SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
ABERDEEN GLOBAL INCOME FUND, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box): [X] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[FCO LOGO]
800 Scudders Mill Road
Plainsboro, New Jersey 08536
(609) 282-4600
February ___, 2003
Dear Stockholder:
The Annual Meeting of Stockholders is to be held at 4:30 p.m. (Eastern time), on
Thursday, March 20, 2003, at Dryden Hall, 7th Floor, Plaza Building, 751 Broad
Street, Newark, New Jersey. A Proxy Statement regarding the meeting, a proxy
card for your vote at the meeting and an envelope, postage pre-paid, in which to
return your proxy card are enclosed.
At the Annual Meeting, the Fund's common stockholders will vote for the election
of the Fund's Class II Directors for three-year terms and until their successors
are duly elected and qualify, and the Fund's preferred stockholders will vote
for the election of two additional Directors for one-year terms and until their
successors are duly elected and qualify. Stockholders will also consider
approval of the amendment and restatement of the Articles Supplementary creating
the Fund's Series W-7 Auction Market Preferred Stock. Stockholders who are
present at the meeting will hear a report on the Fund and will be given an
opportunity to discuss matters of interest to you as a stockholder.
Your Directors recommend that you vote in favor of each of the foregoing
matters.
Martin J. Gilbert
Chairman
YOU ARE URGED TO COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE TO ASSURE A QUORUM AT THE MEETING. THIS IS IMPORTANT REGARDLESS OF THE
NUMBER OF SHARES THAT YOU OWN.
ABERDEEN GLOBAL INCOME FUND, INC.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
---------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 20, 2003
---------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Aberdeen
Global Income Fund, Inc., a Maryland corporation (the "Fund"), will be held at
Dryden Hall, 7th Floor, Plaza Building, 751 Broad Street, Newark, New Jersey, on
Thursday, March 20, 2003, at 4:30 p.m. (Eastern time), for the following
purposes, each more fully described in the Proxy Statement:
1. To elect two Directors to serve as Class II Directors for three-year
terms and until their successors are duly elected and qualify;
2. To elect two Directors to represent the interests of the holders of
preferred stock for the ensuing year;
3. To approve the amendment and restatement of the Articles Supplementary
creating the Fund's Series W-7 Auction Market Preferred Stock; and
4. To transact any other business that may properly come before the meeting
or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on January 31, 2003 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting or any adjournment or postponement thereof.
By Order of the Board of Directors,
Roy M. Randall
Secretary
Plainsboro, New Jersey
February ___, 2003
IMPORTANT: Stockholders are cordially invited to attend the meeting.
Stockholders who do not expect to attend the meeting in person are requested to
complete, date and sign the enclosed proxy card and return it promptly in the
addressed envelope which requires no postage and is intended for your
convenience. Your prompt return of the enclosed proxy card may save the Fund the
necessity and expense of further solicitations to assure a quorum at the
meeting. The enclosed proxy is being solicited on behalf of the Board of
Directors of the Fund.
PROXY STATEMENT
ABERDEEN GLOBAL INCOME FUND, INC.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
---------------------------------------------------------
Annual Meeting of Stockholders
March 20, 2003
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INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors of Aberdeen Global Income Fund, Inc., a
Maryland corporation (the "Fund"), to be voted at the Annual Meeting of
Stockholders of the Fund (the "Meeting") to be held at Dryden Hall, 7th Floor,
Plaza Building, 751 Broad Street, Newark, New Jersey, on Thursday, March 20,
2003, at 4:30 p.m. (Eastern time). The approximate mailing date for this Proxy
Statement is February ___, 2003 or as soon as practicable thereafter.
All properly executed proxies received prior to the Meeting will be voted at the
Meeting in accordance with the instructions marked on the proxy card. Unless
instructions to the contrary are marked, proxies submitted by holders of the
Fund's common stock will be voted FOR Proposals 1 and 3, and proxies submitted
by holders of the Fund's preferred stock will be voted FOR Proposals 2 and 3.
