<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1998.
SECURITIES ACT FILE NO. 333-37243
INVESTMENT COMPANY ACT FILE NO. 811-07957
POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT AS STATED BELOW
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 2 /X/
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 5 /X/
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
GT GLOBAL FLOATING RATE FUND, INC.
(d/b/a AIM FLOATING RATE FUND)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
50 CALIFORNIA STREET, 27TH FLOOR
SAN FRANCISCO, CA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(415) 392-6181
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
ARTHUR J. BROWN, ESQ. SAMUEL D. SIRKO, ESQ. MICHAEL A. SILVER, ESQ.
R. CHARLES MILLER, ESQ. A I M ADVISERS, INC. INVESCO (NY), INC.
KIRKPATRICK & LOCKHART LLP 11 GREENWAY PLAZA 50 CALIFORNIA STREET, 27TH
1800 MASSACHUSETTS AVENUE, N.W. SUITE 100 FLOOR
WASHINGTON, D.C. 20036 HOUSTON, TEXAS 77046 SAN FRANCISCO, CA 94111
(713) 626-1919 (NAME AND ADDRESS OF AGENT FOR
SERVICE)
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES BEING REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Common Stock ($.001 par
value)......................
(1) This registration statement is being filed for the purpose of updating information herein and
no additional shares are being registered hereby. The amount of the registration fee does not
include $83,714.74 which has previously been paid to the Commission for registration fees
relating to 27,628,628 shares registered pursuant to Securities Act File No. 333-37243 and
unissued as of May 20, 1998.
</TABLE>
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<PAGE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT, THE PROSPECTUS IN THIS
REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND RELATES TO REGISTRATION
STATEMENT NO. 333-37243, AS AMENDED, PREVIOUSLY FILED BY THE REGISTRANT ON FORM
N-2. THIS REGISTRATION STATEMENT ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 2
TO REGISTRATION STATEMENT NO. 333-37243, AND SUCH POST-EFFECTIVE AMENDMENT SHALL
HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH THE EFFECTIVENESS OF THIS
REGISTRATION STATEMENT AND IN ACCORDANCE WITH SECTION 8(c) OF THE SECURITIES
ACT. THE REGISTRATION STATEMENT AND THE REGISTRATION STATEMENT AMENDED HEREBY
ARE COLLECTIVELY REFERRED TO HEREUNDER AS THE "REGISTRATION STATEMENT."
<PAGE>
AIM FLOATING RATE FUND
FORM N-2 CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART A
ITEM NUMBER CAPTION PROSPECTUS CAPTION
- ------------- ---------------------------- --------------------------------------------------------
<C> <S> <C>
1 Outside Front Cover......... Outside Front Cover of Prospectus
2 Inside Front and Outside
Back Cover Page............ Inside Front and Outside Back Cover Page of Prospectus
3 Fee Table and Synopsis...... Prospectus Summary; Fund Expenses
4 Financial Highlights........ Not Applicable
5 Plan of Distribution........ Outside Front Cover; Prospectus Summary; Purchase of
Shares; Description of Capital Stock
6 Selling Shareholders........ Not Applicable
7 Use of Proceeds............. Use of Proceeds; Investment Objective and Policies
8 General Description of
Registrant................. Prospectus Summary; The Fund; Investment Objective and
Policies; Investment Restrictions; Special
Considerations and Risk Factors; Description of Capital
Stock
9 Management.................. Management; Description of Capital Stock; Custodian,
Transfer and Dividend Disbursing Agent and Registrar
10 Capital Stock, Long-Term
Debt and Other
Securities................. Dividends and Other Distributions; Dividend Reinvestment
Plan; Taxes; Description of Capital Stock
11 Defaults and Arrears on
Senior Securities.......... Not Applicable
12 Legal Proceedings........... Not Applicable
13 Table of Contents of the
Statement of Additional
Information................ Not Applicable
</TABLE>
<PAGE>
AIM FLOATING RATE FUND
FORM N-2 CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART B
ITEM NUMBER CAPTION
- ------------- ----------------------------
<C> <S> <C>
14 Cover Page.................. Not Applicable
15 Table of Contents........... Not Applicable
16 General Information and
History.................... Not Applicable
17 Investment Objective and
Policies................... Investment Objective and Policies; Investment
Restrictions; Portfolio Transactions
18 Management.................. Management
19 Control Persons and
Principal Holders of
Securities................. Description of Capital Stock
20 Investment Advisory and
Other Services............. Management; Custodian, Transfer and Dividend Disbursing
Agent and Registrar
21 Brokerage Allocation and
Other Practices............ Portfolio Transactions
22 Tax Status.................. Taxes
23 Financial Statements........ Financial Statements
</TABLE>
<PAGE>
AIM FLOATING RATE FUND
COMMON STOCK
- --------------------------------------------------------------------------------
AIM Floating Rate Fund (the "Fund") is a continuously offered, non-diversified,
closed-end investment company. The Fund is managed by A I M Advisors, Inc.
("AIM") and is sub-advised by INVESCO Senior Secured Management, Inc. (the
"Sub-adviser"). The Fund's investment objective is to provide as high a level of
current income and preservation of capital as is consistent with investment in
senior secured corporate loans ("Corporate Loans") and senior secured debt
securities ("Corporate Debt Securities") that meet credit standards established
by the Sub-adviser. The Fund seeks to achieve its objective by investing all of
its investable assets in Floating Rate Portfolio (the "Portfolio"), a separate,
non-diversified, closed-end investment company that has the same investment
objective as the Fund. The Portfolio's investments primarily take the form of
assignments of, or participations in, Corporate Loans made by banks and other
financial institutions and Corporate Debt Securities. It is anticipated that the
Corporate Loans and Corporate Debt Securities will pay interest at rates that
float or reset at a margin above a generally recognized base lending rate such
as the London InterBank Offered Rate ("LIBOR") or the prime rate of a designated
U.S. bank. There 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 $1,000, and the minimum subsequent purchase is
$100.
No market presently exists for the Fund's Common Stock and it is not currently
expected that a secondary market will develop. Since the Fund's Common Stock may
not be considered readily marketable, the Board of Directors of the Fund
currently intends to consider the making of tender offers on a quarterly basis
to repurchase all or a portion of the Common Stock of the Fund from stockholders
at the net asset value per share. See "Tender Offers." Shares of Common Stock
that have been held for less than four years and that are repurchased by the
Fund pursuant to tender offers will be subject to an "Early Withdrawal Charge"
that will not exceed 3.0% of the original purchase amount for such Common Stock.
See "Early Withdrawal Charge."
The Common Stock of the Fund involves investment risks, including fluctuations
in value and the possible loss of some or all of the principal investment. The
Portfolio may invest all or substantially all of its assets in Corporate Loans,
Corporate Debt Securities or other securities that are rated below investment
grade by a nationally recognized statistical rating organization, or in
comparable unrated securities. The Fund is authorized to borrow money to finance
tender offers, for temporary, extraordinary or emergency purposes, or, while it
has no current intention of doing so, for the purpose of financing additional
investments. Such leverage creates certain risks for holders of Common Stock,
including the risk of higher volatility of the net asset value of the Common
Stock. See "Special Considerations and Risk Factors -- Effects of Leverage."
The Fund's Common Stock does not represent a deposit or obligation of, and is
not guaranteed or endorsed by, any bank or other insured depository institution,
and is not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other government agency.
This Prospectus sets forth information about the Fund that an investor should
know before investing. It should be read and retained for future reference.
Additional information concerning the Fund may be obtained by writing to the
Fund at 50 California Street, 27th Floor, San Francisco, California 94111, or by
calling (800) 347-4246.
[LOGO]
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
June 1, 1998
Prospectus Page 1
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Fund Expenses............................................................................. 11
Financial Highlights...................................................................... 12
The Fund.................................................................................. 13
Use of Proceeds........................................................................... 13
Investment Objective and Policies......................................................... 13
Investment Restrictions................................................................... 22
Special Considerations and Risk Factors................................................... 23
Purchase of Shares........................................................................ 28
Tender Offers............................................................................. 29
Early Withdrawal Charge................................................................... 31
Management................................................................................ 32
Directors and Executive Officers.......................................................... 34
Portfolio Transactions.................................................................... 36
Dividends and Other Distributions......................................................... 37
Taxes..................................................................................... 37
Dividend Reinvestment Plan................................................................ 40
Automatic Investment Plan................................................................. 41
Exchanges................................................................................. 42
Net Asset Value........................................................................... 42
Description of Capital Stock.............................................................. 43
Yield Information......................................................................... 45
Custodian, Transfer and Dividend Disbursing Agent and Registrar........................... 45
Additional Information.................................................................... 46
Financial Statements...................................................................... 47
Appendix: Ratings of Securities........................................................... 61
</TABLE>
Prospectus Page 2
<PAGE>
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus. Investors should
carefully consider information set forth under the heading "Special
Considerations and Risk Factors."
<TABLE>
<S> <C>
The Fund: 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 $1,000, and the minimum
subsequent purchase is $100, except that with respect to certain
retirement accounts, the minimum initial purchase is $250. The
Fund reserves the right to waive or modify the initial and
subsequent minimum investment requirements at any time.
The Fund currently intends to offer only shares of Common Stock.
Although the Fund has no present intention to do so, it may in
the future offer shares of preferred stock, subject to the
requirements of the Investment Company Act of 1940, as amended
(the "1940 Act").
Investment Objective and The investment objective of the Fund and the Portfolio is to
Policies: 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-adviser, INVESCO Senior
Secured Management, Inc. (the "Sub-adviser").
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-adviser,
suitable Corporate Loans and Corporate Debt Securities are not
available for investment by the Portfolio or prevailing market or
economic conditions warrant, the Portfolio invests at least 80%
of its total assets in Corporate Loans and Corporate Debt
Securities. Under normal conditions, the Portfolio may invest up
to 20% of its total assets in (i) floating rate senior loans made
and notes issued on an unsecured basis to Borrowers that meet
</TABLE>
Prospectus Page 3
<PAGE>
PROSPECTUS SUMMARY
(Continued)
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<TABLE>
<S> <C>
the credit standards established by the Sub-adviser ("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-adviser, (iii)
fixed rate obligations of U.S. or non-U.S. companies that meet
the credit standards established by the Sub-adviser 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-adviser, may include obligations
considered to have certain speculative characteristics.
The Portfolio has no restrictions on portfolio maturity, but it
is anticipated that a majority of the Corporate Loans and
Corporate Debt Securities in which it invests will have stated
maturities ranging from three to ten years. However, Corporate
Loans and Corporate Debt Securities often require prepayments
from excess cash flow or permit the Borrower to prepay at its
election. The degree to which Borrowers repay Corporate Loans and
Corporate Debt Securities, whether as a contractual requirement
or at their election, cannot be predicted with accuracy. However,
it is anticipated that the Portfolio's Corporate Loans and
Corporate Debt Securities will have an expected average life of
three to five years.
In general, the net asset value of the shares of an investment
company that invests primarily in fixed-income securities changes
as the general level of interest rates fluctuates. The
Sub-adviser 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-adviser 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 ex-
perience a reduction of both income and the value of its assets.
</TABLE>
Prospectus Page 4
<PAGE>
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Portfolio invests in a Corporate Loan or Corporate Debt
Security only if, in the Sub-adviser's judgment, the Borrower can
meet debt service on such Corporate Loan or Corporate Debt
Security. The Sub-adviser 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-adviser for
Corporate Loans and Corporate Debt Securities.
A Corporate Loan in which the Portfolio may invest typically is
negotiated and structured by a syndicate of lenders ("Lenders")
consisting of commercial banks, thrift institutions, insurance
companies, finance companies or other financial institutions, one
or more of which administers the Loan on behalf of all the
Lenders (the "Agent Bank"). The investment of the Portfolio in a
Corporate Loan may take the form of participation interests in a
Corporate Loan ("Participation Interests") or assignments of a
Corporate Loan ("Assignments"). Participation Interests may be
acquired from a Lender or other holders of Participation
Interests ("Participants"). If the Portfolio purchases an
Assignment from a Lender, the Portfolio will generally become a
"Lender" for purposes of the relevant loan agreement, with direct
contractual rights thereunder and under any related collateral
security documents in favor of the Lenders. On the other hand, if
the Portfolio purchases a Participation Interest either from a
Lender or a Participant, the Portfolio will not have established
any direct contractual relationship with the Borrower. The
Portfolio would be required to rely on the Lender or the Partici-
pant that sold the Participation Interest not only for the
enforcement of the Portfolio's rights against the Borrower but
also for the receipt and processing of payments due to the
Portfolio under the Corporate Loans. The Portfolio is thus
subject to the credit risk of both the Borrower and a Lender or
Participant who sold the Participation Interest. The Portfolio
will invest in Loans through the purchase of Participation
Interests only if at the time of investment, the outstanding debt
obligations of the Agent Bank and any Lenders and Participants
interposed between the Portfolio and a Borrower are investment
grade; i.e., rated BBB, A-3 or higher by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("Standard &
Poor's"), or Baa, P-3 or higher by Moody's Investors Service,
Inc. ("Moody's"), or, if unrated, deemed by the Sub-adviser to be
of equivalent quality. See "Investment Objective and Policies."
Corporate Debt Securities typically are in the form of notes or
bonds issued in a public or private placement in the securities
markets. Corporate Debt Securities will typically have
substantially similar terms to Corporate Loans, but will not be
in the form of Participations or Assignments.
