to public offerings made by the Distributor pursuant to this
Agreement (which shall not include those prospectuses, and supplements thereto,
to be distributed to shareholders of the Fund), and any other promotional or
sales literature used by the Distributor or furnished by the Distributor to
dealers in connection with such public offerings, and expenses of advertising in
connection with such public offerings. The Distributor may be reimbursed for all
or a portion of such expenses as the Fund and the Distributor may from time to
time agree.

EIGHTH: The Distributor will accept orders for the purchase of Shares
only to the extent of purchase orders actually received and not in excess of
such orders, and it will not avail itself of any opportunity of making a profit
by expediting or withholding orders. It is mutually understood and agreed that
the Fund may reject purchase orders where, in the judgment of the Fund, such
rejection is in the best interest of the Fund.

NINTH: The Fund and the Distributor shall each comply with all
applicable provisions of the Investment Company Act of 1940 ("1940 Act"), the
Securities Act of 1933 and of all other federal and state laws, rules and
regulations governing the issuance and sale of Shares.

TENTH:

(A) In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Fund agrees to indemnify the Distributor against any and all
claims, demands, liabilities and expenses which the Distributor may incur under
the Securities Act of 1933, or common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in any
registration statement or prospectus of the Fund, or any omission to state a
material fact therein, the omission of which makes any statement contained
therein misleading, unless such statement or omission was made in reliance upon,
and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Distributor. The Distributor agrees to
indemnify the

-4-
<PAGE> 5

Fund against any and all claims, demands, liabilities and expenses which the
Fund may incur arising out of or based upon any act or deed of the Distributor
or its sales representatives which has not been authorized by the Fund in its
prospectus or in this Agreement.

(B) The Distributor agrees to indemnify the Fund against any and all
claims, demands, liabilities and expenses which the Fund may incur under the
Securities Act of 1933, or common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in any registration
statement or prospectus of the Fund, or any omission to state a material fact
therein if such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Fund in connection therewith by or
on behalf of the Distributor.

(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the Fund's transfer agent(s),
or for any failure of any such transfer agent to perform its duties.

ELEVENTH: Nothing herein contained shall require the Fund to take any
action contrary to any provision of its Articles of Incorporation or By-laws, or
to any applicable statute or regulation.

TWELFTH: This Agreement shall become effective with respect to the Fund
as of the date hereof, shall continue in force and effect for two years
thereafter, and shall continue in force and effect from year to year thereafter,
provided, that such continuance is specifically approved with respect to the
Fund at least annually (a)(i) by the Board of Directors of the Fund or (ii) by
the vote of a majority of the outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), and (b) by vote of a majority of the Fund's
directors who are not parties to this Agreement or "interested persons" (as
defined in Section 2(a)(19) of the 1940 Act) of any party to this Agreement cast
in person at a meeting called for such purpose.

-5-
<PAGE> 6

THIRTEENTH:

(A) This Agreement may be terminated with respect to the Fund at any
time, without the payment of any penalty, by vote of the Board of Directors of
the Fund or by vote of a majority of the outstanding voting securities of the
Fund, or by the Distributor, on sixty (60) days' written notice to the other
party.

(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.

FOURTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, it is agreed that the addresses of both the
Fund and the Distributor shall be 11 Greenway Plaza, Suite 100, Houston, Texas
77046.

-6-

<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.

GT GLOBAL FLOATING
RATE FUND, INC.

By: /s/ WILLIAM J. GUILFOYLE
--------------------------------
Name: William J. Guilfoyle
Title: President

Attest:

/s/ MICHAEL A. SILVER
- --------------------------------
Name: Michael A. Silver
Title: Assistant Secretary

AIM DISTRIBUTORS, INC.

By: /s/ JOHN CALDWELL
--------------------------------
Name: John Caldwell
Title: Senior Vice President

Attest:

/s/ KATHLEEN J. PFLUEGER
- --------------------------------
Name: Kathleen J. Pflueger
Title: Secretary

-7-

<PAGE> 1
EXHIBIT (j)

CUSTODIAN CONTRACT

Between

GT GLOBAL FLOATING RATE FUND, INC.

and

STATE STREET BANK AND TRUST COMPANY

<PAGE> 2

CUSTODIAN CONTRACT

This Contract between GT Global Floating Rate Fund, Inc., a corporation
organized and existing under the laws of Maryland, having its principal place of
business at 50 California Street, San Francisco, California 94111 hereinafter
called the "Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian",

WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:

1. Employment of Custodian and Property to be Held by It.

The Fund hereby employs the Custodian as the custodian of its assets,
including securities which it desires to be held in places within the United
States ("domestic securities") and securities it desires to be held outside the
United States ("foreign securities") pursuant to the provisions of the Articles
of Incorporation. The Fund agrees to deliver to the Custodian all securities
and cash owned by it, and all payments of income, payments of principal or
capital distributions received by it with respect to all securities owned by
the Fund from time to time, and the cash consideration received by it for such
new or shares of beneficial interest $.001 par value, ("Shares") of the Fund as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of the Fund held or received by the Fund and not delivered to
the Custodian.

Upon receipt of "Proper Instructions" (within the meaning of Article 4),
the Custodian shall from time to time employ one or more sub-custodians located
in the United States, but only in accordance with an applicable vote by the
Board of Directors of the Fund, and provided that the Custodian shall have no
more or less responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian. The Custodian may employ as sub-custodian for the Fund's foreign
securities and other assets the foreign banking institutions and foreign
securities depositories designated in Schedule A hereto but only in accordance
with the provisions of Article 3.

2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States.

2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, to be held by it in the
United States including all domestic securities owned by the Fund, other
than (a) securities which are maintained pursuant to Section 2.10 in
a clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury, collectively
referred to herein as "Securities Systems" and (b) commercial paper of an
issuer for which State Street Bank and Trust Company acts as issuing and
paying agent ("Direct

<PAGE> 3
Paper") which is deposited and/or maintained in the Direct Paper System of
the Custodian pursuant to Section 2.11.

2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following cases:

1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;

2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;

3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;

4) To the depository agent in connection with tender or other similar
offers for securities of the Fund;

5) To the issuer thereof or its agent when such securities are called,
redeemed, repurchased, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;

6) To the issuer thereof, or its agent, for transfer into the name of
the Fund or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in any such
case, the new securities are to be deliveries to the Custodian.

7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for examination
in accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct;

8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;

<PAGE> 4

9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such case,
the new securities and cash, if any, are to be delivered to the
Custodian;

10) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund, which may be in
the form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be credited to
the Custodian's account in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian will not be held liable
or responsible for the delivery of securities owned by the Fund prior
to the receipt of such collateral;

11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed;

12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of
The National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;

13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by the
Fund;

14) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a resolution
of the Board of Directors or of the Executive Committee signed by an
officer and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Fund to be delivered, setting forth
the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.

2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the Fund
or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund, unless
the Fund has authorized in writing the appointment of a nominee to be used
in common with other registered investment companies having the same
investment adviser as the Fund, or in the name or nominee name of any agent

<PAGE> 5

appointed pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted by
the Custodian on behalf of the Fund under the terms of this Contract shall
be in "street name" or other good delivery form. If, however, the Fund
directs the Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely collect income due
the Fund on such securities and to notify the Fund on a best efforts basis
only of relevant corporate actions including, without limitation, pendency
of calls, maturities, tender or exchange offers.

2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund which
shall contain only property held by the Custodian as Custodian for the
Fund, subject only to draft or order by the Custodian acting pursuant to
the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Fund, other than cash maintained by the Fund in a bank
account established and used in accordance with Rule l7f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for the Fund
may be deposited by it to its credit as Custodian in the Banking Department
of the Custodian or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however, that every such
bank or trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company
and the funds to be deposited with each such bank or trust company shall be
approved by vote of a majority of the Board of Directors of the Fund. Such
funds shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.

2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of the Fund which are
deposited into the Fund's account.

2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States registered securities held hereunder to which
the Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to United States bearer domestic securities if,
on the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as collected,
to the Fund's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due the Fund on United States securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as

<PAGE> 6

may be necessary to assist the Fund in arranging for the timely delivery to
the Custodian of the income to which the Fund is properly entitled.