The persons named as proxy holders will vote in their discretion on any other
business that may properly come before the Meeting or any adjournments or
postponements thereof. Any proxy may be revoked at any time prior to its
exercise by submitting a properly executed, subsequently dated proxy, giving
written notice to the Secretary of the Fund (addressed to the Secretary at the
principal executive office of the Fund, 800 Scudders Mill Road, Plainsboro, New
Jersey 08536), or by attending the Meeting and voting in person. Stockholders
may proxy vote using the enclosed proxy card along with the enclosed envelope
with pre-paid postage. Stockholders may also proxy vote by telephone, fax or
internet. To proxy vote by telephone, fax or internet, stockholders should
follow the instructions contained on their proxy card.
The presence at the Meeting, in person or by proxy, of the stockholders entitled
to cast a majority of all the votes entitled to be cast at the Meeting shall be
necessary and sufficient to constitute a quorum for the transaction of business.
For purposes of determining the presence of a quorum at the Meeting, abstentions
and broker non-votes (that is, proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular proposal with respect to which
the brokers or nominees do not have discretionary power) will be treated as
shares that are present.
Approval of Proposal 1 (Election of Class II Directors to the Board of
Directors) will require the affirmative vote of a majority of the shares of
common stock present in person or by proxy at the Meeting and entitled to vote
thereon. Approval of Proposal 2 (Election of Preferred Directors to the Board of
Directors) will require the affirmative vote of a majority of the shares of
preferred stock present in person or by proxy at the Meeting and entitled to
vote thereon. Approval of Proposal 3 (The amendment and restatement of the
Articles Supplementary creating the Fund's Series W-7 Auction Market Preferred
Stock) will require the affirmative vote of a majority of the shares of common
and preferred stock voting separately. Abstentions are treated as present, and
will have the effect of a vote "against" each Proposal. Proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on these Proposals
will be voted "for" Proposals 1 and 2 and will have the effect of a vote against
Proposal 3.
1
In the event that the necessary quorum to transact business at the Meeting is
not obtained or a quorum is present at the Meeting but sufficient votes to
approve the proposals are not received, the proxy holders may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. Any
adjournment will require the affirmative vote of a majority of those shares
present at the Meeting in person or by proxy. If the necessary quorum is not
obtained, the persons named as proxy holders will vote in favor of the
adjournment. If a quorum is present, the proxy holders will vote those proxies
required to be voted "for" a proposal with respect to which insufficient votes
for approval have been received, in favor of such adjournment, and will vote
those proxies required to be voted "against" a proposal, against adjournment. A
shareholder vote may be taken on any proposal prior to adjournment if sufficient
votes have been received for approval of that proposal.
The following table indicates which class of the Fund's stockholders is being
solicited with respect to each Proposal to be considered at the Meeting.
Solicitation of Vote
Solicitation of Vote of Preferred
of Common Stockholders
Stockholders (Series W-7)
------------ ------------
Proposal 1:
Election of Class II Directors [check mark] X
Proposal 2:
Election of Preferred Directors X [check mark]
Proposal 3:
Amendment and Restatement of the Articles Supplementary [check mark] [check mark]
The Board of Directors has fixed the close of business on January 31, 2003 as
the record date ("Record Date") for the determination of stockholders entitled
to notice of and to vote at the Meeting and at any adjournment or postponement
thereof. Stockholders on the Record Date will be entitled to one vote for each
share held. As of January 31, 2003, the Fund had outstanding 9,266,209 shares of
common stock, par value $0.01 per share and 1,200 shares of Auction Market
Preferred Stock, Series W-7, par value $0.01 per share.
The Board of Directors of the Fund knows of no other business that will be
presented for consideration at the Meeting. If any other matter is properly
presented, it is the intention of the persons named on the enclosed proxy card
to vote in accordance with their discretion.
The Fund will furnish, without charge, a copy of the Fund's annual report for
its fiscal year ended October 31, 2002, and any more recent reports, to any Fund
stockholder upon request. To request a copy, please call or write to Aberdeen
Asset Management Investor Relations, 45 Broadway, 31st Floor, New York, New York
10006, Telephone: 1-800-522-5465.
PROPOSAL 1: ELECTION OF CLASS II DIRECTORS
The Fund's Articles of Incorporation provide that the Board of Directors to be
elected by holders of the Fund's common stock will be divided into three
classes, as nearly equal in number as possible, each of which will serve for
three years with one class being elected each year. Each year the term of office
of one class will expire. Directors who are deemed "interested persons" (as that
term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Fund, the Investment Manager or the Investment
Adviser, are referred to in this Proxy Statement as "Interested Directors."