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
</TABLE>
Prospectus Page 5
<PAGE>
PROSPECTUS SUMMARY
(Continued)
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<TABLE>
<S> <C>
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-adviser for U.S. Borrowers. The
Portfolio similarly may invest in loans to and securities issued
by U.S. Borrowers with significant non-dollar-denominated
revenues, provided that the loans are U.S. dollar-denominated or
otherwise provide for payment in U.S. dollars. In all cases where
the Corporate Loans or Corporate Debt Securities are not
denominated in U.S. dollars, provision will be made for payments
to the Lenders, including the Portfolio, in U.S. dollars pursuant
to foreign currency swap arrangements. See "Investment Objective
and Policies." Loans to such non-U.S. Borrowers or U.S. Borrowers
may involve risks not typically involved in domestic investment,
including fluctuation in foreign exchange rates, future foreign
political and economic developments, and the possible imposition
of exchange controls or other foreign or U.S. governmental laws
or restrictions applicable to such loans.
Leverage: Each of the Fund and the Portfolio may borrow money in amounts up
to 33 1/3% of the value of its total assets to finance tender
offers, for temporary, extraordinary or emergency purposes, or,
while neither the Fund nor the Portfolio has any current
intention of doing so, for the purpose of financing additional
investments. See "Tender Offers." The Fund also may issue one or
more series of preferred shares, although it has no present
intention to do so. The Portfolio or Fund, as the case may be,
may borrow to finance additional investments or issue a class of
preferred shares only when it believes that the return that may
be earned on investments purchased with the proceeds of such
borrowings or offerings will exceed the costs, including debt
service and dividend obligations, associated therewith. However,
to the extent such costs exceed the return on the additional
investments, the return realized by the Fund's Common
Stockholders will be adversely affected. Leverage also creates
other risks for holders of Common Stock, including the risk of
higher volatility of the net asset value of the Common Stock.
Any issuance of preferred shares by the Fund or any bank
borrowings by the Fund or Portfolio are subject to and will
comply with the requirements of the 1940 Act. Pursuant to the
1940 Act, among other things, the Fund may not issue preferred
shares unless immediately after their issuance the Fund is able
to maintain asset coverage of at least 200%. In the case of bank
borrowings, asset coverage of at least 300% must be maintained.
Investment Managers: AIM and the Sub-adviser 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-adviser 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
</TABLE>
Prospectus Page 6
<PAGE>
PROSPECTUS SUMMARY
(Continued)
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<TABLE>
<S> <C>
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
affiliates, currently advises approximately 90 investment company
portfolios. On May 29, 1998, AMVESCAP PLC acquired the Asset
Management Division of Liechtenstein Global Trust AG ("GT"),
which included the Sub-adviser and certain other affiliates.
The Sub-adviser 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-adviser
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-adviser has appointed INVESCO (NY), Inc. ("INVESCO (NY)")
as the investment sub-sub-adviser with respect to certain of the
assets of the Portfolio. The Sub-adviser 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, auto-
matically reinvested in additional shares of Common Stock. See
"Dividend Reinvestment Plan."
Tender Offers: The Fund's Common Stock is not listed on any exchange and it is
not anticipated that a secondary market will develop. In view of
this, the Board of Directors of the Fund intends to consider each
quarter the making of tender offers (each, a "Tender Offer") to
repurchase all or a portion of the Common Stock of the Fund from
stockholders at a price per share equal to the net asset value
per share of the Common Stock determined at the close of business
on the day an offer terminates. The Board is under no obligation
to authorize the making of a Tender Offer and no assurance can be
given that in any particular quarter a
</TABLE>
Prospectus Page 7
<PAGE>
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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 Portfolio may invest a relatively
high percentage of its assets in the obligations of a limited
number of issuers, the Fund may be more susceptible than a more
widely diversified fund to any single economic, political or
regulatory occurrence. However, the Portfolio has no current
intention of investing more than 15% of its assets in the
obligations of any single Borrower.
Although the Portfolio may, consistent with its fundamental
limitations, invest up to 25% of its total assets in the
obligations of Borrowers in
</TABLE>
Prospectus Page 8
<PAGE>
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
any single industry, the Sub-adviser 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-adviser
to be of equivalent quality. However, the Sub-adviser 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 Cor-
porate Debt Securities will satisfy the related Borrowers'
obligations in the event of nonpayment of scheduled interest or
principal, or that the collateral could be readily resold.
Corporate Loans and Corporate Debt Securities made in connection
with highly leveraged transactions are subject to greater credit
risks than other Corporate Loans and Corporate Debt Securities in
which the Portfolio may invest. These credit risks include a
greater possibility of default or bankruptcy of the Borrower and
the assertion that the pledging of collateral to secure the loan
constituted a fraudulent conveyance or preferential transfer that
can be nullified or subordinated to the rights of other creditors
of the Borrower under applicable law. Highly leveraged Corporate
Loans and Corporate Debt Securities also may be less liquid than
other Corporate Loans and Corporate Debt Securities.
</TABLE>
Prospectus Page 9
<PAGE>
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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 "Net Asset Value" for
information with respect to the valuation of illiquid Corporate
Loans.
The Fund's Articles of Incorporation include provisions that
could have the effect of limiting the ability of other entities
or persons to acquire control of the Fund or to change the
composition of its Board of Directors and could have the effect
of depriving holders of Common Stock of an opportunity to sell
their shares at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of the
Fund. See "Description of Capital Stock -- Certain Anti-Takeover
Provisions of the Articles of Incorporation."
</TABLE>
Prospectus Page 10
<PAGE>
FUND EXPENSES
- --------------------------------------------------------------------------------
The following tables are intended to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear, directly or
indirectly.
<TABLE>
<CAPTION>
STOCKHOLDER TRANSACTION EXPENSES
<S> <C>
Sales Load (as a percentage of offering price)................................................................. None
Dividend Reinvestment Plan Fees................................................................................ None
Maximum Early Withdrawal Charge (1)............................................................................ 3%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO COMMON STOCK) (2)
Investment Management and Administrative Fee................................................................... 0.95%
Administrative Fee (3)......................................................................................... 0.25%
Other Expenses (after reimbursement) (4)....................................................................... 0.30%
---------
Total Annual Operating Expenses (after reimbursement).......................................................... 1.50%
---------
---------
</TABLE>
- --------------
(1) Calculated based on the lesser of the then current net asset value or the
original price of the shares being tendered. The maximum early withdrawal
charge applies to shares sold to the Fund pursuant to a Tender Offer during
the first year after purchase; the early withdrawal charge declines annually
thereafter, reaching zero after four years. See "Early Withdrawal Charge."
(2) See "Management" for additional information.
(3) See "Management" for additional information.
(4) "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>
ONE YEAR THREE YEARS FIVE YEARS
------------- --------------- ---------------
<S> <C> <C> <C>
Assuming no tender of Common Stock.................................... $ 15 $ 48 $ 82
Assuming tender and repurchase of Common Stock on last day of period
and imposition of maximum applicable Early Withdrawal Charge......... $ 45 $ 68 $ 82
<CAPTION>
TEN YEARS
-------------
<S> <C>
Assuming no tender of Common Stock.................................... $ 180
Assuming tender and repurchase of Common Stock on last day of period
and imposition of maximum applicable Early Withdrawal Charge......... $ 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 "Ten
Years," for the completion of organizational expense amortization over a five
year period. The above tables and the assumption in the Example of a 5% annual
return and reinvestment at net asset value are required by regulation of the
Securities and Exchange Commission applicable to all closed-end investment
companies; the assumed 5% annual return is not a prediction of, and does not
represent, the projected or actual performance of the Common Stock. Actual
expenses and annual rates of return may be more or less than those assumed for
purposes of the Example. In addition, although the Example assumes reinvestment
of all dividends and other distributions at net asset value, participants in the
Plan may receive shares of the Common Stock obtained at or based on the market
price in effect at the time, which may be at, above or below net asset value.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES, AND
THE FUND'S AND THE PORTFOLIO'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN.
Prospectus Page 11
<PAGE>
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 Coopers & Lybrand L.L.P., independent accountants.
<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 INVESCO (NY), Inc................................................... 1.50%(a)
Without expense reimbursement by INVESCO (NY), 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.
Prospectus Page 12
<PAGE>
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 offices are located at 50
California Street, 27th Floor, San Francisco, California 94111 and 1166 Avenue
of the Americas, New York, New York 10036, and its telephone number is (415)
392-6181.
- --------------------------------------------------------------------------------
USE OF PROCEEDS
- --------------------------------------------------------------------------------
The net proceeds from the sale of the Common Stock offered hereby will be
invested on an ongoing basis in the Portfolio, a separate closed-end,
non-diversified management investment company with the same investment objective
as the Fund. The Portfolio will invest the Fund's net proceeds in accordance
with the Fund's and the Portfolio's investment objective and policies on an
ongoing basis, depending on the availability of Corporate Loans and Corporate
Debt Securities and other relevant conditions. Pending such investment, it is
anticipated that the proceeds will be invested in short-term debt obligations or
instruments. See "Investment Objective and Policies."
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's and the Portfolio's investment objective is to provide as high a
level of current income and preservation of capital as is consistent with
investment in senior secured Corporate Loans and Corporate Debt Securities that
meet credit standards established by the Sub-adviser. This is a fundamental
policy of the Fund and may not be changed without a vote of a majority of the
outstanding shares of the Fund. There can be no assurance that the investment
objective of the Fund will be achieved.
All of the Fund's assets will be invested in the Portfolio. Under normal market
conditions, the Portfolio will invest at least 80% of its total assets in
interests in Corporate Loans and Corporate Debt Securities made to or issued by
Borrowers (which may include U.S. and non-U.S. companies), including those that:
(i) have variable rates which adjust to a base rate, such as the LIBOR on set
dates, typically every 30 days but not to exceed one year; and/or (ii) have
interest rates that float at a margin above a generally recognized base lending
rate such as the Prime Rate of a designated U.S. bank. The Portfolio may invest
up to 20% of its total assets in any of the following: (a) floating rate senior
loans made and notes issued on an unsecured basis to Borrowers that meet the
credit standards established by the Sub-adviser ("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
Prospectus Page 13
<PAGE>
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-adviser); (c) fixed rate
obligations of U.S. or non-U.S. companies that meet the credit standards
established by the Sub-adviser 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-adviser 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-adviser 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-adviser expects the value of the Portfolio to fluctuate
significantly less as a result of interest rate changes than would a portfolio
of fixed-rate obligations. However, because variable interest rates only reset
periodically, the Fund's net asset value may fluctuate from time to time in the
event of an imperfect correlation between either the interest rates on variable
rate loans in the Portfolio or the variable interest rates on nominal amounts in
the Portfolio's interest rate swap transactions, and prevailing interest rates.
Also, a default on a Corporate Loan or Corporate Security in which the Portfolio
has invested or a sudden and extreme increase in prevailing interest rates may
cause a decline in the Fund's net asset value. Conversely, a sudden and extreme
decline in interest rates could result in an increase in the Fund's net asset
value.
Each of the Fund and the Portfolio is classified as non-diversified within the
meaning of the 1940
Prospectus Page 14
<PAGE>
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 the Sub-adviser. It
is anticipated that a significant portion of such Corporate Loans and Corporate
Debt Securities may be issued in highly leveraged transactions such as leveraged
buy-out loans, leveraged recapitalization loans and other types of acquisition
financing. Such Corporate Loans and Corporate Debt Securities present special
risks. See "Special Considerations and Risk Factors." Such Corporate Loans may
be structured to include both term loans, which are generally fully funded at
the time of the Portfolio's investment, and revolving credit facilities, which
would require the Portfolio to make additional investments in the Corporate
Loans as required under the terms of the credit facility. Such Corporate Loans
may also include receivables purchase facilities, which are similar to revolving
credit facilities secured by a Borrower's receivables.
The Portfolio may invest in Corporate Loans and Corporate Debt Securities which
are made to non-U.S. Borrowers, provided that the loans are U.S.
dollar-denominated or otherwise provide for payment in U.S. dollars, and any
such Borrower meets the credit standards established by the Sub-adviser 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-adviser, 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
Prospectus Page 15
<PAGE>
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-adviser. The Sub-adviser generally expects the value of the
collateral securing a Corporate Loan or Corporate Debt Security to be greater
than the value of such Corporate Loan or Corporate Debt Security. However, the
value of such collateral may be equal to or less than the value of the Corporate
Loan or Corporate Debt Security that it secures. Accordingly, in the event of a
default, the Fund may incur a loss. The ability of the Lender to have access to
the collateral may be limited by bankruptcy and other insolvency laws. Under
certain circumstances, the collateral may be released with the consent of the
Agent Bank and Lenders or pursuant to the terms of the underlying credit
agreement with the Borrower or bond indenture. There is no assurance that the
liquidation of the collateral would satisfy the Borrower's obligation in the
event of nonpayment of scheduled interest or principal, or that the collateral
could be readily liquidated. As a result, the Portfolio might not receive
payments to which it is entitled and thereby may experience a decline in the
value of the investment and, possibly, its net asset value.
In the case of highly leveraged loans, a Borrower generally is required to
pledge collateral which may include (i) working capital assets, such as accounts
receivable or inventory, (ii) tangible fixed assets, such as real property,
buildings and equipment, (iii) intangible assets, such as trademarks, copyrights
and patent rights and (iv) security interests in securities of subsidiaries or
affiliates. In the case of Corporate Loans to or Corporate Debt Securities of
privately held companies, the companies' owners may pledge additional security
in the form of guarantees and/or other securities that they own. There may be
temporary periods in the course of providing financing to a Borrower where the
collateral for the loan consists of common stock having a value not less than
200% of the value of the loan on the date the loan is made. Under such
circumstances, the Borrower generally proceeds with a subsequent transaction
which will permit it to pledge assets of a company as collateral for the loan,
although there can be no assurance that the Borrower will be able to effect such
transaction.