2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:

1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the Fund
but only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust company
doing business in the United States or abroad which is qualified under
the Investment Company Act of 1940, as amended, to act as a custodian
and has been designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in the name of a
nominee of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the conditions set
forth in Section 2.10 hereof; (c) in the case of a purchase involving
the Direct Paper System, in accordance with the conditions set forth
in Section 2.11; (d) in the case of repurchase agreements entered into
between the Fund and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the Custodian along with
written evidence of the agreement by the Custodian to repurchase such
securities from the Fund or (e) for transfer to a time deposit account
of the Fund in any bank, whether domestic or foreign; such transfer
may be effected prior to receipt of a confirmation from a broker
and/or the applicable bank pursuant to Proper Instructions as defined
in Article 4;

2) In connection with conversion, exchange or surrender of securities
owned by the Fund as set forth in Section 2.2 hereof;

3) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;

4) For the payment of any dividends declared pursuant to the governing
documents of the Fund;

5) For payment of the amount of dividends received in respect of
securities sold short;

<PAGE> 7

6) For any other proper purpose, but only upon receipt of in addition
to Proper Instructions, a certified copy of a resolution of the Board
of Directors or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such purpose
to be a proper purpose, and naming the Person or persons to whom such
payment is to be made.

2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of
the Fund is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund to
so pay in advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had been
received by the Custodian.

2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, and its rules or regulations, to act as a custodian, as
its agent to carry out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian (as distinguished
from a sub-custodian appointed pursuant to Section 3) of its
responsibilities or liabilities hereunder. In the event of any loss,
damage or expense suffered or incurred by the Fund caused by or resulting
from the negligence or willful misconduct of any agent appointed by the
Custodian pursuant to this paragraph 2.9, the Custodian shall promptly
reimburse the Fund in the amount of such loss, damage, or expense.

2.10 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by the Fund in a
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities Systems" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:

1) The custodian may deposit and/or maintain domestic securities of
the Fund in a Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
Securities System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise for
customers;

<PAGE> 8
2) The records of the Custodian with respect to domestic securities of
the Fund which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund;

3) The Custodian shall pay for domestic securities purchased for the
account of the Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund. The Custodian
shall transfer domestic securities sold for the account of the Fund
upon (i) receipt of advice from the Securities System that payment for
such securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Fund. Copies of all
advices from the Securities System of transfers of domestic securities
for the account of the Fund shall identify the Fund, be maintained
for the Fund by the Custodian and be provided to the Fund at its
request. The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund in the form of a written
advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund on the next business
day;

4) The Custodian shall provide the Fund with any report obtained by
the Custodian (or by any agent appointed by the custodian pursuant to
Section and furnished to the custodian) on the Securities Systems
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System;

5) The Custodian shall have received the initial certificate required
by Article 12 hereof,

6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss, damage or expense
to the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of the Fund,
it shall be entitled to be subrogated to the rights of the Custodian
with respect to any claim against the Securities System or any other
person which the Custodian may have as a consequence of any such loss,
damage or expense if and to the extent that the Fund has not been made
whole for any such loss, damage or expense. The Custodian agrees to
cooperate with the Fund in connection with the enforcement of the
Fund's subrogation rights.

<PAGE> 9

2.11 Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by the Fund in the
Direct Paper System of the Custodian Subject to the following provisions:

1) No transaction relating to securities in the Direct Paper system
will be effected in the absence of Proper Instructions;

2) The Custodian may keep securities of the Fund in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;

3) The records of the Custodian with respect to securities of the Fund
which are maintained in the Direct Paper System shall identify by
book-entry those securities belonging to the Fund;

4) The Custodian shall pay for securities purchases for the account
the Fund upon the making of an entry on the records of the custodian
to reflect such payment and transfer of securities to the account of
the Fund. The Custodian shall transfer securities sold for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for the
account of the Fund;

5) The Custodian shall furnish the Fund confirmation of each transfer
to or from the account of the Fund, in the form of a written advice or
notice, of Direct Paper on the next business day following such
transfer and shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transaction in the Securities System for
the account of the Fund;

6) The Custodian and any agent appointed pursuant to paragraph 2.9
shall provide the Fund with any report on their respective systems of
internal accounting control as the Fund may reasonably request from
time to time.

2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in an
account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon

<PAGE> 10

purchased or sold by the Fund, (iii) for the purposes of compliance by the
Fund with the procedures required by Investment Company Act Release
No.10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) as mutually agreed upon from time
to time in writing by the Custodian and the Fund.

2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in connection
with transfers of securities.

2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Fund such proxies, all proxy soliciting materials
and all notices relating to such securities.

2.15 Communications Relating to Fund Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights
in connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased or
sold by the Fund) received by the Custodian from issuers of the domestic
securities being held for the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the domestic
securities whose tender or exchange is sought and from the party (or his
Agents) making the tender or exchange offer. If the Fund desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Fund shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.

2.16 Reports to Fund by Independent Public Accountants.

The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including domestic securities deposited and/or maintained in a
Securities System, relating to the services provided by the Custodian
under this Contract; such reports, shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by
such examination, and, there are no such inadequacies, the reports shall
so state.

3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States.

<PAGE> 11
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of "Proper Instructions", as defined in Section 4 of this Contract,
together with a certified resolution of the Fund's Board of Directors, the
Custodian and the Fund may agree to amend Schedule A hereto from time to
time to designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the employment
of any one or more such sub-custodians for maintaining custody of the
Fund's assets.

3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities, as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Fund's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the
foreign securities of the Fund held by each foreign sub-custodian.

3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Funds shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such arrangements shall
include entry into agreements containing the provisions set forth in
Section 3.5 hereof.

3.4 Holding Securities. The Custodian may hold securities and other non-cash
property for all of its customers, including the Portfolios of the Fund,
with a foreign sub-custodian in a single account that is identified as
belonging to the Custodian for the benefit of its customers, provided
however, that (i) the records of the Custodian with respect to securities
and other non-cash property of the Portfolios which are maintained in
such account shall identify by book-entry those securities and other
non-cash property belonging to the Portfolios and (ii) the Custodian
shall require that securities and other non-cash property so held by the
foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.

3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set forth
in Exhibit 1 hereto and shall provide that: (a) the Fund's assets will
not be subject to any right, charge, security interest, lien or claim of
any kind in favor of the foreign banking institution or its creditors or
agent, except a claim of payment for their safe custody or
administration; (b) beneficial ownership of the Fund's assets will be
freely transferable without the payment of money or value other than for
custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to the Fund; (d) officers of or
auditors employed by, or

<PAGE> 12

other representatives of the Custodian including to the extent
permitted under applicable law the independent public accountants for the
Fund, will be given access to the books and records or the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Fund held by the foreign sub-custodian
will be subject only to the instructions of the Custodian or its agents.

3.6 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the performance
of such foreign banking institution under its agreement with the
Custodian.

3.7 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as agreed upon, statements in respect of the securities and other
assets of the Fund held by foreign sub-custodians, including but not
limited to an identification of entities having possession of the Fund's
securities and other assets and advices or notifications of any transfers
of securities to or from each custodial account maintained by a foreign
banking institution for the Custodian on behalf or the Fund indicating, as
to securities acquired for the Fund, the identity of the entity having
physical possession of such securities.

3.8 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of Sections
2.2 and 2.7 of this Contract shall apply, mutatis mutandis to the foreign
securities of the Fund held outside the United States by foreign
sub-custodians.

(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of the
Fund and delivery of securities maintained for the account of the Fund
may be effected in accordance with the customary established
securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later
payment for such securities from such purchaser or dealer.

c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of
record of such securities.

3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care in
the performance of its duties and to indemnify and hold harmless, the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institutions

<PAGE> 13

performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.

3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.10, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, such loss
as may result from (a) political risk (including, but not limited to,
exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or (b)
other losses (excluding a bankruptcy or insolvency of State Street London
Ltd. not caused by political risk) due to Acts of God, nuclear incident
or other losses under circumstances where the Custodian and State Street
London Ltd. have exercised reasonable care.

3.11 Reimbursement or Advances. If the Fund requires the Custodian to advance
cash or securities for any purpose including the purchase or sale of
foreign exchange or of contracts for foreign exchange, or in the event
that the Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash and to
dispose of Fund assets to the extent necessary to obtain reimbursement.

3.12 Monitoring responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection with
the initial approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent

<PAGE> 14

thereof) or that its shareholders' equity has declined below S200 million
(in each case computed in accordance with generally accepted U.S.
accounting principles).