Directors who are not interested persons as described above are referred to in
this Proxy Statement as "Independent Directors."
The Board of Directors of the Fund, including the Independent Directors, upon
the recommendation of the Fund's Nominating Committee, which is composed
entirely of Independent Directors, has nominated William J. Potter and Peter D.
Sacks to serve as Class II Directors for three-year terms to expire at the
Annual Meeting of Stockholders to be held in 2006 and until their successors are
duly elected and qualify. Messrs. Potter and Sacks were elected by stockholders
to serve until the 2003 Annual Meeting. The nominees have indicated an intention
to serve if elected and have consented to be named in this Proxy Statement.
2
It is the intention of the persons named on the enclosed proxy card to vote for
the election of the persons indicated above to serve as Class II Directors for a
three-year term. The Board of Directors of the Fund knows of no reason why any
of these nominees will be unable to serve, but in the event of any such
inability, the proxies received will be voted for such substituted nominees as
the Board of Directors may recommend.
The names of the Fund's nominees for election as Class II Directors, and each
other Director of the Fund, and their addresses, ages and principal
occupations during the past five years are provided in the table below.
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Number of
Funds in
Term of Fund
Office Complex*
and Overseen by
Position(s) Length Director or
Held With of Time Principal Occupation(s) Nominee for Other Directorships Held by
Name, Address and Age the Fund Served During Past Five Years Director Director or Nominee for Director
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Class II
Current Directors and Nominees for a Term expiring at the Annual Meeting to be held in 2006
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Independent Directors
---------------------
William J. Potter+ ++(degree) Class II Current Mr. Potter has extensive 3 Aberdeen Australia Equity
236 West 27th Street Director term experience in investment Fund, Inc.; Aberdeen
3rd Floor expires banking and fund Asia-Pacific Income Fund,
New York, NY 10001 2003; management. Mr. Potter Inc.; Aberdeen Asia-Pacific
Director has held senior positions Income Investment Company
Age: 54 since with Toronto Dominion Limited; National Foreign
1992 Bank, Barclays Bank PLC, Trade Counsel (trade
and Prudential association); Alexandria
Securities, Inc., as well Bancorp (banking group in
as board of director Cayman Islands); E.C. Power,
positions with investment Inc. (energy company);
funds involving over $20 Alexandria Funds.
billion in assets since
1983. Mr. Potter has
been involved in the
Australian capital
markets since 1974,
including management and
board of director
positions with a noted
Australian brokerage
house. Mr. Potter is
President of a U.S.
investment bank and has
securities licenses in
both the U.S. and
Canada. Mr. Potter also
has extensive securities
underwriting experience
in various capital
markets with an emphasis
on natural resources.
Mr. Potter is currently
President of Ridgewood
Group International Ltd.,
an international
consulting and merchant
banking company, and
President of Ridgewood
Capital Funding, Inc., a
private placement
securities firm.
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3
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Number of
Funds in
Term of Fund
Office Complex*
and Overseen by
Position(s) Length Director or
Held With of Time Principal Occupation(s) Nominee for Other Directorships Held by
Name, Address and Age the Fund Served During Past Five Years Director Director or Nominee for Director
---------------------------------------------------------------------------------------------------------------------------------
Peter D. Sacks+ ++ Class II Current Mr. Sacks is currently 3 Aberdeen Australia Equity
445 King Street West, Director term Managing Partner of Toron Fund, Inc.; Aberdeen
4th Floor expires Capital Markets, Inc., a Asia-Pacific Income Fund,
Toronto, Ontario M5V 1K4 2003; company he established in Inc.; Aberdeen Asia-Pacific
Canada Director 1988 to design and manage Income Investment Company
since customized equity, fixed Limited; Aberdeen G7 Trust;
Age: 57 1992 income and currency First Horizon Holdings LTD;
portfolios for individual First Horizon Capital Corp.;
and corporate clients. Cirrus Financial Concepts Inc.
Mr. Sacks also serves on
the Boards of Directors
of Toron Capital Markets,
Inc. (portfolio
management), Toron
Capital Management, Ltd.
and Toron Asset
Management, Inc.