The rate of interest payable on floating or variable rate Corporate Loans or
Corporate Debt Securities is established as the sum of a base lending rate plus
a specified margin. These base lending rates generally are LIBOR, the Prime Rate
of a designated U.S. bank, or another base lending rate used by commercial
lenders. The interest rate on Prime Rate-based Corporate Loans and Corporate
Debt Securities floats daily as the Prime Rate changes, while the interest rate
on LIBOR-based Corporate Loans and Corporate Debt Securities is reset
periodically, typically every 30 days to one year. Certain of the floating or
variable rate Corporate Loans and Corporate Debt Securities in which the
Portfolio will invest may permit the Borrower to select an interest rate reset
period of up to one year. A portion of the Portfolio's investments may consist
of Corporate Loans with interest rates that are fixed for the term of the loan.
Investment in Corporate Loans and Corporate Debt Securities with longer interest
rate reset periods or fixed interest rates may increase fluctuations in the
Fund's net asset value as a result of changes in interest rates. However the
Fund will attempt to hedge all of its fixed-rate Corporate Loans and Corporate
Debt Securities against fluctuations in interest rates by entering into interest
rate swap transactions. The Portfolio also will attempt to maintain a portfolio
of Corporate Loans and Corporate Debt Securities that will have a dollar
weighted average period to the next interest rate adjustment of no more than 90
days.
Corporate Loans and Corporate Debt Securities traditionally have been structured
so that Borrowers pay higher margins when they elect LIBOR, in order to permit
lenders to obtain generally consistent yields on Corporate Loans and Corporate
Debt Securities, regardless of whether Borrowers select the LIBOR option, or the
Prime-based option. In recent years, however, the differential between the lower
LIBOR base rates and the higher Prime Rate base rates prevailing in the
commercial bank markets has widened to the point where the higher margins paid
by Borrowers for LIBOR pricing options do not currently compensate for the
differential between the Prime Rate and the LIBOR rates. Consequently, Borrowers
have increasingly selected the LIBOR-based pricing option, resulting in a yield
on Corporate Loans and Corporate Debt Securities that is consistently lower than
the yield would be if Borrowers selected the Prime Rate-based pricing option.
This trend will significantly limit the ability of the Fund to achieve a net
return to stockholders that consistently approximates the average published
prime rate of leading U.S. banks. At the date of this Prospectus, the
Sub-adviser 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,
Prospectus Page 16
<PAGE>
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-adviser's judgment, the Borrower can meet debt service on such loan or
security. In addition, the Sub-adviser 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-adviser 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-adviser'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-adviser 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-adviser 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-adviser'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-adviser
will use due care in making such analysis, there can be no assurance that such
analysis will disclose factors which may impair the value of the Corporate Loan
or Corporate Debt Security.
Corporate Loans and Corporate Debt Securities made in connection with highly
leveraged transactions are subject to greater credit risks than other Corporate
Loans and Corporate Debt Securities in which the Portfolio may invest. These
credit risks include a greater possibility of default or bankruptcy of the
Borrower and the assertion that the pledging of collateral to secure the loan
constituted a fraudulent conveyance or preferential transfer which can be
nullified or subordinated to the rights of other creditors of the Borrower under
applicable law. Highly leveraged Corporate Loans and Corporate Debt Securities
also may be less liquid than other Corporate Loans and Corporate Debt
Securities.
A Borrower also must comply with various restrictive covenants contained in any
Corporate Loan agreement between the Borrower and the lending syndicate
("Corporate Loan Agreement") or in any trust indenture or comparable document in
connection with a Corporate Debt Security ("Corporate Debt Security Document").
Such covenants, in addition to requiring the scheduled payment of interest and
principal, may include restrictions on dividend payments and other distributions
to stockholders, provisions requiring the Borrower to maintain specific
financial ratios or relationships and limits on total debt. In addition, the
Corporate Loan Agreement or Corporate Debt Security Document may contain a
covenant requiring the Borrower to prepay the Corporate Loan or Corporate Debt
Security with any excess cash flow. Excess cash flow generally includes net cash
flow after scheduled debt service payments and permitted capital expenditures,
among other things, as well as the proceeds from asset dispositions or sales of
securities. A breach of a covenant (after giving effect to any cure period) in a
Corporate Loan Agreement which is not waived by the Agent Bank and the lending
syndicate normally is an event of acceleration; i.e., the Agent Bank has the
right to demand immediate repayment in full of the outstanding Corporate Loan.
Acceleration may also occur in the case of the breach of a covenant in a
Corporate Debt Security Document.
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
Prospectus Page 17
<PAGE>
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-adviser. 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
Prospectus Page 18
<PAGE>
Bank guarantor, sole negotiator or sole structuror with respect to a Corporate
Loan.
Because it may be necessary to assert through an Intermediate Participant such
rights as may exist against the Borrower, in the event the Borrower fails to pay
principal and interest when due, the Portfolio may be subject to delays,
expenses and risks that are greater than those that would be involved if the
Portfolio could enforce its rights directly against the Borrower. Moreover,
under the terms of a Participation, the Portfolio may be regarded as a creditor
of the Intermediate Participant (rather than of the Borrower), so that the
Portfolio may also be subject to the risk that the Intermediate Participant may
become insolvent. Similar risks may arise with respect to the Agent Bank, as
described below. Further, in the event of the bankruptcy or insolvency of the
Borrower, the obligation of the Borrower to repay the Corporate Loan may be
subject to certain defenses that can be asserted by such Borrower as a result of
improper conduct by the Agent Bank or Intermediate Participant. The Portfolio
will invest in Corporate Loans only if, at the time of investment, all
outstanding debt obligations of the Agent Bank and Intermediate Participants are
investment grade, i.e., rated BBB or A-3 or higher by Standard & Poor's or Baa
or P-3 or higher by Moody's or determined to be of comparable quality in the
judgment of the Sub-adviser.
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
Prospectus Page 19
<PAGE>
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-adviser expects that liquidity will improve. The
Portfolio has no limitation on the amount of its investments which are not
readily marketable or are subject to restrictions on resale. Such investments,
which may be considered illiquid, may affect the Fund's ability to realize the
net asset value in the event of a voluntary or involuntary liquidation of its
assets. To the extent that such investments are illiquid, the Portfolio may have
difficulty disposing of securities in order to enable the Fund to repurchase
shares of its Common Stock pursuant to Tender Offers, if any. The Board of
Directors of the Fund will consider the liquidity of the Portfolio's investments
in determining whether a Tender Offer should be made by the Fund. See "Net Asset
Value" for information with respect to the valuation of illiquid Corporate Loans
and Corporate Debt Securities.
OTHER INVESTMENT POLICIES
The Fund and the Portfolio have adopted certain other policies as set forth
below:
LEVERAGE. Each of the Fund and the Portfolio is authorized to borrow money in
amounts of up to 33 1/3% of the value of its total assets at the time of such
borrowings. Borrowings by the Fund and the Portfolio (commonly known as
"leveraging") create an opportunity for greater total return but, at the same
time, increase exposure to capital risk. In addition, borrowed funds are subject
to interest costs that may offset or exceed the return earned on the borrowed
funds. Neither the Fund nor the Portfolio has any current intention of borrowing
to finance additional investments. See "Special Considerations and Risk Factors
- -- Effects of Leverage."
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to its permitted investments but currently intends to do so only with
member banks of the Federal Reserve System or with primary dealers in U.S.
Government securities. Under a repurchase agreement, the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. The Portfolio's repurchase agreements will
provide that the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement, and will be marked to market daily.
The repurchase date usually is within seven days of the original purchase date.
Repurchase agreements are deemed to be loans under the 1940 Act. In all cases,
the Sub-adviser 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
Prospectus Page 20
<PAGE>
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 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-adviser 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
Prospectus Page 21
<PAGE>
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-adviser 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-adviser 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-adviser 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),
Prospectus Page 22
<PAGE>
purchase debt securities, enter into repurchase agreements, and lend its
portfolio securities.
5. Invest more than 25% of its total assets in the securities of issuers in any
one industry; provided that this limitation shall not apply with respect to
obligations issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities; and provided further that the Fund and the Portfolio may each
invest more than 25% of its assets in securities of issuers in the industry
group consisting of financial institutions and their holding companies,
including commercial banks, thrift institutions, insurance companies and finance
companies. For purposes of this restriction, the term "issuer" includes the
Borrower, the Agent Bank and any Intermediate Participant (as defined under
"Investment Objective and Policies -- Description of Participation Interests and
Assignments").
6. Purchase 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.
- --------------------------------------------------------------------------------
SPECIAL CONSIDERATIONS AND
RISK FACTORS
- --------------------------------------------------------------------------------
EFFECTS OF LEVERAGE. Each of the Fund and the Portfolio may borrow money in
amounts up to 33 1/3% of the value of its total assets to finance tender offers,
for temporary, extraordinary or emergency purposes, or, while neither the Fund
nor the Portfolio has any current intention of doing so, for the purpose of
financing additional investments. See "Tender Offers." The Fund also may issue
one or more series of preferred shares, although it has no present intention to
do so. The Portfolio or Fund, as the case may be, may borrow to finance
additional investments or issue a class of preferred shares only when it
believes that the return that may be earned on investments purchased with the
proceeds of such borrowings or offerings will exceed the costs, including debt
service and dividend obligations, associated therewith. However, to the extent
such costs exceed the return on the additional investments, the return realized
by the Fund's Common Stockholders will be adversely affected.
Capital raised through leverage will be subject to interest costs or dividend
payments which may or 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
Prospectus Page 23
<PAGE>
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-adviser's ability to
predict correctly interest rates and market movements, and there is no assurance
that a leveraging strategy will be successful during any period in which it is
employed.
CREDIT RISK. Corporate Loans and Corporate Debt Securities may constitute
substantially all of the Portfolio's investments. Corporate Loans and Corporate
Debt Securities are primarily dependent upon the creditworthiness of the
Borrower for payment of interest and principal. The nonreceipt of scheduled
interest or principal on a Corporate Loan or Corporate Debt Security may
adversely affect the income of the Portfolio or the value of its investments,
which may in turn reduce the amount of dividends or the net asset value of the
shares of the Fund. The Portfolio's ability to receive payment of principal of
and interest on a Corporate Loan or a Corporate Debt Security also depends upon
the creditworthiness of any institution interposed between the Portfolio and the
Borrower. To reduce credit risk, the Sub-adviser 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
Prospectus Page 24
<PAGE>
customary valuation techniques considered appropriate in the judgment of the
Sub-adviser. 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-adviser to be of
equivalent quality. Debt rated Baa by Moody's is considered by Moody's to have
speculative characteristics. Debt rated Ba or B by Moody's is regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
While such lower quality debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Securities rated Ba and lower are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds," and
involve a high degree of risk. The Sub-adviser 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-adviser 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
Prospectus Page 25
<PAGE>
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 adviser to manage the Fund's assets in accordance with
its investment objective. The Fund's investment performance may be affected by a
withdrawal of all of its assets from the Portfolio. Of course, a complete
withdrawal of Fund assets could be accomplished only pursuant to a Portfolio
tender offer.
Smaller investors in the Portfolio may be adversely affected by the actions of a
larger investor in the Portfolio. For example, if a large investor withdraws a
significant amount of assets from the Portfolio, the remaining investors may
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may hold fewer securities, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured mutual funds that have
large or institutional investors.
Funds that invest all their assets in interests in a separate investment company
are a relatively new development in the investment company industry and,
therefore, the Fund may be subject to
Prospectus Page 26
<PAGE>
additional regulations than historically structured funds.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund stockholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund stockholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio Loans and
noncash assets (as opposed to a cash distribution from the Portfolio). If Loans
and noncash assets are distributed, the Fund could incur brokerage, tax or other
charges in converting them to cash. In addition, the distribution in kind may
result in a less diversified portfolio of investments and will adversely affect
the liquidity of the Fund. Notwithstanding the above, there are other means for
meeting stockholder redemption requests, such as borrowing.
Prospectus Page 27
<PAGE>
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 thirteen months from the date of their
original purchase, the Distributor will additionally compensate such dealers
quarterly at an annual rate based on a percentage of the value of such shares
sold by such dealers and remaining outstanding, in accordance with the following
schedule:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AS A
YEAR AFTER DATE PERCENTAGE OF VALUE OF
OF ORIGINAL PURCHASE SHARES OUTSTANDING
- ------------------------------- ---------------------------
<S> <C>
First.......................... 0.00%
Second......................... 0.10%
Third.......................... 0.15%
Fourth......................... 0.20%
Fifth and following............ 0.25%
</TABLE>
The compensation paid to selected dealers and the Distributor, including the
compensation paid at the time of purchase, the quarterly payments mentioned
above and the early withdrawal charge, if any, will not in the aggregate exceed
the applicable limit, as determined from time to time by the National
Association of Securities Dealers, Inc. ("NASD").
Prospectus Page 28
<PAGE>
TENDER OFFERS
- --------------------------------------------------------------------------------
In recognition of the possibility that a secondary market for the Fund's shares
will not exist, the Fund may take actions that will provide liquidity to
stockholders. The Fund may from time to time make Tender Offers, i.e., offers to
repurchase all or a portion of its shares of Common Stock from stockholders at a
price per share equal to the net asset value per share of the Common Stock
determined at the close of business on the day an offer terminates. The Board of
Directors considers each quarter the making of Tender Offers. There can be no
assurance that the Board will decide to undertake the making of a Tender Offer
in any particular quarter. In addition, any partial Tender Offer by the Fund may
result in a proration of the shares repurchased from the Fund's Common
Stockholders who participate in the Tender Offer. Subject to the Fund's
investment restriction with respect to borrowings, the Fund may borrow money to
finance the repurchase of shares pursuant to any Tender Offers. See "Special
Considerations and Risk Factors -- Effects of Leverage" and "Investment
Restrictions."