3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of the
Funds assets are maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the Investment Company
Act of 1940 meeting the qualification set forth in Section 26(a) of said
Act. The appointment of any such branch as a sub-custodian shall be
governed by paragraph 1 of this Contract.

(b) Cash held for the Fund in the United Kingdom shall be maintained
in an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.

3.14 Tax law. The Custodian shall have no responsible or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision whereof. It shall be the responsibility
of the Custodian to use reasonable efforts and due care (a) to perform
such ministerial steps as are required to collect any tax refund, (b) to
ascertain the appropriate rate of tax withholding and (c) to provide such
documents as may be required to enable the Fund to receive appropriate
tax treatment under applicable tax laws and any applicable treaty
provisions. Unless otherwise informed by the Fund, the Custodian, in
performance of its duties under this Section, shall be entitled to apply
categorical treatment of the Fund according to the nationality of the
Fund, the particulars of its organization and other relevant details that
shall be supplied by the Fund. The Custodian shall be entitled to rely on
any information supplied by the Fund. The Custodian may engage reasonable
professional advisors disclosed to the Fund by the Custodian, which may
include attorneys, accountants or financial institutions in the regular
business of investment administration and may rely upon advice received
therefrom. It shall be the duty of the Fund to inform the Custodian of any
change in the organization, domicile or other relevant fact concerning tax
treatment of the Fund and further to inform the Custodian if the Fund is
or becomes the beneficiary of any special ruling or treatment not
applicable to the general nationality and category or entity of which
the Fund is a part under general laws and treaty provisions.

4. Proper Instructions

Proper Instructions as used herein means a writing or tested telex signed
or initialed by one or more person or persons as the Board of Directors shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested, and may be in the
form of standing instructions. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to

<PAGE> 15
be confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors of the
Fund accompanied by a detailed description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided; the Board of
Directors and the Custodian are satisfied that such procedures afford adequate
safeguards for the Funds assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three party agreement which requires a segregated asset account in
accordance with Section 2.12.

5. Actions Permitted without Express Authority

The Custodian may in its discretion, without express authority from the
Fund:

1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the Fund;

2) surrender securities in temporary form for securities in
definitive form;

3) endorse for collection, in the name of the Fund, checks, in
general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund except as
otherwise directed by the Board of Directors of the Fund.

6. Evidence of Authority

The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.

7. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income

The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund
pursuant to Proper Instructions, shall itself keep such books of account and/or
compute such net asset value per share. The net asset value of the Fund's shares
will be determined weekly as determined by the Fund's Board of Directors and
will also be determined monthly as of the close of regular trading on the New
York Stock Exchange, Inc. The net asset value per share will be computed by
dividing the value of the securities held by the

<PAGE> 16

Fund plus any cash or other assets (including interest and dividends accrued
but not yet received and earned discount) minus all liabilities (including
accrued expenses) by the total number of shares outstanding at such time. If so
directed, the Custodian shall also calculate weekly the net income of the Fund
as described in the Fund's currently effective prospectus related to the Fund
and shall advise the Fund and the Transfer Agent weekly of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the weekly income of the Fund shall be made at the time or times
described from time to time in the Fund's currently effective prospectus.

8. Mitigation by Custodian

Upon the occurrence of any event connected with the duties of the
Custodian under this Contract which causes or may cause any loss, damage or
expense to the Fund, (i) the Custodian shall, and (ii) shall exercise reasonable
efforts to cause any subcustodian to, use reasonable efforts and take all
reasonable steps under the circumstances to mitigate the effects of such event
and to avoid continuing harm to the Fund.

9. Notification of Litigation; Right to Proceed

The Fund shall not be liable for indemnification under this Contract to
the extent that the Fund's ability to defend against any litigation or
proceeding brought against the Custodian in respect of which indemnity may be
sought under this Contract is prejudiced by the Custodian's failure to give
prompt notice of the Commencement or any such litigation or proceeding with
respect to claims in such litigation or proceedings for which indemnity by the
Fund may be sought and subject to applicable law and the ruling of any court of
competent jurisdiction, the Fund shall be entitled to participate in any such
litigation or proceeding and, after written notice from the Fund to the
Custodian, the Fund may assume the defense of such litigation or proceeding with
counsel of its choice at its own expense in respect of that portion of the
litigation for which the Fund may be subject to an indemnification obligation;
provided, however, that the Custodian shall be entitled to participate in the
defense of any such litigation or proceeding. If the Fund has acknowledged in
writing its obligation to indemnify the Custodian with respect to such
litigation or proceeding, the Custodian's participation shall be at its own
expense and the Fund shall control the defense of the litigation or proceeding.
If the Fund is not permitted to participate in or control such litigation or
proceeding under applicable law or by a ruling of a court of competent
jurisdiction, the Custodian shall reasonably prosecute such litigation or
proceeding. The Custodian shall not consent to the entry of any judgment or
enter into any settlement in any such litigation or proceeding without providing
the Fund with adequate notice of any such settlement or judgment, and without
the Fund's prior written consent. The Custodian shall submit written evidence to
the Fund with respect to any cost or expense for which it is seeking
indemnification in such form and detail as the Fund may reasonably request.

10. Records

The Custodian shall create and maintain and retain all records relating to
its activities and obligations under this Contract in such manner as will meet
the obligations of the Fund under the

<PAGE> 17

Investment Company Act of 1940 and the rules and regulations thereunder, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder. All such records shall be the property of the Fund and in the event
of termination of this Contract shall be delivered to the Fund or a successor
custodian as instructed by the Fund. All such records shall at all times during
the regular business hours of the Custodian be open for inspection and audit by
duly authorized officers, employees or agents of, attorneys for and auditors
employed by the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations.

11. Opinion of Fund's Independent Accountant

The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Fund's Form N-2 and Form N-SAR or other annual
reports to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.

12. Compensation of Custodian

The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.

13. Responsibility of Custodian

So long as and to the extent that it is in the exercise of reasonable
care, the Custodian not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care and diligence in carrying out the provisions of this Contract
and shall be liable to the Fund for all losses, damages and expenses suffered or
incurred by the Fund resulting from the failure of the Custodian to exercise
such reasonable care and diligence. The Fund agrees that the Custodian shall be
indemnified by and shall be without liability to the Fund for any action taken
or omitted by it in good faith without negligence. It shall be entitled to rely
on and may act upon advice of counsel (who may be counsel for the Funds on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.

The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to subcustodians
located in the United States (except as specifically provided in Article 3.10)
and, regardless of whether assets are maintained in the custody of a foreign

<PAGE> 18
banking institution, a foreign securities depository, or a branch of a U.S. bank
as contemplated by paragraph 3.11 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody or any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions
or acts of war or terrorism.

If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount equal to the
Custodian's reasonable estimate of the amount to be paid or for which the
Custodian may potentially be liable and in a form satisfactory to the Custodian.

If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund's assets
to the extent necessary to obtain reimbursement.

14. Effective Period; Termination and Amendment

This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors of the Fund has approved the initial use
of a particular Securities System, as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended and that the Custodian shall not act
under Section 2.11 hereof in the absence of receipt or an initial certificate of
the Secretary or an Assistant Secretary that the Board of Directors has approved
the initial use of the Direct Paper System; provided further, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Articles of
Incorporation, and further provided, that the Fund may at any time by action of
its Board of Directors (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
intermediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the

<PAGE> 19

happening of a like event at the direction of an appropriate regulatory agency
or court of competent jurisdiction.

Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.

15. Successor Custodian

If a successor custodian shall be appointed by the Board of Directors of
the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System unless otherwise instructed by the Fund.

If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, delivered at the office of the Custodian, transfer such
securities, funds and other properties in accordance with such vote.

In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or
trust company, which is a "bank" as defined in the Investment Company Act
of 1940, doing business in Boston, Massachusetts, of its own selection, having
an aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such bank or Trust Company shall be
the successor of the Custodian under this contract.

In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect. The Custodian agrees to
cooperate with the successor custodian and the Fund in execution of documents
and performance of other action necessary or desirable in order to substitute
the successor custodian for the Custodian.

16. Interpretive and Additional Provisions

In connection with the operation of this Contract, the custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this

<PAGE> 20

Contract as may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Articles of Incorporation
of the Fund. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.