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Class III Directors
Term expiring at the Annual Meeting to be held in 2004
---------------------------------------------------------------------------------------------------------------------------------
Interested Director
-------------------
Martin J. Gilbert** Chairman Term as Mr. Gilbert is the Chief 2 Aberdeen Asia-Pacific Income
One Albyn Place of Board, Director Executive and an Executive Fund, Inc.; Aberdeen
Aberdeen, AB10 1YG Class III expires Director of Aberdeen Asset Asia-Pacific Income Investment
United Kingdom Director 2004; Management PLC, which was Company Limited.
Director established in 1983 and is
Age: 47 since the parent company of the Mr. Gilbert is also a director
2001 Fund's Investment Manager of foreign funds advised by
and Investment Adviser. entities affiliated with the
He is one of the founding Investment Manager and the
directors of Aberdeen Investment Adviser.
Asset Management PLC and
has been involved in the
investment management
industry since 1982, after
he qualified as a
chartered accountant. He
has been Chairman of the
Board of the Fund and of
Aberdeen Asia-Pacific
Income Fund, Inc. since
2001. He has been a
Director of Aberdeen Asset
Management Limited (the
Fund's Investment Adviser)
and Aberdeen Asset
Managers (C.I.) Limited
(the Fund's Investment
Manager) since 2001.
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4
---------------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Term of Fund
Office Complex*
and Overseen by
Position(s) Length Director or
Held With of Time Principal Occupation(s) Nominee for Other Directorships Held by
Name, Address and Age the Fund Served During Past Five Years Director Director or Nominee for Director
---------------------------------------------------------------------------------------------------------------------------------
Independent Directors
---------------------
Neville J. Miles(degree) Class III Term Mr. Miles has over 20 3 Aberdeen Australia Equity
2 Paddington Street Director expires years of international Fund, Inc.; Aberdeen
Paddington, NSW 2021 2004; investment banking Asia-Pacific Income Fund,
Australia Director experience. He was Inc.; Aberdeen Asia-Pacific
since formerly head of Income Investment Company
Age: 56 1999 Corporate Treasury at Limited; Aberdeen Leaders
Westpac Banking Limited (investment company).
Corporation and Managing
Director of Ord Minnett
Securities Limited
(stockbrokers). Mr.
Miles has extensive
experience in the areas
of corporate acquisitions
and equity offerings.
Mr. Miles is currently an
investor and real estate
developer. He has
served, for over five
years, as a Director of
Ballyshaw Pty. Ltd.
(investing/consulting)
and Dawnglade Pty. Ltd.
(real estate investment),
and has served as a
Director of Villepen Pty.
Ltd. (real estate
investment company) since
1999; Sonic
Communications Pty. Ltd.
since 2000, and
Commsecure Limited since
2002.
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Warren C. Smith Class III Term Mr. Smith is a Managing 1 Aberdeen Asia-Pacific Income
1002 Sherbrooke St. West Director expires Editor with BCA Investment Company Limited;
Suite 1600 2004; Publications, independent Aberdeen G7 Trust.
Montreal, Quebec H3A 3L6 Director publishers of financial
Canada since market research,
1992 including The Bank Credit
Age: 47 Analyst. Since 1982, he
has helped direct the
firm's investment
strategy, and has been
editor of several U.S.
and international
publications. Mr. Smith
has also developed and
edited new institutional
research products since
1989. Mr. Smith lectures
to investment groups
around the globe.
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5
---------------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Term of Fund
Office Complex*
and Overseen by
Position(s) Length Director or
Held With of Time Principal Occupation(s) Nominee for Other Directorships Held by
Name, Address and Age the Fund Served During Past Five Years Director Director or Nominee for Director
---------------------------------------------------------------------------------------------------------------------------------
Class I Directors
Term expiring at the Annual Meeting to be held in 2005
---------------------------------------------------------------------------------------------------------------------------------
Interested Director
-------------------
Laurence S. Freedman, A.M.** Class I Term Mr. Freedman has over 35 2 EquitiLink Holdings Pty.