The Fund's assets consist primarily of its interest in the Portfolio. Therefore,
in order to finance the repurchase of Fund shares pursuant to Tender Offers, the
Fund 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 the making of such a tender
offer. The Fund cannot make a Tender Offer larger than a tender offer made by
the Portfolio. The Portfolio will make tender offers, if any, to all of its
investors, including the Fund, on the same terms, which practice may affect the
size of the Portfolio's offers. Subject to the Portfolio's investment
restriction with respect to borrowings, the Portfolio may borrow money or issue
debt obligations to finance its repurchase obligations pursuant to any such
tender offer.
The Fund expects that ordinarily there will be no secondary market for the
Fund's Common Stock and that periodic Tender Offers will be the only source of
liquidity for Fund stockholders. Nevertheless, if a secondary market develops
for the Common Stock of the Fund, the market price of the shares may vary from
net asset value from time to time. Such variance may be affected by, among other
factors, relative demand and supply of shares and the performance of the Fund,
especially as it affects the yield on and net asset value of the Common Stock of
the Fund. A Tender Offer for shares of Common Stock of the Fund at net asset
value is expected to reduce any spread between net asset value and market price
that may otherwise develop. However, there can be no assurance that such action
would result in the Fund's Common Stock trading at a price that equals or
approximates net asset value.
Although the Board of Directors believes that the Tender Offers generally would
be beneficial to holders of the Fund's Common Stock, the acquisition of shares
of Common Stock by the Fund will decrease the total assets of the Fund and
therefore have the likely effect of increasing the Fund's expense ratio
(assuming such acquisition is not offset by the issuance of additional shares of
Common Stock). Furthermore, to the extent the Fund borrows to finance the making
of Tender Offers, interest on such borrowings reduce the Fund's net investment
income.
It is the Board of Directors' announced policy, which may be changed by the
Board, not to repurchase shares pursuant to a Tender Offer if (1) such
repurchases would terminate the Fund's status as a RIC under the Code (which
would make the Fund a taxable entity, causing its income to be taxed at the
corporate level in addition to the taxation of stockholders who receive
dividends from the Fund); (2) the Portfolio would not be able to liquidate
portfolio securities in a manner that is orderly and consistent with the Fund's
investment objective and policies in order to repurchase Common Stock tendered
pursuant to the Tender Offer; or (3) there is, in the Board's judgment, any (a)
legal action or proceeding instituted or threatened challenging the Tender Offer
or otherwise materially adversely affecting the Fund, (b) declaration of a
Prospectus Page 29
<PAGE>
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-adviser would otherwise consider it disadvantageous to do
so.
Each Tender Offer will be made and stockholders notified in accordance with the
requirements of the Securities Exchange Act of 1934 and the 1940 Act, either by
publication or mailing or both. The offering documents will contain such
information as is prescribed by such laws and the rules and regulations
promulgated thereunder. The repurchase of tendered shares by the Fund is a
taxable event. See "Taxes." The Fund will pay all costs and expenses associated
with the making of any Tender Offer. An Early Withdrawal Charge will be imposed
on most shares accepted for tender that have been held for less than four years.
See "Early Withdrawal Charge."
Prospectus Page 30
<PAGE>
EARLY WITHDRAWAL CHARGE
- --------------------------------------------------------------------------------
An Early Withdrawal Charge to recover distribution expenses incurred by the
Distributor will be charged against the stockholder's investment account and
paid to the Distributor in connection with most shares of Common Stock held for
less than four years which are accepted by the Fund for repurchase pursuant to a
Tender Offer in the manner described below. The Early Withdrawal Charge will be
imposed on those shares of Common Stock accepted for tender based on an amount
equal to the lesser of the then current net asset value of the shares of Common
Stock or the original purchase price of the shares of Common Stock being
tendered. Accordingly, the Early Withdrawal Charge is not imposed on increases
in the net asset value above the initial purchase price. In addition, the Early
Withdrawal Charge is not imposed on shares derived from reinvestments of
dividends or capital gains distributions. In determining whether an Early
Withdrawal Charge is payable, it is assumed that the acceptance of an offer to
repurchase pursuant to a Tender Offer would be made from the earliest purchase
of shares of Common Stock. The Early Withdrawal Charge imposed will vary
depending on the length of time the Common Stock has been owned since purchase
(separate purchases shall not be aggregated for these purposes), as set forth in
the following table:
<TABLE>
<CAPTION>
EARLY
YEAR OF REPURCHASE WITHDRAWAL
AFTER PURCHASE CHARGE
- ---------------------- -----------
<S> <C>
First....................................... 3.0%
Second...................................... 2.5%
Third....................................... 2.0%
Fourth...................................... 1.0%
Fifth and following......................... 0.0%
</TABLE>
In determining whether an Early Withdrawal Charge is applicable to a tender of
shares of Common Stock, the calculation will be determined in the manner that
results in the lowest possible amount being charged. Therefore, it will be
assumed that the tender is first of shares of Common Stock held for over four
years and shares of Common Stock acquired pursuant to reinvestment of dividends
or distributions and then of shares of Common Stock held longest during the
three-year period. The Early Withdrawal Charge will not be applied to dollar
amounts representing an increase in the net asset value since the time of
purchase.
EXAMPLE:
Assume an investor purchased 1,000 shares of Common Stock (at a cost of $10,000)
and in the second year after purchase, the net asset value per share is $10.15
and, during such time, the investor has acquired 100 additional shares of Common
Stock upon dividend reinvestment. If at such time the investor makes his first
redemption of 500 shares of Common Stock (proceeds of $5,075), 100 shares will
not be subject to the Early Withdrawal Charge because of dividend reinvestment.
With respect to the remaining 400 shares of Common Stock, the Early Withdrawal
Charge is applied only to the original cost of $10 per share and not to the
increase in net asset value of $0.15 per share. Therefore, $4,000 of the $5,075
redemption proceeds will be charged at a rate of 2.5% (the applicable rate in
the second year after purchase).
Prospectus Page 31
<PAGE>
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-adviser. The
responsibility for making decisions to buy, sell or hold a particular security
rests with the Sub-adviser, subject to review by the Board of Trustees of the
Portfolio and AIM.
In providing investment management for the Portfolio, the Sub-adviser 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-adviser a monthly
fee at an annual rate of 0.48% of the Portfolio's average daily 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-adviser and INVESCO (NY), the latter acts as the investment
sub-sub-adviser 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-adviser with respect to
certain of the Portfolio's assets, as determined by the Sub-adviser (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. 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-adviser (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.
Prospectus Page 32
<PAGE>
The Sub-adviser is a subsidiary of AMVESCAP. As of April 30, 1998, the
Sub-adviser had assets under management totaling approximately $3.1 billion and
the Sub-adviser ranked as the largest institutional investment manager of the
senior secured asset class. INVESCO (NY) is also a subsidiary of AMVESCAP. The
U.S. offices of the Sub-adviser and INVESCO (NY) are located at 1166 Avenue of
the Americans, New York, New York 10036, and 50 California Street, 27th Floor,
San Francisco, California 94111.
On May 29, 1998, Liechtenstein Global Trust AG ("GT"), the former indirect
parent organization of the Sub-adviser, consummated a purchase agreement with
AMVESCAP PLC pursuant to which AMVESCAP PLC acquired GT's Asset Management
Division, which includes the Sub-adviser, INVESCO (NY) and certain other
affiliates. As a result of this transaction, the Sub-adviser and INVESCO (NY)
each is now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the
sale, the Sub-adviser 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-adviser 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-adviser 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-adviser 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.
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 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.
Prospectus Page 33
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Directors and executive officers of the Fund, their ages and their principal
occupations during the last five years are set forth below.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
FUND AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 President, GT Global since 1995; Director, GT Global since 1991; Senior Vice
Director, Chairman of the Board and President President and Director of Sales and Marketing, GT Global from May 1992 to April
50 California Street 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
San Francisco, CA 94111 Director, Liechtenstein Global Trust AG (holding company of the various
international GT companies) Advisory Board since January 1996; Director, G.T.
Global Insurance Agency ("G.T. Insurance") since 1996; President and Chief
Executive Officer, G.T. Insurance since 1995; Senior Vice President and
Director, Sales and Marketing, G.T. Insurance from April 1995 to November 1995;
Senior Vice President, Retail Marketing, GT Insurance from 1992 to 1993. Mr.
Guilfoyle is also a director or trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered
by the Sub-adviser.
C. Derek Anderson, 56 President, Plantagenet Capital Management, LLC (an investment partnership);
Director Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director,
Suite 400 PremiumWear, Inc. (formerly Munsingwear, Inc.)(a casual apparel company) and
San Francisco, CA 94104 Director, "R" Homes, Inc. and various other companies. Mr. Anderson is also a
director or trustee of each of the other investment companies registered under
the 1940 Act, that is sub-advised or sub-administered by the Sub-adviser.
Frank S. Bayley, 58 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson
Director Company (a private investment company). Mr. Bayley also is a director or trustee
Two Embarcadero Center of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Managing Partner of Accel Partners (a venture capital firm). He also serves as a
Director director of Viasoft and PageMart, Inc. (both public software companies), as well
One Embarcadero Center as several other privately held software communications companies. Mr. Patterson
Suite 3820 also is a director or trustee of each of the other investment companies
San Francisco, CA 94111 registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Ruth H. Quigley, 63 Private investor; President, Quigley Friedlander & Co., Inc. (a financial
Director advisory services firm) from 1984 to 1986. Miss Quigley also is a director or
1055 California Street trustee of each of the other investment companies registered under the 1940 Act
San Francisco, CA 94108 that is sub-advised or sub-administered by the Sub-adviser.
John J. Arthur+, 53 Director, Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice
Vice President 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.
</TABLE>
- --------------------
* Mr. Guilfoyle is an "interested person" of the Fund as defined by the 1940
Act due to his affiliation with Chancellor GT and its affiliates.
+ Mr. Arthur and Ms. Relihan are married to each other.
Prospectus Page 34
<PAGE>
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
FUND AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
Kenneth W. Chancey, 52 Vice President -- Mutual Fund Accounting, Chancellor GT since 1992; and Vice
Vice President and President, Putnam Fiduciary Trust Company from 1989 to 1992.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Melville B. Cox, 54 Vice President and Chief Compliance Officer, A I M Advisors, Inc., A I M Capital
Vice President 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.; Director and Senior Vice
Vice President 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 Management Group Inc.;
Vice President 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; Chairman of
the Board of Directors and President, INVESCO Holdings Canada Inc.; and
Director, AIM Funds Group Canada Inc. and INVESCO G.P. Canada Inc.
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, Chancellor GT since 1997;
Vice President Executive Vice President, Asset Management Division, Liechtenstein Global Trust
50 California Street since October 1996; Senior Vice President, General Counsel and Secretary of GT
San Francisco, CA 94111 Asset Management, Inc., Chancellor LGT, GT Global, GT Services and G.T.
Insurance from May 1994 to October 1996; Senior Vice President, General Counsel
and Secretary, Strong/Corneliuson Management, Inc.; and Secretary, each of the
Strong Funds from October 1991 through May 1994.
Carol F. Relihan+, 43 Director, Senior Vice President, General Counsel and Secretary, A I M Advisors,
Vice President 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.; and Assistant Vice
Vice President and Assistant Treasurer President and Assistant Treasurer, Fund Management Company.
</TABLE>
------------------------------
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-adviser 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 May 1, 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-adviser and other third-party service providers perform substantially all of
the services necessary for the Fund's operations.
- --------------------
+ Mr. Arthur and Ms. Relihan are married to each other.
Prospectus Page 35
<PAGE>
PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Portfolio's Board of Trustees, the
Sub-adviser 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-adviser 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-adviser 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-adviser may select
brokers to execute the Portfolio's portfolio transactions on the basis of the
research and brokerage services they provide to the Sub-adviser for its use in
managing the Portfolio and its other advisory accounts. Such services may
include furnishing analyses, reports and information concerning issuers,
industries, securities, geographic regions, economic factors and trends,
portfolio strategy, and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). Research and brokerage services received from such brokers are in
addition to, and not in lieu of, the services required to be performed by the
Sub-adviser 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-adviser determines in good faith that such commission is reasonable
in terms either of that particular transaction or the overall responsibility of
the Sub-adviser 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-adviser 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-adviser 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-adviser. 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-adviser 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-adviser 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-adviser 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
Prospectus Page 36
<PAGE>
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."
- --------------------------------------------------------------------------------
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
Prospectus Page 37
<PAGE>
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 substantially all
of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
See the next section for a discussion of the tax consequences to the Fund of
certain transactions engaged in by the Portfolio.
TAXATION OF THE PORTFOLIO
The Portfolio 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.
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,
Prospectus Page 38
<PAGE>
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 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. 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
Prospectus Page 39
<PAGE>
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 Fund's earnings
and profits and the stockholder's basis for the tendered shares. Also, there is
a risk that non-tendering holders of Common Stock may be considered to have
received a deemed distribution that may be a taxable dividend in whole or in
part. Holders of Common Stock may wish to consult their tax advisers prior to
tendering.