17. Massachusetts Law to Apply

This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.

18. Prior Contracts

This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.

19. Shareholder Communications Election

Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the custodian "yes" or does not check either "yes" or "no" below, the
custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.

YES [ ] The Custodian is authorized to release the Fund's name, address,
and share positions.

NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.

20. Assignment

Neither the Fund nor the Custodian shall have the right to assign any of
its rights or obligations under this Contract without the prior written consent
of the other party.

21. Severability

<PAGE> 21
If any provision of this Contract is held to be unenforceable as a matter
of law, the other terms and provisions hereof shall not be affected thereby and
shall remain in full force and effect.

<PAGE> 22

IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 30th day of April, 1997.

ATTEST GT GLOBAL FLOATING RATE FUND INC.

/s/ [ILLEGIBLE] By /s/ DAVID J. THELANDER
- --------------------------- --------------------------------
David J. Thelander

ATTEST STATE STREET BANK AND TRUST COMPANY

By
- --------------------------- -------------------------------

<PAGE> 23

ATTEST GLOBAL FLOATING RATE FUND, INC,

By
- --------------------------- -------------------------------

ATTEST STATE STREET BANK AND TRUST COMPANY

/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- --------------------------- -------------------------------

<PAGE> 24

Schedule A

The following foreign bank institutions and foreign securities
depositories have been approved by the Board of Directors of GT Global Floating
Rate Fund, Inc. for use as sub-custodians for the Fund's Securities and other
assets:

(Insert banks and securities depositories)

Certified:

- ---------------------------
Fund's Authorized Officer

- ---------------------------
Date:

<PAGE> 1
EXHIBIT (k)(1)

TRANSFER AGENCY CONTRACT BETWEEN
GT GLOBAL FLOATING RATE FUND, INC.

AND

GT GLOBAL INVESTOR SERVICES, INC.

This Transfer Agency Contract ("Contract") is made as of April 30,
1997 between GT Global Floating Rate Fund, Inc. (the "Fund"), a Maryland
Corporation, and GT Global Investor Services, Inc. ("GT"), a California
corporation.

WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as a closed-end management investment company;
and

WHEREAS, the Fund may from time-to-time in the future establish one or
more additional separate and distinct series of common stock of the Fund; and

WHEREAS, the Fund desires to retain GT to act as transfer agent and
dividend disbursing agent to the Fund, and GT is willing to act in such
capacities;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:

I. APPOINTMENT

The Fund hereby appoints GT to act as transfer agent and dividend
disbursing agent of the Fund for the period and on the terms set forth in this
Contract. GT accepts such appointment and agrees to render the services herein
set forth for the compensation herein provided.

II. DEFINITIONS

As used in this Contract, the following terms shall have the
definition ascribed to them in this Paragraph.

(A) "Agent" means a broker, dealer or other agent authorized to act
on behalf of a Shareholder in transactions involving Shares.

(B) "Agent Firm" means an investment, stock brokerage or other
business firm employing an Agent.

(C) "Authorized Person" means any officer of the Fund and any other
person, whether or not any such person is an officer or employee of the Fund,
duly authorized by the Board of Directors, the President or any Vice President
of the Fund to give Oral and Written Instructions on behalf of the Fund. The
Fund will provide to GT and keep current a written list of all Authorized
Persons.

(D) "Custodian" means the custodian or custodians employed by the
Fund to maintain custody of the Fund's assets.
<PAGE> 2
(E) "Distributor" means the principal underwriter of the Shares of
the Fund.

(F) "Governing Corporate Documents" means the Articles of
Incorporation, By-Laws and other applicable governing corporate documents of
the Fund all as may be amended from time-to-time.

(G) "Oral Instructions" means oral instructions actually received by
GT from an Authorized Person or from a person reasonably believed by GT to be
an Authorized Person.

(H) "Prospectus" means the prospectus included in the current N-2 of
the Fund.

(I) "Shares" means shares of common stock of the Fund.

(J) "Shareholder" means the owner of Shares.

(K) "Written Instructions" means written instructions delivered by
hand, mail, tested telegram or telex, cable, or facsimile sending device,
received by GT and signed by an Authorized Person.

III. AUTHORIZED AND REGISTERED SHARES

(A) As of the date of this Contract, the Fund represents that one
billion Shares are authorized for issuance under the Fund's Articles of
Incorporation. The Fund agrees to keep GT apprised, to the extent necessary for
GT to adequately perform its duties hereunder, of the number of shares of the
Fund authorized for issuance.

IV. COMPLIANCE BY GT WITH GOVERNING CORPORATE DOCUMENTS,
PROSPECTUS AND APPLICABLE LAW AND REGULATION

All of GT's actions in fulfilling its responsibilities under this
Contract shall be made in accordance with the Prospectus, the Governing
Corporate Documents, the rules and regulations of the Securities and Exchange
Commission and the laws and regulations of the State of Maryland relating to
the issuance and transfer of securities such as the Shares.

V. RECORDS

(A) GT shall maintain records of the accounts for each Shareholder
which include the following information with respect to the Fund:

(1) name, address and United States Taxpayer Identification Number;

(2) number of Shares held and number of Shares for which
certificates, in any, have been issued, including certificate numbers and
denominations;

(3) historical information regarding the account of each Shareholder,
including dividends and distributions paid and the date and price of all
transactions in a Shareholder's account;

(4) any stop or restraining order placed against a Shareholder's
account;

-2-
<PAGE> 3
(5) any correspondence relating to the current maintenance of
shareholder's account;

(6) information with respect to all tax withholdings;

(7) any information required to enable GT to perform any calculations
contemplated or required by this Agreement or that may reasonably be requested
by the Fund.

(B) The books and records pertaining to the Fund which are in the
possession of GT shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable laws, rules and regulations. The Fund or its authorized
representatives shall have access to such books and records at all times during
GT's normal business hours. Upon the reasonable request of the Fund, copies of
any such books and records shall be provided by GT to the Fund or its authorized
representatives, at the Fund's expense.

VI. TRANSACTIONS NOT REQUIRING INSTRUCTIONS

In the absence of contrary Written Instructions, GT is authorized to
take the following actions in providing services under this Contract, all in
accordance with the provisions of the Prospectus:

(A) SHARE TRANSACTIONS -- UNCERTIFICATED SHARES

(1) ISSUANCE OF SHARES. Upon receipt by GT of a purchase order for
Shares from the Distributor or directly from an investor or an investor's
Agent, upon the further receipt by GT of sufficient information necessary to
enable GT to establish an account, and after confirmation of receipt of
payment for such Shares, GT shall create an account and issue and credit Shares
to such account.

(2) TRANSFERS OF SHARES. When the Distributor, a Shareholder or a
Shareholder's Agent provides GT with instructions to transfer Shares on the
books of the Fund, and GT further receives such documentation as is necessary
to process the transfer, GT shall transfer the registration of such Shares and
if necessary deliver them pursuant to such instructions.

(3) TENDER OFFERS. Upon receipt of acceptance of a tender offer
from the Distributor, a Shareholder or a Shareholder's Agent, GT shall
repurchase the number of Shares indicated thereon from the tendering
Shareholder's account and disburse to the tendering Shareholder or the
Shareholder's Agent, if so instructed, the proceeds of the repurchase.

(B) SHARE TRANSACTIONS -- CERTIFICATED SHARES

(1) The Fund shall supply GT with a sufficient supply of
certificates representing Shares, in the form approved from time to time by the
Board of Directors or officers of the Fund, and, from time-to-time, shall
replenish such supply upon the request of GT Certificates shall be property
executed, manually or by facsimile signature, by the duly authorized officers
of the Fund. Notwithstanding the death, resignation or removal of any officer
of the Fund, such executed certificates bearing the manual or facsimile
signature of such officer

-3-

<PAGE> 4
shall remain valid and may be issued to Shareholders until GT is otherwise
directed.

(2) In the case of the loss or destruction of any certificate
representing Shares, no new certificates shall be issued in lieu thereof, unless
there shall first have been furnished an appropriate bond of indemnity issued by
a surety company approved by GT.

(3) Upon receipt of written instructions from a Shareholder or a
Shareholder's Agent of uncertificated Shares for a certificate in the number of
shares in the Shareholder's account, GT shall issue the requested certificate
and deliver it to the Shareholder in accordance with the Shareholder's
instructions.

(4) GT shall process all orders for the purchase, transfer,
redemption and exchange of certificated Shares in the same fashion as it
processes such orders for uncertificated Shares, as specified in subparagraph
VI(A) of this Contract, provided that, as specified in the Prospectus, GT
receives properly executed and completed certificates and stock power transfers
or similar documents necessary to effectuate the contemplated transaction.

(5) Upon receipt of certificates, which shall be in proper form
for transfer, together with Shareholder's instructions to hold such
certificates for safekeeping, GT shall reduce such Shares to uncertificated
status, while retaining the appropriate registration in the name of the
Shareholder upon the transfer books.

(C) SPECIAL INVESTMENT AND WITHDRAWAL PLANS. GT shall process
transactions of Shareholders participating in any special investment and/or
withdrawal plans or programs established by the Fund or the Distributor with
respect to Shares, such as automatic investment plans, systematic withdrawal
plans and dollar cost averaging investing programs, in accordance with the
terms of such plans or programs as provided to GT the Fund or the Distributor.

VII. RELIANCE BY GT ON INSTRUCTIONS

Unless otherwise provided in this Contract, GT shall act only Oral or
Written Instructions (collectively, "Instructions"). GT shall be entitled to
rely upon any Instructions actually received by it under this Contract. The
Fund agrees that GT shall incur no liability to the Fund in acting upon
Instructions given to GT hereunder, provided that such Instructions reasonably
appear to have been received from an Authorized Person.

VIII. DIVIDENDS AND DISTRIBUTION

(A) The Fund shall furnish GT with appropriate evidence of action by
the Fund's board of directors declaring dividends and distributions and
authorizing their payment as described in the Prospectus. After deducting any
amount required to be withheld by any applicable tax laws, rules and
regulations or other applicable laws, rules and regulations, in accordance with
the instructions in proper form from a Shareholder and the provisions of the
Governing Corporate Documents and Prospectus, GT shall issue and credit the
account of the Shareholder with Shares or pay such dividends for distributions
to the Shareholder in cash, upon the election of the Shareholder as provided
for in the Prospectus. In lieu of receiving from the Custodian and paying to
Shareholders cash dividends or distributions, GT may arrange for the direct
payment of cash dividends and distributions to Shareholders by the Custodian,
in accordance with such procedures and controls as are mutually agreed upon
from time to time by

-4-
<PAGE> 5
and among the Fund, GT and the Custodian.

(B) GT shall prepare and file with the Internal Revenue Service and
other appropriate taxing authorities, and address and mail to Shareholders,
such returns and information relating to dividends and distributions paid by
the Fund as are required to be so prepared, filed and mailed by applicable
laws, rules and regulations, or such substitute form of notice as may from time
to time be permitted or required by the Internal Revenue Service. On behalf of
the Fund, GT shall mail certain requests for Shareholders' certifications under
penalties of perjury of taxpayer identification numbers and/or other
information and pay on a timely basis to the appropriate Federal authorities
any taxes withheld on dividends and distributions paid by the Fund, all as
required by applicable Federal tax laws and regulations.

IX. COMMUNICATIONS WITH SHAREHOLDERS

(A) COMMUNICATIONS TO SHAREHOLDERS. GT will address and mail all
communications by the Fund to the shareholders of the Fund, including reports
to Shareholders, confirmations of purchases and sales of Shares, periodic
account statements, dividend and distribution notices and proxy materials for
meetings of shareholders. GT will receive and tabulate the proxy cards for
meetings of Shareholders, and if requested by the Fund, attend meetings of
Shareholders for purposes of reporting on and certifying such tabulations.

(B) CORRESPONDENCE. GT will answer such correspondence from
Shareholders, Agents and others relating to its duties hereunder and such other
correspondence as may from time to time be mutually agreed upon by GT and the
Fund.

X. OTHER ONGOING SERVICES

As requested by the Fund, GT shall also provide the following services
on an ongoing basis:

(A) Furnish to the Fund or its designated agent such state-by-state
registration reports reasonably necessary to enable the Fund to keep current
the registration of its shares with state securities authorities.

(B) Provide toll free phone lines for direct Shareholder use, plus
customer liaison staff with on-line inquiry capacity.

(D) Provide the Fund with Shareholder lists and such statistical
information as the Fund reasonably may request.

(E) Provide the Custodian with such information as the Fund or the
Custodian reasonably may request.

(F) Mail duplicate confirmations and/or statements to Agents with
respect to their clients' accounts and transactions in Shares, whether such
transactions were executed through such Agents or directly through GT.

-5-
<PAGE> 6
(G) Provide detail for confirmations and/or statements to be provided
to Shareholders by Agent Firms, and provide such other Shareholder accounting
information to Agent Firms as may be agreed upon between the Fund and GT.

(H) Provide to the custodian timely notification of Share transactions
and such other information as may be agreed upon from time to time by the Fund,
GT and the Custodian.

XI. COOPERATION WITH ACCOUNTANTS

GT shall cooperate with the Fund's independent public accountants and
shall take all reasonable action in the performance of its obligations under
this Contract to assure that all necessary information is made available to
such accountants for the timely expression of their opinion with respect to the
financial statements of the Fund.

XII. CONFIDENTIALITY

GT agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and their
prior, present or potential Shareholders, except, after prior notification to
and approval in writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld when GT may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested do divulge such
information by duly constituted authorities, or when so requested by the Fund.

XIII. COMPENSATION

As compensation for the services rendered by GT during the term of this
Contract, the Fund will pay to GT monthly fees that shall be agreed to from
time to time by the Fund and GT. In addition, as may be agreed to from time to
time by the Fund and GT, the Fund shall reimburse GT for certain expenses
incurred by GT in rendering services with respect to that Fund under this
Contract.

XIV. STANDARD OF CARE

(A) In the performance of its duties hereunder, GT shall be obligated
to exercise care and diligence and to act in good faith and to use its best
efforts within reasonable limits to ensure the accuracy and completeness of all
services provided under this Contract.

(B) GT shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically agreed
to by GT in writing.

(C) GT shall be responsible and liable for all losses, damages and
costs (including reasonable attorneys fees) incurred by the Fund which is due
to or caused by GT's negligence in the performance of its duties under this
contract or for GT's negligent failure to perform such duties as are
specifically ascribed to GT in this Contract; provided that, to the extent that
duties, obligations and responsibilities are not expressly set forth in this
Contract, GT shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of
GT, or reckless disregard by GT of such duties, obligations and
responsibilities.

-6-
<PAGE> 7
(D) Without limiting the generality of the foregoing subparagraphs of
this Paragraph XIV or of any other provision of this Contract, in connection
with GT's duties under this Contract, GT shall not be under any duty or
obligation to inquire into and shall not be liable for or in respect of:

(1) the validity or invalidity or authority or lack thereof of
any Oral or Written Instruction, notice or other instrument which conforms to
the applicable requirements of this Contract, if any, and which GT reasonably
believes to be genuine; or

(2) delays or errors or loss of data occurring by reason of
circumstances beyond GT's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical
breakdown, earthquake, flood or catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.

XV. RECEIPT OF ADVICE

(A) ADVICE OF INVESTMENT FUNDS. If GT is in doubt as to any action
to be taken or omitted by it, GT may request and shall receive from the Fund
directions or advice including Oral or Written Instructions where appropriate.

(B) ADVICE OF COUNSEL. If GT is in doubt as to any question
of law involved in any action to be taken or omitted by it, GT may request
advice from counsel of its own choosing (who may also be counsel for the Fund,
the Distributor and/or the investment adviser of the Fund).

(C) CONFLICTING ADVICE. In case of conflict between directions,
advice or Oral or Written Instructions received by GT pursuant to subparagraph
(A) of this Paragraph and advice received by GT pursuant to subparagraph (b) of
this Paragraph, GT shall be entitled to rely on and follow the advice received
Pursuant to subparagraph (8) alone.

(D) PROTECTION OF GT

(1) GT shall be protected in any action or inaction which it
takes in reliance on any directions, advice or Oral or Written Instructions
received pursuant to subparagraphs (A) or (B) of this Paragraph which GT, after
receipt of any such directions, advice or Oral or Written Instructions, in good
faith believes to be consistent with such directions, advice or Oral or Written
instructions, as the case may be.