* * * * *
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its stockholders. For further information,
reference should be made to the pertinent Code sections and the regulations
promulgated thereunder, which are subject to change by legislative, judicial, or
administrative action either prospectively or retroactively. Investors are urged
to consult their tax advisers regarding specific questions as to federal, state,
local, or foreign taxes. Foreign investors should consider applicable foreign
taxes in their evaluation of an investment in the Fund.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
Pursuant to the Plan, each stockholder will be deemed to have elected to have
all dividends and other distributions, net of any applicable withholding taxes,
automatically reinvested in additional shares of Common Stock, newly issued by
the Fund, unless GT Global Investor Services, Inc., the Fund's transfer agent,
as the Plan Agent (the "Plan Agent"), is otherwise instructed by the stockholder
in writing. Such dividends and 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 certain open-end investment companies sub-advised by INVESCO (NY)
("AIM/GT Funds"). Automatic reinvestment in shares of a AIM/GT Fund are made at
net asset value without imposition of a sales charge. Reinvestments in a AIM/GT
Fund may only be directed to an account with the identical shareholder
registration and account number. These elections may be changed by a shareholder
at any time; to be effective with respect to a distribution, the shareholder or
the shareholder's broker must contact the Plan Agent by mail or telephone at
least 15 business days prior to the payment date.
Stockholders who do not participate in the Plan will receive all dividends and
other distributions in cash, net of any applicable withholding taxes, paid in
U.S. dollars by check mailed directly to the stockholder by GT Global Investor
Services, Inc., as dividend-paying agent. Stockholders who do not wish to have
dividends and other distributions automatically reinvested should notify the
Plan Agent at California Plaza, 2121 N. California Boulevard, Suite 450, Walnut
Creek, California 94596. Dividends and other distributions with respect to
shares of Common Stock registered in the name of a broker-dealer or other
nominee (i.e., in "street name") will be reinvested under the Plan unless such
service is not provided by the broker-dealer or nominee or the stockholder
elects to receive dividends and other distributions in 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.
Prospectus Page 40
<PAGE>
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 participants in the Plan at least 30 days before the
record date for the distribution. The Plan also may be amended by the Fund or
the Plan Agent, but (except when necessary or appropriate to comply with
applicable law, rules or policies of a regulatory authority) only by at least 30
days' written notice to participants in the Plan. All correspondence concerning
the Plan should be directed to the Plan Agent, California Plaza, 2121 N.
California Boulevard, Suite 450, Walnut Creek, California 94596.
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN
- --------------------------------------------------------------------------------
Investors may purchase shares of the Fund's Common Stock through the Automatic
Investment Plan. Under this Plan, an amount specified by the stockholder of $100
or more (or $25 for Individual Retirement Accounts, Code Section 403(b)(7)
custodial accounts and other tax-qualified employer-sponsored retirement
accounts) on a monthly or quarterly basis will be sent to GT Global Investor
Services, Inc. from the investor's bank for investment in the Fund. Participants
in the Automatic Investment Plan should not elect to receive dividends or other
distributions from the Fund in cash. Investors should contact their brokers or
GT Global Investor Services, Inc. for more information.
Prospectus Page 41
<PAGE>
EXCHANGES
- --------------------------------------------------------------------------------
The Fund may make available to stockholders who tender shares of the Fund's
Common Stock pursuant to a Tender Offer the privilege of exchanging Fund shares
at net asset value for Class B shares of AIM/GT 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/GT Fund; however, the exchanging
stockholders will be subject to a contingent deferred sales charge on any such
AIM/GT Fund equivalent to the Early Withdrawal Charge on Common Stock of the
Fund. Thus, shares of such AIM/GT Fund may be subject to a contingent deferred
sales charge upon a subsequent redemption from the AIM/GT Fund. The purchase of
shares of such AIM/GT 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/GT Fund
shares will not be permitted to exchange those shares for shares of the Fund's
Common Stock.
The prospectus for each AIM/GT 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.
- --------------------------------------------------------------------------------
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-adviser, are accrued daily.
The Sub-adviser, 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-adviser 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-adviser 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-adviser 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
Prospectus Page 42
<PAGE>
has not yet fully developed, in valuing Corporate Loans and Corporate Debt
Securities, the Sub-adviser 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-adviser may rely to an increasing extent on such market
prices and quotations in valuing the Corporate Loans and Corporate Debt
Securities held by the Portfolio.
Other portfolio securities (other than short-term obligations but including
listed issues) may be valued on the basis of prices furnished by one or more
pricing services which determine prices for normal, institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. In certain circumstances, portfolio
securities are valued at the last sale price on the exchange that is the primary
market for such securities, or the last quoted bid price for those securities
for which the over-the-counter market is the primary market or for listed
securities in which there were no sales during the day. The value of interest
rate swaps, caps and floors is determined in accordance with a formula and then
confirmed periodically by obtaining a bank quotation. Positions in options are
valued at the last sale price on the market where any such option is principally
traded. Obligations with remaining maturities of 60 days or less are valued at
amortized cost unless this method no longer produces fair valuations. Repurchase
agreements are valued at cost plus accrued interest. Rights or warrants to
acquire stock or stock acquired pursuant to the exercise of a right or warrant,
may be valued taking into account various factors such as original cost to the
Portfolio, earnings and net worth of the issuer, market prices for securities of
similar issuers, assessment of the issuer's future prosperity, liquidation value
or third party transactions involving the issuer's securities. Securities for
which there exist no price quotations or valuations and all other assets are
valued at fair value as determined in good faith by or on behalf of the Board of
Trustees of the Portfolio.
- --------------------------------------------------------------------------------
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
The Fund is authorized to issue 1 billion shares of capital stock, $.001 par
value, all of which is classified as Common Stock. Although it has no current
intention of doing so, the Board of Directors of the Fund is authorized to
classify and reclassify any unissued shares of capital stock from time to time
by setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or terms and conditions of
redemption of such shares by the Fund. The description of the capital stock and
the description under "Description of Capital Stock -- Certain Anti-Takeover
Provisions of the Articles of Incorporation" are subject to the provisions
contained in the Fund's Articles of Incorporation and Bylaws.
COMMON STOCK
Shares of the Common Stock have no preemptive, conversion, exchange or
redemption rights. Each share has equal voting, dividend, distribution and
liquidation rights. The outstanding shares of Common Stock are, and those
offered hereby, when issued, will be, fully paid and nonassessable. Stockholders
are entitled to one vote per share. All voting rights for the election of
directors are noncumulative, which means that the holders of more than 50% of
the shares can elect 100% of the directors then nominated for election if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any directors.
As of the date of this Prospectus, GT Global, Inc. and its affiliates own
approximately 10% 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
Prospectus Page 43
<PAGE>
ability of other entities or persons to acquire control of the Fund, (ii) the
Fund's freedom to engage in certain transactions, and (iii) the ability of the
Fund's directors or stockholders to amend the Articles of Incorporation. These
provisions of the Articles of Incorporation may be regarded as "anti-takeover"
provisions. Under Maryland law and the Fund's Articles of Incorporation, the
affirmative vote of the holders of at least a majority of the votes entitled to
be cast is required for the consolidation of the Fund with another corporation,
a merger of the Fund with or into another corporation (except for certain
mergers in which the Fund is the successor), a statutory share exchange in which
the Fund is not the successor, a sale or transfer of all or substantially all of
the Fund's assets, the dissolution of the Fund and any amendment to the Fund's
Articles of Incorporation. In addition, the affirmative vote of the holders of
at least 66 2/3% (which is higher than that required under Maryland law or the
1940 Act) of the outstanding shares of the Fund's capital stock is required
generally to authorize any of the following transactions or to amend the
provisions of the Articles of Incorporation relating to such transactions:
(i) merger, consolidation or statutory share exchange of the Fund with or into
any other corporation;
(ii) issuance of any securities of the Fund to any person or entity for cash;
(iii) sale, lease or exchange of all or any substantial part of the assets of
the Fund to any entity or person (except assets having an aggregate market value
of less than $1,000,000); or
(iv) sale, lease or exchange to the Fund, in exchange for securities of the
Fund, of any assets of any entity or person (except assets having an aggregate
fair market value of less than $1,000,000).
A similar vote also would be required for any amendment of the Articles of
Incorporation to convert the Fund to an open-end investment company by making
any class of the Fund's capital stock a "redeemable security," as that term is
defined in the 1940 Act. Such vote would not be required with respect to any of
the foregoing transactions, however, when, under certain conditions, the Board
of Directors approves the transaction, although in certain cases involving
merger, consolidation or statutory share exchange or sale of all or
substantially all of the Fund's assets or the conversion of the Fund to an
open-end investment company, the affirmative vote of the holders of a majority
of the outstanding shares of the Fund's capital stock would nevertheless be
required. Reference is made to the Articles of Incorporation of the Fund, on
file with the SEC, for the full text of these provisions.
The provisions of the Articles of Incorporation described above and the Fund's
right to make a tender offer for its shares could have the effect of depriving
the stockholders of opportunities to sell their shares at a premium over net
asset value by discouraging a third party from seeking to obtain control of the
Fund in a tender offer or similar transaction. The overall effect of these
provisions is to render more difficult the accomplishment of a merger or the
assumption of control. 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.
Prospectus Page 44
<PAGE>
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.
- --------------------------------------------------------------------------------
CUSTODIAN, TRANSFER AND DIVIDEND
DISBURSING AGENT AND REGISTRAR
- --------------------------------------------------------------------------------
State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts 02171, will serve as custodian of the Fund's assets held in the
United States. Rules adopted under the 1940 Act permit the Fund to maintain its
securities and cash in the custody of certain eligible banks and securities
depositories. GT Global Investor Services, Inc. (the "Transfer Agent") will
serve as the Fund's transfer and dividend disbursing agent and registrar.
Prospectus Page 45
<PAGE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby will be
passed on for the Fund by Kirkpatrick & Lockhart LLP, Washington, D.C.
INDEPENDENT ACCOUNTANTS
The Fund's independent accountants are Coopers & Lybrand L.L.P., One Post Office
Square, Boston, Massachusetts 02109. Coopers & Lybrand L.L.P. will conduct an
annual audit of the Fund, assist in the preparation of the Fund's federal and
state income tax returns and consult with the Fund as to matters of accounting,
regulatory filings, and federal and state income taxation.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the Fund, AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely on internal computer
systems as well as external computer systems provided by third parties. Some of
these systems were not originally designed to distinguish between the year 1900
and the year 2000. This inability, if not corrected, could adversely affect the
services AIM, AIM Distributors, the Transfer Agent and the Sub-adviser and
others provide the Fund and its shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of Fund data in all systems. Phase (i) has been
completed; phase (ii) is substantially completed; phase (iii) has commenced; and
phase (iv) is expected to commence during the third quarter of 1998. The Project
is scheduled to be completed by December 31, 1998. Following completion of the
Project, AIM, AIM Distributors and INVESCO (NY) will review any systems
subsequently acquired to confirm that they are Year 2000 compliant.
FURTHER INFORMATION
Further information concerning the Common Stock and the Fund may be found in the
Registration Statement, on file with the SEC.
Prospectus Page 46
<PAGE>
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.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 17, 1998
47
<PAGE>
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.
48
<PAGE>
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.
49
<PAGE>
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
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
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>
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 --
Sun Apparel, Inc.: ........................................ B1 -- -- 1.5
TEXTILES & APPAREL
Term loan B due 9/30/04 ................................. -- 2,500,000 2,493,750 --
------------
8,884,688
------------
Finance (2.2%)
WCI Communities Limited Partnership, Inc.: ................ B1 -- -- 2.2
REAL ESTATE
Term loan due 2/18/00 ................................... -- 3,500,000 3,482,500 --
------------
3,482,500
------------
Energy (1.7%)
Centennial Resources, Inc.: ............................... B2 -- -- 1.7
COAL
Term loan B due 3/31/04 ................................. -- 1,966,667 1,954,375 --
Term loan A due 3/31/02 ................................. -- 850,000 844,688 --
------------
2,799,063 --
------------ -----
TOTAL SENIOR SECURED FLOATING RATE INTERESTS (cost
$156,936,118) .............................................. 157,057,699 97.1
------------ -----
<CAPTION>
Value % of Net
Repurchase Agreement (Note 1) Assets
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
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.
51
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <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 DIVIDED BY 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.
52
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
STATEMENT OF OPERATIONS
May 1, 1997 (commencement of operations) to December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <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.
53
<PAGE>
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.
54
<PAGE>
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.
55
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
May 1, 1997
(commencement
of
operations)
to
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.
56
<PAGE>
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 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 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.
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 Funds 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 Chancellor LGT Senior Secured Management,
Inc. (the "Manager").
When possible, the Manager will rely on quotations provided by banks, dealers or
pricing services with respect to Corporate Loans and Corporate Debt Securities.
Whenever it is not possible to obtain such quotes, the Manager, subject to
guidelines reviewed by the Portfolio's Board of Trustees, values the Corporate
Loans and Corporate Debt Securities at Fair Value, which approximates market
value. In valuing a Corporate Loan or Corporate Debt Security, the Manager
considers, among other factors, (i) the creditworthiness of the U.S. or non-U.S.
Company borrowing or issuing Corporate Debt Securities ("Borrower") and any
intermediate loan participants, (ii) the current interest rate, period until
next interest rate reset and maturity of the Corporate Loan or Corporate Debt
Security, (iii) recent prices in the market for instruments of similar quality,
rate, period until next interest rate reset and maturity.
The value of interest rate swaps, caps and floors is determined in accordance
with a formula and then confirmed periodically by obtaining a bank quotation.