(2) Notwithstanding the foregoing, nothing in this Paragraph
shall be construed as imposing upon GT any obligation (a) to seek such
directions, advice or Oral or Written Instructions, or (b) to act in accordance
with such directions advice or Oral or Written Instructions when received,
unless, under the terms of another provision of this Contract, the same is a
condition to GT's properly taking or omitting to take such actions.

XVI. INDEMNIFICATION OF GT

The Fund agrees to indemnify and hold harmless GT and its nominees and
subcontractors, if any, from all taxes, charges, expenses, assessments, claims
and liabilities (including, without limitation, liabilities arising under the
1933 Act, the 1940 Act, the Securities Exchange Act of 1934, the Commodities
Exchange Act, and any state and foreign securities and

-7-
<PAGE> 8
blue sky laws, all as or to be amended from time to time) and expenses,
including (without limitation) reasonable attorneys' fees and disbursements,
arising directly or indirectly from any action or thing which GT takes or does
or omits to take or do:

(A) at the request or on the direction of or in reliance upon the
advice of the Fund;

(B) upon Oral or Written Instructions; or

PROVIDED that GT shall not be indemnified against any liability to the Fund or
the Shareholders (or any expenses incident to such liability) arising out of
GT's own willful misfeasance, bad faith or negligence or reckless disregard of
its duties in connection with the performance of its duties and obligations
specifically described in this Contract.

XVII. INDEMNIFICATION OF THE FUND

GT agrees to indemnify and hold harmless the Fund from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the 1933 Act, the 1940 Act, the
Securities Exchange Act of 1934, the Commodities Exchange Act, and any state
and foreign securities and blue sky laws, all as or to be amended from time to
time) and expenses, including (without limitation) reasonable attorneys' fees
and disbursements, arising directly or indirectly from any action or omission
of GT that does not meet the standard of care to which GT is subject under
Paragraph XIV of this Contract.

XVIII. DURATION AND TERMINATION

This Contract shall continue with respect to the Fund until
termination with respect to that Fund by the Fund or GT on sixty (60) days'
prior written notice.

XIX. REGISTRATION AS A TRANSFER AGENT

GT represents that it is currently registered as a transfer agent with
the Securities and Exchange Commission, and that it will remain so registered
for the duration of this Contract. GT agrees that it will promptly notify the
Fund in the event of any material change in its status as a registered transfer
agent. Should GT fail to be registered with the Securities and Exchange
Commission as a transfer agent at any time during the term of this Contract,
the Fund may immediately terminate this Contract, upon written notice to GT.

XX. NOTICES

All notices and other communications hereunder, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices with respect to a party shall be directed to
such address as may from time to time be designated by that party to the other.

XXI. FURTHER ACTIONS

Each party agrees to perform such further acts and execute such
further documents as are necessary to effect the purposes of this Contract.

-8-

<PAGE> 9
XXII. AMENDMENTS

This Contract or any part hereof may be amended only by an instrument
in writing signed by both parties hereto.

XXIII. COUNTERPARTS

This Contract may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

XXIV. MISCELLANEOUS

This Contract embodies the entire agreement and understanding between
the parties hereto, and supersedes all prior agreements and understandings
relating to the subject matter hereof, provided that the parties may embody in
one or more separate documents their agreement or agreements with respect to
such matters that this Contract provides may be later agreed to by and between
the parties from time to time. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Contract shall be governed by and construed in accordance with California law.
If any provision of this Contract shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Contract shall not
be affected thereby. This Contract shall be binding and shall inure to the
benefit of the parties hereto and their respective successors.

-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated below on the day and year first written
above.

GT GLOBAL FLOATING RATE FUND, INC.

/s/ JOHN CAST /s/ DAVID J. THELANDER
- ---------------------------- ----------------------------------
Attest: By: David J. Thelander

GT GLOBAL INVESTOR SERVICES, INC.

/s/ MARK V. SPARKS /s/ JAMES R. TUFTS
- ---------------------------- ----------------------------------
Attest: By: James R. Tufts

-10-

<PAGE> 1
EXHIBIT (k)(2)

FUND ACCOUNTING AND PRICING AGENT AGREEMENT

This Fund Accounting and Pricing Agent Agreement (the "Agreement") is
made as of April 30, 1997, by and among GT Global Floating Rate Fund, Inc. (the
"Fund"), Floating Rate Portfolio (the "Portfolio"), and Chancellor LGT Asset
Management, Inc. ("Chancellor LGT").

WHEREAS, each of the Fund and the Portfolio is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a closed-end
management investment company;

WHEREAS, the Fund and the Portfolio are part of a complex of investment
companies that are managed and/or administered by Chancellor LGT (the "GT
Global Group of Funds");

WHEREAS, the Fund and the Portfolio desire to retain Chancellor LGT to
act as their accounting and pricing agent, and Chancellor LGT is willing to act
in such capacities.

NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereinafter set forth, the Fund, the Portfolio and Chancellor LGT
hereby agree as follows:

SECTION 1. APPOINTMENT. The Fund and the Portfolio hereby appoint
Chancellor LGT to act as the accounting and pricing agent for the period and on
the terms and conditions set forth in this Agreement. Chancellor LGT hereby
accepts such appointment and agrees to render the services set forth for the
compensation herein provided.

SECTION 2. DEFINITIONS. As used in this Agreement and in addition to
the terms defined elsewhere herein, the following terms shall have the meanings
assigned to them in this Section:

(a) "Authorized Person" means any officer of the Fund or the
Portfolio and any other person, whether or not any such person is an
officer or employee of the Fund or the Portfolio, duly authorized by the
Board of Directors or Trustees, the President or any Vice President of the
Fund or the Portfolio to give Oral and/or Written Instructions on behalf of
the Fund or the Portfolio.

(b) "Commission" means the Securities and Exchange Commission.

(c) "Custodian" means the custodian or custodians employed by the
Fund and the Portfolio to maintain custody of the Fund's and the
Portfolio's assets.
<PAGE> 2
(d) "Governing Documents" means the Articles of Incorporation,
Declaration of Trust, By-Laws and other applicable charter documents of the
Fund and the Portfolio, all as they may be amended from time to time.

(e) "Oral Instruction" means oral instructions actually received
by Chancellor LGT from an Authorized Person or from a person reasonably
believed by Chancellor LGT to be an Authorized Person, provided that, any
Oral Instruction shall be promptly confirmed by Written Instructions.

(f) "Prospectus" means the current prospectus of the Fund.

(g) "Shares" means shares of beneficial interest of the Fund and
of the Portfolio.

(h) "Shareholder" means any owner of Shares.

(i) "Written Instructions" means written instructions delivered
by hand, mail, tested telegram or telex, cable or facsimile sending device
received by Chancellor LGT and signed by an Authorized Person.

SECTION 3. COMPLIANCE WITH LAWS, ETC. In performing its
responsibilities hereunder, Chancellor LGT shall comply with all terms and
provisions of the Governing Documents, the Prospectus and all applicable state
and federal laws including, without limitation, the 1940 Act and the rules and
regulations promulgated by the Commission thereunder.

SECTION 4. SERVICES. In consideration of the compensation payable
hereunder and subject to the supervision and control of the Fund's and the
Portfolio's Boards, Chancellor LGT shall provide the following services to the
Fund and the Portfolio:

(a) PRICING AGENT. As pricing agent, Chancellor LGT shall:

(1) Obtain security market quotes from services approved by
the investment manager of the Portfolio or, if such quotes are
unavailable, then obtain such prices from the investment manager
of the Portfolio or from such sources as the investment manager
may direct, and, in either case, calculate the market value of the
Portfolio's investments; and

(2) Value the assets of the Portfolio and compute the net
asset value per Share of the Portfolio at such dates and times and
in the manner specified in the then

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<PAGE> 3
currently effective Prospectus and transmit to the Portfolio's
investment manager.

(b) ACCOUNTING AGENT. As fund accounting agent, Chancellor LGT
shall:

(1) Calculate the net income of the Fund;

(2) Calculate capital gains or losses for the Fund from the
sale or disposition of assets, if any;

(3) Maintain the general ledger and other accounts, books
and financial records of the Fund and the Portfolio, as required
under Section 31(a) of the 1940 Act and the rules promulgated by
the Commission thereunder in connection with the services provided
by Chancellor LGT;

(4) Perform the following functions on a daily basis:

(A) journalize the Fund's and the Portfolio's
investment, capital share and income and expense activities;

(B) reconcile cash and investment balances of the Fund
and the Portfolio with the Custodian and provide the
Portfolio's investment manager with the beginning cash
balance available for investment purposes and update the cash
availability throughout the day as required by the investment
manager;

(C) verify investment buy/sell trade tickets received
from the Fund's investment manager and transmit trades to the
Fund's Custodian for proper settlement;

(D) maintain individual ledgers for investment
securities;

(E) maintain historical tax lots for investment
securities;

(F) calculate various contractual expenses (e.g.,
advisory and custody fees);

(G) post to and prepare the Fund's and the Portfolio's
statement of assets and liabilities and statement of
operations; and

-3-

<PAGE> 4
(H) monitor expense accruals and notify an Authorized
Person of any proposed adjustments;

(5) Receive and act upon notices, Oral and Written
Instructions, certificates, instruments or other communications
from the Fund's and the Portfolio's shareholder servicing and
transfer agent;

(6) Assist in the preparation of financial statements
semiannually which will include the following items:

(A) schedule of investments;

(B) statement of assets and liabilities;

(D) changes in net assets;

(E) cash statement; and

(F) schedule of capital gains and losses;

(7) Prepare monthly security transaction listings;

(8) Prepare quarterly broker security transactions
summaries; and

(9) At the reasonable request of the Fund or the Portfolio,
assist in the preparation of various reports or other financial
documents required by federal, state and other appropriate laws
and regulations.

SECTION 5. COMPENSATION. As compensation for the services rendered by
Chancellor LGT hereunder during the term of the Agreement, the Fund and the
Portfolio shall pay to Chancellor LGT monthly such fees as shall be agreed to
from time to time by the Fund, the Portfolio and Chancellor LGT, in writing and
attached hereto as Schedule A. In addition, as may be agreed to from time to
time in writing by the Fund, the Portfolio and Chancellor LGT, the Fund and the
Portfolio shall reimburse Chancellor LGT for certain expenses that it incurs in
rendering services under this Agreement.

SECTION 6. RELIANCE BY CHANCELLOR LGT ON INSTRUCTIONS. Unless
otherwise provided in this Agreement, Chancellor LGT shall act only upon Oral
or Written Instructions. Chancellor LGT shall be entitled to rely upon any such
Instructions actually received by it under this Agreement. The Fund and the
Portfolio agree that Chancellor LGT shall incur no liability to the Fund or the

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<PAGE> 5
Portfolio in acting upon Oral or Written Instructions given to Chancellor LGT
hereunder, provided that, such Instructions reasonably appear to have been
received from an Authorized Person.

SECTION 7. COOPERATION WITH AGENTS OF THE FUND AND THE PORTFOLIO.
Chancellor LGT shall cooperate with the Fund's and the Portfolio's agents and
employees, including, without limitation, their independent accountants, and
shall take all reasonable action in the performance of its obligations under
this Agreement to assure that all necessary information is made available to
such agents to the extent necessary in the performance of their duties to the
Fund and the Portfolio.

SECTION 8. CONFIDENTIALITY. Chancellor LGT, on behalf of itself and
its employees, agrees to treat confidentially all records and other information
relating to the Fund and the Portfolio except when requested to divulge such
information by duly constituted authorities provided that notification and
prior approval is obtained from the Fund or the Portfolio, which approval shall
not be unreasonably withheld and may not be withheld if Chancellor LGT, in its
judgment, may be subject to civil or criminal contempt proceedings for failure
to comply.

SECTION 9. STANDARD OF CARE. In the performance of its
responsibilities hereunder, Chancellor LGT shall exercise care and diligence in
the performance of its duties and act in good faith and use its best efforts to
ensure the accuracy and completeness of all services under this Agreement. In
performing services hereunder, Chancellor LGT:

(a) shall be under no duty to take any action on behalf of the
Fund or the Portfolio except as specifically set forth herein or as may be
specifically agreed to by Chancellor LGT in writing; and in computing the
net asset value per Share of the Fund or the Portfolio, Chancellor LGT may
rely upon any information furnished to it including, without limitation,
information (1) as to the accrual of liabilities of the Fund or the
Portfolio and as to liabilities of the Fund or the Portfolio not appearing
on the books of account kept by Chancellor LGT, (2) as to the existence,
status and proper treatment of reserves, if any, authorized by the Fund or
the Portfolio, (3) as to the sources of quotations to be used in computing
net asset value, (4) as to the fair value to be assigned to any securities
or other property for which price quotations are not readily available and
(5) as to the sources of information with respect to "corporate actions"
affecting portfolio securities of the Portfolio (information as to
"corporate actions" shall include information as to dividends,
distributions, interest payments, prepayments, stock splits, stock
dividends, rights offerings,

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<PAGE> 6
conversions, exchanges, recapitalizations, mergers, redemptions, calls,
maturity dates and similar actions, including ex-dividend and record dates
and the amounts and terms thereof);

(b) shall be responsible and liable for all losses, damages and
costs (including reasonable attorneys' fees) incurred by the Fund or the
Portfolio which is due to or caused by Chancellor LGT's negligence in the
performance of its duties under this Agreement or for Chancellor LGT's
negligent failure to perform such duties as are specifically assumed by
Chancellor LGT in this Agreement, provided that, to the extent that duties,
obligations and responsibilities are not expressly set forth in this
Agreement, Chancellor LGT shall not be liable for any act or omission that
does not constitute willful misfeasance, bad faith or negligence on the
part of Chancellor LGT or reckless disregard by Chancellor LGT of such
duties, obligations and responsibilities; and

(c) without limiting the generality of the foregoing, Chancellor
LGT shall not, in connection with Chancellor LGT's duties under this
Agreement, be under any duty or obligation to inquire into and shall not be
liable for or in respect of:

(1) the validity or invalidity or authority or lack of
authority of any Oral or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this
Agreement, if any and that Chancellor LGT reasonably believes to
be genuine; and

(2) delays or errors or loss of data occurring by reason of
circumstances beyond Chancellor LGT's control including, without
limitation, acts of civil or military authorities, national
emergencies, labor difficulties, fire, mechanical breakdown,
denial of access, earthquake, flood or catastrophe, acts of God,
insurrection, war, riots, or failure of the mails, transportation,
communication or power supply.

Notwithstanding any other provisions of this Agreement, the following
provisions shall apply with respect to Chancellor LGT's computation of the
Fund's and the Portfolio's net asset value: Chancellor LGT shall be held to the
exercise of reasonable care in computing and determining net asset value as
provided in Section 4(a), above, but shall not be held accountable or liable
for any losses, damages or expenses of the Fund, the Portfolio or any
Shareholder or former Shareholder may incur arising from or based upon errors
or delays in the determination of such net

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<PAGE> 7
asset value unless such error or delay was due to Chancellor LGT's negligence
or willful misfeasance in the computation and determination of such net asset
value. The parties hereto acknowledge, however, that Chancellor LGT causing an
error or delay in the determination of net asset value may, but does not in and
of itself, constitute negligence or willful misfeasance. In no event shall
Chancellor LGT be liable or responsible to the Fund or the Portfolio or any
other party for any error or delay which continued or was undetected after the
date of an audit of the Fund or the Portfolio performed by the certified public
accountants employed by the Fund or the Portfolio if, in the exercise of
reasonable care in accordance with generally accepted accounting principles,
such accountants should have become aware of such error or delay in the course
of performing such audit. Chancellor LGT's liability for any such negligence or
willful misfeasance which results in an error in determination of such net
asset value be limited to the direct out-of-pocket loss the Fund, the Portfolio
and/or any Shareholder or former Shareholder shall actually incur.

Without limiting the generality of the foregoing, Chancellor LGT shall
not be held accountable or liable to the Fund, the Portfolio, a Shareholder or
former Shareholder or any other person for any delays or losses, damages or
expenses any of them may suffer or incur resulting from (1) Chancellor LGT's
failure to receive timely and suitable notification concerning quotations,
corporate actions or similar matters relating to or affecting portfolio
securities of the Fund or the Portfolio or (2) any errors in the computation of
a net asset value based upon or arising out of quotations or information as to
corporate actions if received by Chancellor LGT from a source that Chancellor
LGT was authorized to rely upon. Nevertheless, Chancellor LGT will use its best
judgment in determining whether to verify through other sources any information
that it has received as to quotations or corporate actions if Chancellor LGT
has reason to believe that any such information is incorrect.