Obligations with remaining maturities of 60 days or less are valued at amortized
cost unless this method no longer produces fair valuations. Repurchase
agreements are valued at cost plus accrued interest. Rights or warrants to
acquire stock or stock acquired pursuant to the exercise of a right or warrant,
may be valued taking into account various factors such as original cost to the
Portfolio, earnings and net worth of the issuer, market prices for securities of
similar issuers, assessment of the issuer's future prosperity, liquidation value
or third party transactions involving the issuer's securities.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Portfolio's Board of Trustees.
(B) Repurchase Agreements
With respect to repurchase agreements entered into by the Portfolio, it is the
Portfolio's policy to always receive, as collateral, United States government
securities or other high quality debt securities of which the value, including
accrued interest, is at least equal to the amount to be repaid to the Portfolio
under each agreement at its maturity.
(C) Foreign Currency Swaps
Foreign currency swaps are the exchange by the Portfolio with another party (the
"counterparty") of the right to receive the currency in which a loan is
denominated for the right to receive U.S. dollars.
The Portfolio may enter into a transaction subject to a foreign currency swap
only if, at the time of entering into such swap, the outstanding debt
obligations of the counterparty are investment grade or determined to be of
comparable quality in the judgement of the Manager. The amounts of U.S. dollar
payments to be received by the Portfolio and the foreign currency payments to be
received by the counterparty are fixed at the time the swap arrangement is
entered into. The swap protects the Portfolio from fluctuations in exchange
rates and locks in the right to receive payments under the loan in a
predetermined amount of U.S. dollars.
(D) Security Transactions
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. The Portfolio may trade securities
on other than normal settlement terms. This may increase the market risk if the
other party to the transaction fails to deliver and causes the Portfolio to
subsequently invest at less advantageous prices.
(E) Taxes
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue
57
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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
58
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
Funds. For performing shareholder servicing, reporting, and general transfer
agent services, GT Services receives an annual maintenance fee of $17.50 per
account, a new account fee of $4.00 per account, a per transaction fee of $1.75
for all transactions other than exchanges and a per exchange fee of $2.25. GT
Services also is reimbursed by the Funds for its out-of-pocket expenses for such
items as postage, forms, telephone charges, stationery and office supplies.
Chancellor LGT is the pricing and accounting agent for the Fund and Portfolio.
Each of the Fund and the Portfolio pays a monthly fee for these services to
Chancellor LGT at the annualized rate, respectively of .02% and .01% of their
average daily net assets.
The Fund pays each of its Directors who is not an employee, officer or director
of the Manager or any of its affiliated companies $5,000 per year plus $300 for
each meeting of the board attended by the Director and reimburses travel and
other expenses incurred in connection with attending board meetings. The
Portfolio pays each of its Trustees who is not an employee, officer, or director
of the Manager or any of its affiliated companies $500 per year plus $150 for
each meeting of the board or any committee thereof attended by the Trustee.
3. Purchases and Sales of Securities
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>
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.
59
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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.
60
<PAGE>
APPENDIX: RATINGS OF SECURITIES
- --------------------------------------------------------------------------------
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
("MOODY'S") SECURITIES RATINGS
Aaa -- Securities which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Securities which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade securities. They are rated lower than the best securities because
margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Securities which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Securities which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such securities lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba -- Securities which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes securities in this class.
B -- Securities which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payment or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Securities which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Securities which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Securities which are rated C are the lowest rated class of securities, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
ranking category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the Company ranks in the lower end of its generic rating
category.
Prospectus Page 61
<PAGE>
NOTES
- --------------------------------------------------------------------------------
<PAGE>
AIM FLOATING RATE FUND
PART C -- OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
Report of Independent Accountants [filed herewith]
Statement of Assets and Liabilities [filed herewith]
(2) EXHIBITS:
<TABLE>
<S> <C>
(a) Articles of Incorporation [previously filed]
(b) Bylaws [previously filed]
(c) None
(d) Instruments Defining Rights of Shareholders [previously filed]
(e) Dividend Reinvestment Plan [previously filed]
(f) None
(g)(1) Investment Management and Administration Contract [filed herewith]
(2) Sub-Advisory and Sub-Administration Contract [filed herewith]
(3) Sub-Sub-Advisor and Sub-Sub-Administration Contract [filed herewith]
(4) Administration Contract [filed herewith]
(5) Sub-Administration Agreement [filed herewith]
(h)(1) Distribution Agreement [filed herewith]
(2) Selected Dealer Agreement [filed herewith]
(3) Bank Agency Agreement [filed herewith]
(i) None
(j) Custodian Agreement [previously filed]
(k)(1) Transfer Agency Agreement [previously filed]
(2) Fund Accounting and Pricing Agent Agreement [previously filed]
(l) Opinion and Consent of Counsel [previously filed]
(m) None
(n) Consent of Independent Accountants [filed herewith]
(o) Audited Financial Statements dated December 31, 1997 [filed herewith]
(p) None
(q) None
</TABLE>
ITEM 25. MARKETING ARRANGEMENTS
See the Distribution Agreement filed as Exhibit (h)(1) to this Registration
Statement.
II-1
<PAGE>
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
<TABLE>
<CAPTION>
NUMBER OF RECORD
SHAREHOLDERS AS OF
TITLE OF CLASS MAY 20, 1998
- --------------------------------------------------------------------------------------------- -------------------
<S> <C>
Shares of Common Stock, par value $0.001 per share........................................... 6,038
</TABLE>
ITEM 29. INDEMNIFICATION
Article Twelfth of the Fund's Articles of Incorporation, previously filed as
Exhibit 1 to Registration Statement No. 333-17425, and Article IX of the Fund's
Bylaws, previously filed as Exhibit 2 to Registration Statement No. 333-17425,
provide that the Fund shall indemnify its present and past directors, officers,
employees and agents, and persons who are serving or have served at the Fund's
request in similar capacities for other entities to the maximum extent permitted
by applicable law (including Maryland law and the 1940 Act). Section 2-418(b) of
the Maryland General Corporation Law ("Maryland Code") permits the Fund to
indemnify its directors unless it is established that the act or omission of the
director was material to the matter giving rise to the proceeding, and (a) the
act or omission was committed in bad faith or was the result of active and
deliberate dishonesty; or (b) the director actually received an improper
personal benefit in money, property or services; or (c) in the case of any
criminal proceeding, the director had reasonable cause to believe the act or
omission was unlawful. Indemnification may be made against judgments, penalties,
fines, settlements and reasonable expenses incurred by the director in
connection with a proceeding, in accordance with the Maryland Code. Pursuant to
Section 2-418(j)(1) and Section 2-418(j)(2) of the Maryland Code, the Fund is
permitted to indemnify its officers, employees and agents to the same extent as
its directors. The provisions set forth above apply insofar as consistent with
Section 17(h) of the 1940 Act, which prohibits indemnification of any director
or officer of the Fund against any liability to the Fund or its shareholders to
which such director or officer otherwise would be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Insofar as indemnification for liability arising under the Securities Act of
1933 ("1933 Act") may be permitted to directors, officers and controlling
persons of the Fund, pursuant to the
II-2
<PAGE>
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-adviser
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;
II-3
<PAGE>
(b) that, for the purposes of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of those securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(c) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(3) Registrant hereby undertakes that:
(a) For the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant under Rule 497(h) under the
Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, and the State of California, on this
27th day of May, 1998.
GT GLOBAL FLOATING RATE FUND, INC.
d/b/a AIM FLOATING RATE FUND
By: WILLIAM J. GUILFOYLE*
-----------------------------------
William J. Guilfoyle
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 and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ --------------------------------------------- ----------------
<S> <C> <C>
WILLIAM J. GUILFOYLE* Director, Chairman of the Board of Directors May 27, 1998
- -------------------------------------- and President (Chief Executive Officer)
William J. Guilfoyle
C. DEREK ANDERSON* Director May 27, 1998
- --------------------------------------
C. Derek Anderson
FRANK S. BAYLEY* Director May 27, 1998
- --------------------------------------
Frank S. Bayley
ARTHUR C. PATTERSON* Director May 27, 1998
- --------------------------------------
Arthur C. Patterson
RUTH H. QUIGLEY* Director May 27, 1998
- --------------------------------------
Ruth H. Quigley
ROBERT G. WADE, JR.* Director May 27, 1998
- --------------------------------------
Robert G. Wade, Jr.
/S/ KENNETH W. CHANCEY Vice President (Principal Accounting Officer) May 27, 1998
- --------------------------------------
Kenneth W. Chancey
*By:/S/ MICHAEL A. SILVER
-------------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney previously filed
</TABLE>
II-5
<PAGE>
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
27th day of May, 1998.
FLOATING RATE PORTFOLIO
By: WILLIAM J. GUILFOYLE*
-----------------------------------
William J. Guilfoyle
President
This Registration Statement of AIM Floating Rate Fund has been signed below
by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ --------------------------------------------- ----------------
<S> <C> <C>
WILLIAM J. GUILFOYLE* Trustee, Chairman of the Board of Trustees
- -------------------------------------- and President (Chief Executive Officer)
William J. Guilfoyle May 27, 1998
C. DEREK ANDERSON* Trustee
- --------------------------------------
C. Derek Anderson May 27, 1998
FRANK S. BAYLEY* Trustee
- --------------------------------------
Frank S. Bayley May 27, 1998
ARTHUR C. PATTERSON* Trustee
- --------------------------------------
Arthur C. Patterson May 27, 1998
RUTH H. QUIGLEY* Trustee
- --------------------------------------
Ruth H. Quigley May 27, 1998
ROBERT G. WADE, JR.* Trustee
- --------------------------------------
Robert G. Wade, Jr. May 27, 1998
/S/ KENNETH W. CHANCEY Vice President (Principal Accounting Officer)
- --------------------------------------
Kenneth W. Chancey May 27, 1998
*By:/S/ MICHAEL A. SILVER
-------------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney previously filed
</TABLE>
II-6
<PAGE>
AIM FLOATING RATE FUND
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
- ----------- ------------------------------------------------------------------------------------- -------------------
<S> <C> <C>
(a) Articles of Incorporation (previously filed).........................................
(b) Bylaws (previously filed)............................................................
(c) None.................................................................................
(d) Instruments Defining Rights of Shareholders (previously filed).......................
(e) Dividend Reinvestment Plan (previously filed)........................................
(f) None.................................................................................
(g)(1) Investment Management and Administration Contract (filed herewith)...................
(2) Sub-Advisory and Sub-Administration Contract (filed herewith)........................
(3) Sub-Sub-Advisory and Sub-Sub-Administration Contract (filed herewith)................
(4) Administration Contract (filed herewith).............................................
(5) Sub-Administration Agreement (filed herewith)........................................
(h)(1) Distribution Agreement (filed herewith)..............................................
(2) Selected Dealer Agreement (filed herewith)...........................................
(3) Bank Agency Agreement (filed herewith)...............................................
(i) None.................................................................................
(j) Custodian Agreement (previously filed)...............................................
(k)(1) Transfer Agency Agreement (previously filed).........................................
(2) Fund Accounting and Pricing Agent Agreement (previously filed).......................
(l) Opinion and consent of counsel (previously filed)....................................
(m) None.................................................................................
(n) Consent of Independent Accountants (filed herewith)..................................
(o) Audited Financial Statements dated December 31, 1997 (filed herewith)................
(p) None.................................................................................
(q) None.................................................................................
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FUND'S
ANNUAL FINANCIAL STATMENTS AND IS QUALFIED IN ITS ENTIRETY
BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001027826
<NAME> GT GLOBAL FLOATING RATE FUND, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 159911
<INVESTMENTS-AT-VALUE> 160033
<RECEIVABLES> 2274
<ASSETS-OTHER> 101
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 162408
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 711
<TOTAL-LIABILITIES> 711
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 161425
<SHARES-COMMON-STOCK> 16134
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 151
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 122
<NET-ASSETS> 161697
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6424
<OTHER-INCOME> 33
<EXPENSES-NET> 1105
<NET-INVESTMENT-INCOME> 5351
<REALIZED-GAINS-CURRENT> 151
<APPREC-INCREASE-CURRENT> 122
<NET-CHANGE-FROM-OPS> 5624
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5351)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16622
<NUMBER-OF-SHARES-REDEEMED> (720)
<SHARES-REINVESTED> 222
<NET-CHANGE-IN-ASSETS> 161697
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1861
<AVERAGE-NET-ASSETS> 124759
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> 0.02
<PER-SHARE-DIVIDEND> (0.46)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.02
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
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, a
Delaware business trust ("Portfolio"), 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 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
1
<PAGE>
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
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) 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 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
Paragraph 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
2
<PAGE>
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) 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 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.
3
<PAGE>
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 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
4
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Attest: FLOATING RATE PORTFOLIO
- -------------------------------------------- By: -----------------------------------------
Name:
Title:
Attest: A I M ADVISORS, INC.
- -------------------------------------------- By: -----------------------------------------
Name:
Title:
</TABLE>
5
<PAGE>
APPENDIX A
TO
INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT
OF
FLOATING RATE PORTFOLIO
The Portfolio shall pay the Adviser, out of the assets of a Portfolio, as
full compensation for all services rendered and all facilities furnished
hereunder, a management fee of 0.95% of the Fund's average daily net assets for
the calendar year, computed in the manner used for the determination of the
Portfolio's net asset value.
6
<PAGE>
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 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 is 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
1
<PAGE>
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.
(d) Sub-Adviser will provide the Portfolio with, or obtain for them,
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 Paragraph 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.
(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
2
<PAGE>
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 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 a 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 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.
3
<PAGE>
10. 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 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 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.
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.
4
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Attest: A I M ADVISORS, INC.
- -------------------------------------------- By: -----------------------------------------
Name:
Title:
Attest: INVESCO SENIOR SECURED MANAGEMENT, INC.
- -------------------------------------------- By: -----------------------------------------
Name:
Title:
</TABLE>
5
<PAGE>
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.
6
<PAGE>
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 SECONDARY 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. 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
1
<PAGE>
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.
(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.
2
<PAGE>
(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 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 a 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.
(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.
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,
3
<PAGE>
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.
(a) This Contract shall become effective upon the date hereabove 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 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.
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.
4
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Attest: INVESCO SENIOR SECURED MANAGEMENT, INC.
- -------------------------------------------- By: -----------------------------------------
Name:
Title:
Attest: INVESCO (NY), INC.
- -------------------------------------------- By: -----------------------------------------
Name:
Title:
</TABLE>
5
<PAGE>
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.
6
<PAGE>
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.
(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 ("Sub-Administration Contract") with a
sub-administrator in 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 delegated
1
<PAGE>
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 of Directors of the Fund 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.
(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 AIM 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 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.
2
<PAGE>
(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.
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 Independent
Directors, cast in person at a meeting called for the purpose of voting on such
approval.
(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 Fund, 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 Directors, 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 Fund.
(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, and no amendment of this Contract shall be effective
until approved by vote of a majority of the Fund's outstanding voting
securities, when required by the 1940 Act.
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
3
<PAGE>
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 FUND, INC.
By:
--------------------------------------
Name:
Title:
Attest:
- --------------------------------------
Name:
Title:
A I M ADVISORS, INC.
By:
--------------------------------------
Attest:
- --------------------------------------
4
<PAGE>
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 between 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,
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
1
<PAGE>
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 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 be paid no 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
2
<PAGE>
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.
(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 Independent
Directors, cast in person at a meeting called for the purpose of voting on such
approval.
(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 Fund, 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 Directors, 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 Fund.
(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, and no amendment of this Contract shall be effective
until approved by vote of a majority of the Fund's outstanding voting
securities, when required by the 1940 Act.
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 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.
3
<PAGE>
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 FUND, INC.
By:
--------------------------------------
Attest:
- --------------------------------------
A I M ADVISORS, INC.
By:
--------------------------------------
Attest:
- --------------------------------------
INVESCO (NY), INC.
By:
--------------------------------------
Attest:
- --------------------------------------
4
<PAGE>
EXHIBIT (h)(1)
DISTRIBUTION AGREEMENT
BETWEEN
GT GLOBAL FLOATING RATE FUND, INC.
AND
A I M DISTRIBUTORS, INC.
THIS AGREEMENT made this 29(th) 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.
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.
(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.
1
<PAGE>
(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.
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 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
2
<PAGE>
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.
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.
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:
--------------------------------------
Name:
Title:
Attest:
- --------------------------------------
Name:
Title:
A I M DISTRIBUTORS, INC.
By:
--------------------------------------
Name: Michael J. Cemo
Title: President
Attest:
- --------------------------------------
Name: Stephen I. Winer
Title: Assistant Secretary
3
<PAGE>
[GRAPHIC]
SELECTED DEALER AGREEMENT
FOR INVESTMENT COMPANIES MANAGED
BY A I M ADVISORS, INC.
To the Undersigned Selected Dealer:
Gentlemen:
A I M Distributors, Inc., as the exclusive national distributor of shares (the
"Shares") of the registered investment companies for which we now or in the
future act as underwriter, as disclosed in each Fund's prospectus, which may be
amended from time to time by us (the "Funds"), understands that you are a member
in good standing of the National Association of Securities Dealers, Inc.
("NASD'), or, if a foreign dealer, that you agree to abide by all of the rules
and regulations of the NASD for purposes of this Agreement (which you confirm by
your signature below). In consideration of the mutual covenants stated below,
you and we hereby agree as follows:
1. Sales of Shares through you will be at the public offering price of such
Shares (the net asset value of the Shares plus any sales charge applicable
to such Shares (the "Sales Charge")), as determined in accordance with the
then effective prospectus or Statement of Additional Information used in
connection with the offer and sale of Shares (collectively, the
"Prospectus"), which public offering price may reflect scheduled variations
in, or the elimination of, the Sales Charge on sales of the Funds' Shares
either generally to the public or in connection with special purchase
plans, as described in the Prospectus. You agree that you will apply any
scheduled variation in, or elimination of, the Sales Charge uniformly to
all offerees in the class specified in the Prospectus.
2. You agree to purchase Shares solely through us and only for the purpose of
covering purchase orders already received from customers or for your own
bona fide investment. You agree not to purchase for any other securities
dealer unless you have an agreement with such other dealer or broker to
handle clearing arrangements and then only in the ordinary course of
business for such purpose and only if such other dealer has executed a
Selected Dealer Agreement with us. You also agree not to withhold any
customer order so as to profit therefrom.
3. The procedures relating to the handling of orders shall be subject to
instructions which we will forward from time to time to all selected
dealers with whom we have entered into a Selected Dealer Agreement. The
minimum initial order shall be specified in the Funds' then current
Prospectuses. All purchase orders are subject to receipt of Shares by us
from the Funds concerned and to acceptance of such orders by us. We reserve
the right in our sole discretion to reject any order.
4. With respect to the Funds the Shares of which are indicated in that Fund's
Prospectus as being sold with a Sales Charge (the "Load Funds"), you will
be allowed the concessions from the public offering price provided in the
Load Funds' Prospectus and/or periodic instruction from us. With respect to
the Funds, the Shares of which are indicated in that
<PAGE>
Page 2
Fund's Prospectus as being sold with a contingent deferred sales charge or
early withdrawal charge (the "CDSC Funds"), you will be paid a commission
as disclosed in the CDSC Fund's Prospectus and/or periodic instructions
from us. With respect to the Funds whose Shares are indicated as being
sold without a Sales Charge or a contingent deferred sales charge (the
"No-Load Funds"), you may charge a reasonable administrative fee. For the
purposes of this Agreement the term Dealer Commission means commissions or
concessions payable to you as disclosed in the Funds' Prospectuses and the
terms "Sales Charge" and "Dealer Commission" apply only to the Load Funds
and the CDSC Funds. All Dealer Commissions are subject to change without
notice by us and will comply with any changes in regulatory requirements.
You agree that you will not combine customer orders to reach breakpoints in
commissions for any purpose whatsoever unless authorized by the Prospectus
or by us in writing.
5. You agree that your transactions in Shares of the Funds will be limited to
(a) the purchase of Shares from us for resale to your customers at the
public offering price then in effect or for your own bona fide investment,
(b) exchanges of Shares between Funds, as permitted by the Funds' then
current registration statement (which includes the Prospectus) and in
accordance with procedures as they may be modified by us from time to time,
and (c) transactions involving the redemption of Shares by a Fund or the
repurchase of Shares by us as an accommodation to shareholders or where
applicable, through tender offers. Redemptions by a Fund and repurchases
by us will be effected in the manner and upon the terms described in the
Prospectus. We will, upon your request, assist you in processing such
orders for redemptions or repurchases. To facilitate prompt payment
following a redemption or repurchase of Shares, the owner's signature shall
appear as registered on the Funds' records and, as described in the
Prospectus, it may be required to be guaranteed by a commercial bank, trust
company or a member of a national securities exchange.
6. Sales and exchanges of Shares may only be made in those states and
jurisdictions where the Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those states
and jurisdictions in which the Shares are registered or qualified for sale,
and you agree to indemnify us and/or the Funds for any claim, liability,
expense or loss in any way arising out of a sale of Shares in any state or
jurisdiction in which such Shares are not so registered or qualified.
7. We shall accept orders only on the basis of the then current offering
price. You agree to place orders in respect of Shares immediately upon the
receipt of orders from your customers for the same number of Shares. Orders
which you receive from your customers shall be deemed to be placed with us
when received by us. Orders which you receive prior to the close of
business, as defined in the Prospectus, and placed with us within the time
frame set forth in the Prospectus shall be priced at the offering price
next computed after they are received by you. We will not accept from you a
conditional order on any basis. All orders shall be subject to confirmation
by us.
<PAGE>
Page 3
8. Your customer will be entitled to a reduction in the Sales Charge on
purchases made under a Letter of Intent or Right of Accumulation described
in the Prospectus. In such case, your Dealer Commission will be based upon
such reduced Sales Charge; however, in the case of a Letter of Intent
signed by your customer, an adjustment to a higher Dealer Commission will
thereafter be made to reflect actual purchases by your customer if he
should fail to fulfill his Letter of Intent. When placing wire trades, you
agree to advise us of any Letter of Intent signed by your customer or of
any Right of Accumulation available to him of which he has made you aware.
If you fail to so advise us, you will be liable to us for the return of any
Dealer Commission plus interest thereon.
9. You and we agree to abide by the Conduct Rules of the NASD and all other
federal and state rules and regulations that are now or may become
applicable to transactions hereunder. Your expulsion from the NASD will
automatically terminate this Agreement without notice. Your suspension from
the NASD or a violation by you of applicable state and federal laws and
rules and regulations of authorized regulatory agencies will terminate this
Agreement effective upon notice received by you from us. You agree that it
is your responsibility to determine the suitability of any Shares as
investments for your customers, and that AIM Distributors has no
responsibility for such determination.
10. With respect to the Load Funds and the CDSC Funds, and unless otherwise
agreed, settlement shall be made at the offices of the Funds' transfer
agent within three (3) business days after our acceptance of the order.
With respect to the No-Load Funds, settlement will be made only upon
receipt by the Fund of payment in the form of federal funds. If payment is
not so received or made within ten (10) business days of our acceptance of
the order, we reserve the right to cancel the sale or, at our option, to
sell the Shares to the Funds at the then prevailing net asset value. In
this event, or in the event that you cancel the trade for any reason, you
agree to be responsible for any loss resulting to the Funds or to us from
your failure to make payments as aforesaid. You shall not be entitled to
any gains generated thereby.
11. If any Shares of any of the Load Funds sold to you under the terms of this
Agreement are redeemed by the Fund or repurchased for the account of the
Funds or are tendered to the Funds for redemption or repurchase within
seven (7) business days after the date of our confirmation to you of your
original purchase order therefore, you agree to pay forthwith to us the
full amount of the Dealer Commission allowed to you on the original sale
and we agree to pay such amount to the Fund when received by us. We also
agree to pay to the Fund the amount of our share of the Sales Charge on the
original sale of such Shares.
12. Any order placed by you for the repurchase of Shares of a Fund is subject
to the timely receipt by the Fund's transfer agent of all required
documents in good order. If such documents are not received within a
reasonable time after the order is placed, the order is subject to
cancellation, in which case you agree to be responsible for any loss
resulting
<PAGE>
Page 4
to the Fund or to us from such cancellation.
13. We reserve the right in our discretion without notice to you to suspend
sales or withdraw any offering of Shares entirely, to change the offering
prices as provided in the Prospectus or, upon notice to you, to amend or
cancel this Agreement. You agree that any order to purchase Shares of the
Funds placed by you after notice of any amendment to this Agreement has
been sent to you shall constitute your agreement to any such amendment.
14. In every transaction, we will act as agent for the Fund and you will act as
principal for your own account. You have no authority whatsoever to act as
our agent or as agent for the Funds, any other Selected Dealer or the
Funds' transfer agent and nothing in this Agreement shall serve to appoint
you as an agent of any of the foregoing in connection with transactions
with your customers or otherwise.
15. No person is authorized to make any representations concerning the Funds or
their Shares except those contained in the Prospectus and any such
information as may be released by us as information supplemental to the
Prospectus. If you should make such unauthorized representation, you agree
to indemnify the Funds and us from and against any and all claims,
liability, expense or loss in any way arising out of or in any way
connected with such representation.
16. We will supply you with copies of the Prospectuses of the Funds (including
any amendments thereto) in reasonable quantities upon request. You will
provide all customers with a prospectus prior to or at the time such
customer purchases Shares. You will provide any customer who so requests a
copy of the Statement of Additional Information within the time dictated by
regulatory requirements, as they may be amended from time to time.
17. You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers
by wire or telephone for purchases, exchanges or redemptions, and shall
indemnify us against any claims by your customers as a result of your
failure to properly transmit their instructions.
18. No advertising or sales literature, as such terms are defined by the NASD,
of any kind whatsoever will be used by you with respect to the Funds or us
unless first provided to you by us or unless you have obtained our prior
written approval.
19. All expenses incurred in connection with your activities under this
Agreement shall be borne by you.
20. This Agreement shall not be assignable by you. This Agreement shall be
constructed in accordance with the laws of the State of Texas.
<PAGE>
Page 5
21. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as registered from time to time with the NASD.
22. This Agreement constitutes the entire agreement between the undersigned and
supersedes all prior oral or written agreements between the parties hereto.
<PAGE>
Page 6
A I M DISTRIBUTORS, INC.
Date: By: X
------------------------ --------------------------
The undersigned accepts your invitation to become a Selected Dealer
and agrees to abide by the foregoing terms and conditions.
The undersigned acknowledges receipt of Prospectuses for use in
connection with offers and sales of the Funds.
Date By: X
------------------------ --------------------------
Signature
--------------------------
Print Name Title
--------------------------
Dealer's Name
--------------------------
Address
--------------------------
City State Zip
--------------------------
Telephone
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
<PAGE>
[LOGO]
BANK ACTING AS AGENT
FOR ITS CUSTOMERS
Agreement Relating to shares
OF THE AIM FAMILY OF FUNDS-Registered Trademark-
(CONFIRMATION AND PROSPECTUS TO BE SENT BY A I M
DISTRIBUTORS, INC. TO CUSTOMER)
A I M Distributors, Inc. is the exclusive national distributor of the shares of
the registered investment companies for which we now or in the future act as
underwriter, as disclosed in each Fund's prospectus, which may be amended from
time to time (the "Funds"). As exclusive agent for the Funds, we are offering to
make available shares of the Funds (the "Shares") for purchase by your customers
on the following terms:
1. In all sales of Shares you shall act as agent for your customers, and in no
transaction shall you have any authority to act as agent for any Fund or
for us.