SECTION 10. RECEIPT OF ADVICE. If Chancellor LGT is in doubt as to any
action to be taken or omitted by it, Chancellor LGT may request, and shall be
entitled to rely upon, directions and advice from the Fund or the Portfolio,
including Oral or Written Instructions where appropriate, or from counsel of its
own choosing (who may also be counsel for the Fund or the Portfolio), with
respect to any question of law. In case of conflict between directions, advice
or Oral and Written Instructions received by Chancellor LGT pursuant to this
Section, Chancellor LGT shall be entitled to rely on and follow the advice
received from counsel as described above. Chancellor LGT shall be protected in
any action or in action that it takes in reliance on any directions, advice or
Oral or Written Instructions received pursuant to this Section that Chancellor
LGT, after the receipt of the same, in good faith believes to be consistent with

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<PAGE> 8
such directions, advice or Oral or Written Instructions, as the case may be.
Notwithstanding the foregoing, nothing in this Section shall be construed as
imposing on Chancellor LGT any obligation to seek such directions, advice or
Oral or Written Instruction, or to act in accordance with them when received,
unless the same is a condition to Chancellor LGT's properly taking or omitting
to take such action under the terms of this Agreement.

SECTION 11. INDEMNIFICATION OF CHANCELLOR LGT. The Fund and the
Portfolio agree, separately and not jointly, to indemnify and hold harmless
Chancellor LGT and its officers, directors, employees, nominees and
subcontractors, if any, from all taxes, charges, expenses, assessments, claims
and liabilities, including, without limitation, liabilities arising under the
1940 Act, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the Commodities Exchange Act and any state or foreign
securities or blue sky laws, and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, arising directly or indirectly
from any action or thing that Chancellor LGT takes or omits to take or do:

(a) at the request or on the direction of or in reliance upon the
advice of the Fund or the Portfolio;

(b) upon Oral or Written Instructions; or

provided that, Chancellor LGT shall not be indemnified against any liability to
the Fund or the Portfolio, or any expenses incident thereto, arising out of
Chancellor LGT's own willful misfeasance, bad faith or negligence or reckless
disregard of its duties in connection with the performance of its duties and
obligations specifically described in this Agreement.

SECTION 12. INDEMNIFICATION OF THE FUND AND THE PORTFOLIO. Chancellor
LGT agrees to indemnify and hold harmless each of the Fund and the Portfolio
and their officers, trustees, directors and employees, from all taxes, charges,
expenses, assessments, claims and liabilities, including, without limitation,
liabilities arising under the 1940 Act, the Securities Act of 1933, as amended,
the Securities Exchange act of 1934, as amended, the Commodities Exchange Act
and any state or foreign securities or blue sky laws, and expenses, including
without limitation, reasonable attorneys' fees and disbursements, arising
directly or indirectly from any action or omission of Chancellor LGT that does
not meet the standard of care to which Chancellor LGT is subject under Section
9, above.

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<PAGE> 9
SECTION 13. LIMITATION OF LIABILITY OF SHAREHOLDERS AND TRUSTEES OF
THE FUND AND THE PORTFOLIO. It is expressly agreed that the obligations of the
Fund and the Portfolio hereunder shall not be binding upon any of the
shareholders, trustees, directors, officers, nominees, agents or employees of
the Fund or the Portfolio personally, but shall only bind the assets and
property of the Fund or the Portfolio, respectively, as provided in the
Governing Documents. The execution and delivery of this Agreement has been
authorized by the Boards of the Fund and the Portfolio, and this Agreement has
been executed and delivered by an authorized officer of each of the Fund and the
Portfolio acting as such, and neither such authorization by the Boards nor
such execution and delivery by such officer shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Fund or the
Portfolio as provided in the Governing Documents.

SECTION 14. DURATION AND TERMINATION. This Agreement shall continue
with respect to the Fund and the Portfolio until termination with respect to
the Fund or the Portfolio is effected by the Fund, the Portfolio, or Chancellor
LGT upon sixty days' prior written notice to the other. In the event of the
"assignment" of this Agreement within the meaning of the 1940 Act, this
Agreement shall terminate automatically.

SECTION 15. NOTICES. All notices and other communications hereunder,
including Written Instructions, shall be in writing or by confirming telegram,
cable, telex or facsimile sending device. Notices with respect to a party shall
be directed to such address as may from time to time be designated by that party
to the other.

SECTION 16. FURTHER ACTIONS. The Fund, the Portfolio and Chancellor
LGT agree to perform such further acts and to execute such further documents as
may be necessary or appropriate to effect the purposes of this Agreement.

SECTION 17. AMENDMENTS. This Agreement, or any part thereof, may be
amended only by an instrument in writing signed by the Fund, the Portfolio and
Chancellor LGT.

SECTION 18. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.

SECTION 19. MISCELLANEOUS. This Agreement embodies the entire
agreement and understanding between the Fund, the Portfolio and Chancellor LGT
and supersedes all prior agreements and understandings relating to the subject
matter hereof, provided that the Fund, the Portfolio and Chancellor LGT may

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<PAGE> 10
embody in one or more separate documents their agreement or agreements with
respect to such matters that this Agreement provides may be later agreed to by
and among the Fund, the Portfolio and Chancellor LGT from time to time. The
captions in this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement shall be governed by and construed in
accordance with California law. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the Fund, the Portfolio and Chancellor
LGT and their respective successors.

IN WITNESS WHEREOF, the Fund, the Portfolio and Chancellor LGT have
caused this Agreement to be executed by their officers designated below as of
this day, month and year first above written.

GT GLOBAL FLOATING RATE FUND, INC.

By: /s/ DAVID J. THELANDER
-------------------------------
David J. Thelander

Attest: /s/ JOHN CAST
---------------------------

FLOATING RATE PORTFOLIO

By: /s/ DAVID J. THELANDER
---------------------------------
David J. Thelander

Attest: /s/ JOHN CAST
-----------------------------

CHANCELLOR LGT ASSET MANAGEMENT, INC.

By: /s/ JAMES R. TUFTS
---------------------------------
James R. Tufts

Attest: /s/ JOHN CAST
-----------------------------

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<PAGE> 11
SCHEDULE A

FUND ACCOUNTING AND PRICING AGENT FEES

Annual Fee payable based on aggregate net assets of the GT Global
Group of Funds:

First $5 billion in net assets .02% (2 basis points) of the Fund's
of the GT Global Group of Funds: average daily net assets
.01% (1 basis point) of the Portfolio's
average daily net assets

In excess of $5 billion in net .01% (1 basis point) of the Fund's
assets of the GT Global Group average daily net assets
of Funds: .01% (1 basis point) of the Portfolio's
average daily net assets

<PAGE> 1
EXHIBIT (l)

August 31, 1998

AIM Floating Rate Fund
50 California Street, 27th Floor
San Francisco, California 94111

Ladies and Gentlemen:

We hereby consent to the reference to our firm in the prospectus that
is being filed as part of Post-Effective Amendment No. 4 to the registration
statement of GT Global Floating Rate Fund, Inc. (d/b/a AIM Floating Rate Fund)
on Form N-2 (File No. 333-37243).

Very truly yours,

KIRKPATRICK & LOCKHART LLP

By: /s/ R. CHARLES MILLER
R. Charles Miller

<PAGE> 1
EXHIBIT (n)

[LETTERHEAD OF PRICEWATERHOUSECOOPERS LLP]

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Board of Trustees of AIM Floating Rate Fund, Inc. (formerly G.T. Global
Floating Rate Fund, Inc.):

We hereby consent to the inclusion of our reports dated February 17,
1998 on our audit of the financial statements and financial highlights of GT
Global Floating Rate Fund, Inc. (d/b/a AIM Floating Rate Fund) as of December
31, 1997 in the Prospectus with respect to the Post-Effective Amendment to the
Registration Statement on Form N-2 under the Securities Act of 1933, as
amended, of GT Global Floating Rate Fund, Inc. (d/b/a AIM Floating Rate Fund).
We further consent to the reference to our Firm under the caption "Financial
Highlights" in the Prospectus and "Independent Accountants" in the Statement of
Additional Information.

/s/ PRICEWATERHOUSECOOPERS LLP
--------------------------------------------
PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
August 25, 1998