2. The customers in question are, for all purposes, your customers and not
customers of A I M Distributors, Inc. In receiving orders from your
customers who purchase Shares, A I M Distributors, Inc. is not soliciting
such customers and, therefore, has no responsibility for determining
whether Shares are suitable investments for such customers.
3. It is hereby understood that in all cases in which you place orders with us
for the purchase of Shares (a) you are acting as agent for the customer;
(b) the transactions are without recourse against you by the customer; (c)
as between you and the customer, the customer will have full beneficial
ownership of the securities; (d) each such transaction is initiated solely
upon the order of the customer; and (e) each such transaction is for the
account of the customer and not for your account.
4. Orders received from you will be accepted by us only at the public offering
price applicable to each order, as established by the then current
prospectus or Statement of Additional Information, (collectively, the
"Prospectus") of the appropriate Fund, subject to the discounts (defined
below) provided in such Prospectus. Following receipt from you of any order
to purchase Shares for the account of a customer, we shall confirm such
order to you in writing. We shall be responsible for sending your customer
a written confirmation of the order with a copy of the appropriate Fund's
current Prospectus. We shall send you a copy of such confirmation.
Additional instructions may be forwarded to you from time to time. All
orders are subject to acceptance or rejection by us in our sole discretion.
5. Members of the general public, including your customers, may purchase
Shares only at the public offering price determined in the manner described
in the current Prospectus of the appropriate Fund. With respect to the
Funds, the Shares of which are indicated in
<PAGE>
Bank Acting as Agent for its Customers Page 2
- --------------------------------------------------------------------------------
that Fund's Prospectus as being sold with a sales charge (i.e. the "Load
Funds"), you will be allowed to retain a commission or concession from the
public offering price provided in such Load Funds' current Prospectus
and/or periodic instructions from us. With respect to the Funds, the
Shares of which are indicated in that Fund's Prospectus as being sold with
a contingent deferred sales charge or early withdrawal charge (the "CDSC
Funds"), you will be paid a commission or concession as disclosed in the
CDSC Fund's then current Prospectus and/or periodic instructions from us.
With respect to the Funds whose Shares are indicated on the attached
Schedule as being sold without a sales charge or a contingent deferred
sales charge, (i.e. the "No-Load Funds"), you will not be allowed to retain
any commission or concession. All commissions or concessions set forth in
any of the Load Funds' or CDSC Funds' Prospectus are subject to change
without notice by us and will comply with any changes in regulatory
requirements.
6. The tables of sales charges and discounts set forth in the current
Prospectus of each Fund are applicable to all purchases made at any one
time by any "purchaser", as defined in the current Prospectus. For this
purpose, a purchaser may aggregate concurrent purchases of securities of
any of the Funds.
7. Reduced sales charges may also be available as a result of quantity
discounts, rights of accumulation or letters of intent. Further
information as to such reduced sales charges, if any, is set forth in the
appropriate Fund Prospectus. In such case, your discount will be based
upon such reduced sales charge; however, in the case of a letter of intent
signed by your customer, an adjustment to a higher discount will thereafter
be made to reflect actual purchases by your customer if he should fail to
fulfill his letter of intent. You agree to advise us promptly as to the
amounts of any sales made by you to your customers qualifying for reduced
sales charges. If you fail to so advise us of any letter of intent signed
by your customer or of any right of accumulation available to him of which
he has made you aware, you will be liable to us for the return of any
discount plus interest thereon.
8. By accepting this Agreement you agree:
a. that you will purchase Shares only from us;
b. that you will purchase Shares from us only to cover purchase orders
already received from your customers; and
c. that you will not withhold placing with us orders received from your
customers so as to profit yourself as a result of such withholdings.
9. We will not accept from you a conditional order for Shares on any basis.
10. Payment for Shares ordered from us shall be in the form of a wire transfer
or a cashiers check mailed to us. Payment shall be made within three (3)
business days after our acceptance of the order placed on behalf of your
customer. Payment shall be equal to the public offering price less the
discount retained by you hereunder.
<PAGE>
Bank Acting as Agent for its Customers Page 3
- --------------------------------------------------------------------------------
11. If payment is not received within ten (10) business days of our acceptance
of the order, we reserve the right to cancel the sale or, at our option, to
sell Shares to the Fund at the then prevailing net asset value. In this
event you agree to be responsible for any loss resulting to the Fund from
the failure to make payment as aforesaid.
12. Shares sold hereunder shall be available in book-entry form on the books of
the Funds' Transfer Agent unless other instructions have been given.
13. No person is authorized to make any representations concerning Shares of
any Fund except those contained in the applicable current Prospectus and
printed information subsequently issued by the appropriate Fund or by us as
information supplemental to such Prospectus. You agree that you will not
make Shares available to your customers except under circumstances that
will result in compliance with the applicable Federal and State Securities
and Banking Laws and that you will not furnish to any person any
information contained in the then current Prospectus or cause any
advertisement to be published in any newspaper or posted in any public
place without our consent and the consent of the appropriate Fund.
14. Sales and exchanges of Shares may only be made in those states and
jurisdictions where Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those states
and jurisdictions in which the Shares are registered or qualified for
sales, and you agree to indemnify us and/or the Funds for any claim,
liability, expense or loss in any way arising out of a sale of Shares in
any state or jurisdiction not identified by us as a state or jurisdiction
in which such Shares are so registered or qualified. We agree to indemnify
you for any claim, liability, expense or loss in any way arising out of a
sale of shares in any state or jurisdiction identified by us as a state or
jurisdiction in which shares are so registered or qualified.
15. You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers
by wire or telephone for purchases, exchanges or redemptions, and shall
indemnify us against any claims by your customers as a result of your
failure to properly transmit their instructions.
16. All sales will be made subject to our receipt of Shares from the
appropriate Fund. We reserve the right, in our discretion, without notice,
to modify, suspend or withdraw entirely the offering of any Shares and,
upon notice, to change the sales charge or discount or to modify, cancel or
change the terms of this Agreement. You agree that any order to purchase
Shares of the Funds placed by you after any notice of amendment to this
Agreement has been sent to you shall constitute your agreement to any such
agreement.
17. The names of your customers shall remain your sole property and shall not
be used by us for any purpose except for servicing and information mailings
in the normal course of
<PAGE>
Bank Acting as Agent for its Customers Page 4
- --------------------------------------------------------------------------------
business to Fund Shareholders.
18. Your acceptance of this Agreement constitutes a representation that you are
a "Bank" as defined in Section 3 (a) (6) of the Securities Exchange Act of
1934, as amended, and are duly authorized to engage in the transactions to
be performed hereunder.
All communications to us should be sent to A I M Distributors, Inc., Eleven
Greenway Plaza, Suite 100, Houston, Texas 77046. Any notice to you shall be
duly given if mailed or telegraphed to you at the address specified by you
below or to such other address as you shall have designated in writing to
us. This Agreement shall be construed in accordance with the laws of the
State of Texas.
A I M DISTRIBUTORS, INC.
Date: By: X
------------------------- ---------------------------------
The undersigned agrees to abide by the foregoing terms and conditions.
Date: By: X
------------------------- ---------------------------------
Signature
---------------------------------
Print Name Title
---------------------------------
Dealer's Name
---------------------------------
Address
---------------------------------
City State Zip
Please sign both copies and return one copy of each to:
<PAGE>
Bank Acting as Agent for its Customers Page 5
- --------------------------------------------------------------------------------
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
<PAGE>
[letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of GT Global Floating Rate Fund, Inc.
d/b/a AIM Floating Rate Fund):
We hereby consent to the inclusion of our report 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 Statement of Additional Information with respect to
the Post-Effective Amendment to the Registration Statement on Form N-2 under
the Securities Act of 1933, as amended, of AIM Floating Rate Fund. We further
consent to the reference to our Firm under the captions "Financial
Highlights" and "Other Information" in the Prospectus and "Independent
Accountants" in the Statement of Additional Information.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
May 26, 1998
<PAGE>
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.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 17, 1998
F1
<PAGE>
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.
F2
<PAGE>
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.
F3
<PAGE>
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
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
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>
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 --
Sun Apparel, Inc.: ........................................ B1 -- -- 1.5
TEXTILES & APPAREL
Term loan B due 9/30/04 ................................. -- 2,500,000 2,493,750 --
------------
8,884,688
------------
Finance (2.2%)
WCI Communities Limited Partnership, Inc.: ................ B1 -- -- 2.2
REAL ESTATE
Term loan due 2/18/00 ................................... -- 3,500,000 3,482,500 --
------------
3,482,500
------------
Energy (1.7%)
Centennial Resources, Inc.: ............................... B2 -- -- 1.7
COAL
Term loan B due 3/31/04 ................................. -- 1,966,667 1,954,375 --
Term loan A due 3/31/02 ................................. -- 850,000 844,688 --
------------
2,799,063 --
------------ -----
TOTAL SENIOR SECURED FLOATING RATE INTERESTS (cost
$156,936,118) .............................................. 157,057,699 97.1
------------ -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
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.
F5
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <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 DIVIDED BY 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.
F6
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
STATEMENT OF OPERATIONS
May 1, 1997 (commencement of operations) to December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <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.
F7
<PAGE>
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.
F8
<PAGE>
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.
F9
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC. -- CONSOLIDATED
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
MAY 1, 1997
(COMMENCEMENT
OF
OPERATIONS)
TO
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.
F10
<PAGE>
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 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 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.
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 Funds 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 Chancellor LGT Senior Secured Management,
Inc. (the "Manager").
When possible, the Manager will rely on quotations provided by banks, dealers or
pricing services with respect to Corporate Loans and Corporate Debt Securities.
Whenever it is not possible to obtain such quotes, the Manager, subject to
guidelines reviewed by the Portfolio's Board of Trustees, values the Corporate
Loans and Corporate Debt Securities at Fair Value, which approximates market
value. In valuing a Corporate Loan or Corporate Debt Security, the Manager
considers, among other factors, (i) the creditworthiness of the U.S. or non-U.S.
Company borrowing or issuing Corporate Debt Securities ("Borrower") and any
intermediate loan participants, (ii) the current interest rate, period until
next interest rate reset and maturity of the Corporate Loan or Corporate Debt
Security, (iii) recent prices in the market for instruments of similar quality,
rate, period until next interest rate reset and maturity.
The value of interest rate swaps, caps and floors is determined in accordance
with a formula and then confirmed periodically by obtaining a bank quotation.
Obligations with remaining maturities of 60 days or less are valued at amortized
cost unless this method no longer produces fair valuations. Repurchase
agreements are valued at cost plus accrued interest. Rights or warrants to
acquire stock or stock acquired pursuant to the exercise of a right or warrant,
may be valued taking into account various factors such as original cost to the
Portfolio, earnings and net worth of the issuer, market prices for securities of
similar issuers, assessment of the issuer's future prosperity, liquidation value
or third party transactions involving the issuer's securities.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Portfolio's Board of Trustees.
(B) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, it is the
Portfolio's policy to always receive, as collateral, United States government
securities or other high quality debt securities of which the value, including
accrued interest, is at least equal to the amount to be repaid to the Portfolio
under each agreement at its maturity.
(C) FOREIGN CURRENCY SWAPS
Foreign currency swaps are the exchange by the Portfolio with another party (the
"counterparty") of the right to receive the currency in which a loan is
denominated for the right to receive U.S. dollars.
The Portfolio may enter into a transaction subject to a foreign currency swap
only if, at the time of entering into such swap, the outstanding debt
obligations of the counterparty are investment grade or determined to be of
comparable quality in the judgement of the Manager. The amounts of U.S. dollar
payments to be received by the Portfolio and the foreign currency payments to be
received by the counterparty are fixed at the time the swap arrangement is
entered into. The swap protects the Portfolio from fluctuations in exchange
rates and locks in the right to receive payments under the loan in a
predetermined amount of U.S. dollars.
(D) SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. The Portfolio may trade securities
on other than normal settlement terms. This may increase the market risk if the
other party to the transaction fails to deliver and causes the Portfolio to
subsequently invest at less advantageous prices.
(E) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue
F11
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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
F12
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
Funds. For performing shareholder servicing, reporting, and general transfer
agent services, GT Services receives an annual maintenance fee of $17.50 per
account, a new account fee of $4.00 per account, a per transaction fee of $1.75
for all transactions other than exchanges and a per exchange fee of $2.25. GT
Services also is reimbursed by the Funds for its out-of-pocket expenses for such
items as postage, forms, telephone charges, stationery and office supplies.
Chancellor LGT is the pricing and accounting agent for the Fund and Portfolio.
Each of the Fund and the Portfolio pays a monthly fee for these services to
Chancellor LGT at the annualized rate, respectively of .02% and .01% of their
average daily net assets.
The Fund pays each of its Directors who is not an employee, officer or director
of the Manager or any of its affiliated companies $5,000 per year plus $300 for
each meeting of the board attended by the Director and reimburses travel and
other expenses incurred in connection with attending board meetings. The
Portfolio pays each of its Trustees who is not an employee, officer, or director
of the Manager or any of its affiliated companies $500 per year plus $150 for
each meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
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>
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.
F13
<PAGE>
GT GLOBAL FLOATING RATE FUND, INC.
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.
F14