25 Lime Street Director expires years of experience in Limited (holding company);
Suite 405 2005; funds management with a Aberdeen Leaders Limited
Sydney, NSW 2000 Director focus on global (investment company); TEN
Australia since investment analysis. Network Holdings Limited
1992 Prior to founding (television network); EIML
Age: 59 EquitiLink in 1981, he Australia Pty. Limited
was Director of (investment company); Link
Investment at BT Traders Pty. Ltd.; Link
Australia Limited. Mr. Traders (Aust) Pty. Ltd.;
Freedman's areas of fund Letota Pty. Ltd.
management specialization
include investment in
resource and development
companies, international
economies and the
geo-political impact on
investment markets. He
was Chairman of the Fund
from 2000 to 2001 and
President of the Fund
from its inception until
2001. Mr. Freedman was
founder of the Fund's
Investment Adviser, and
until December 2000, he
was Joint Managing
Director of the Fund's
Investment Adviser and a
Director of the Fund's
Investment Manager.
Mr. Freedman was also
Chairman from 1995 to
2001, President from 1985
to 2000 and Director
since 1985, of Aberdeen
Australia Equity Fund,
Inc.; Chairman from 1995
to 2000, Vice President
from 1986 to 2001, and
Director from 1986 to
2000, of Aberdeen
Asia-Pacific Income
Fund, Inc.; Joint
Managing Director from
1986 to 2000 of Aberdeen
Asia-Pacific Income
Investment Company
Limited; and Joint
Managing Director from
1988 to 2000 of
EquitiLink Limited
(holding company). He
was a Director of
EquitiLink E Link Ltd.
(investment company)
from 1998 to 2002, and
has been
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6
---------------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Term of Fund
Office Complex*
and Overseen by
Position(s) Length Director or
Held With of Time Principal Occupation(s) Nominee for Other Directorships Held by
Name, Address and Age the Fund Served During Past Five Years Director Director or Nominee for Director
---------------------------------------------------------------------------------------------------------------------------------
Chairman of Link
Enterprises (International)
Pty. Ltd. (investment
company) since 1980.
---------------------------------------------------------------------------------------------------------------------------------
Independent Directors
---------------------
David L. Elsum, A.M.+ Class I Term Mr. Elsum has over 20 3 Aberdeen Australia Equity
9 May Grove Director expires years of experience in Fund, Inc.; Aberdeen
South Yarra, Victoria 3141 2005; investment and insurance Asia-Pacific Income Fund,
Australia Director markets. He was a member Inc.; Aberdeen Asia-Pacific
since of the Corporations and Income Investment Company
Age: 65 1992 Securities Panel of the Limited; Melbourne Wholesale
Australian Securities Fish Market Pty. Ltd.; Queen
Commission until 2000, was Victoria Market Pty. Ltd.
a member of the Australian (municipal market); Financial
Federal Government Planning Association Limited
Administrative Appeals (industry association);
Tribunal until 2001, Aberdeen Leaders Limited
Chairman of Audit Victoria (investment company).
(government statutory
authority) from 1997 to
2000, and has been a
member of the State of
Victoria Regulator-General
Appeal Panel since 2001.
Mr. Elsum is Chairman of
Stodart Investment Pty.
Ltd. He was founding
Managing Director of Capel
Court Investment Bank, and
has served as Chief
Executive of several
major public companies,
including The MLC
Limited (insurance) and
President of the State
of Victoria
Superannuation Fund
(pension fund
management).
---------------------------------------------------------------------------------------------------------------------------------
E. Duff Scott++ Class I Term Mr. Scott is currently 1 Aberdeen Asia-Pacific Income
8 Sunnydene Crescent Director expires President of Multibanc Investment Company Limited;
Toronto, Ontario M4N 3J6 2005; Financial Corporation and Aberdeen G7 Trust; Multibanc
Canada Director Multibanc NT Financial Financial Corporation and
since Corporation, investment Multibanc NT Financial
Age: 66 1992 holding companies. He Corporation (investment
also serves as Chairman holding companies); QLT Inc.
of QLT Inc., a (biopharmaceuticals); Perle
biopharmaceutical Systems, Inc. (computers);
company. Previously, Mr. Lions Gate Entertainment
Scott was Chairman of (media); Becker Milk Company
Peoples Jewelers (real estate); Telco Split Co.
Corporation (retail (split share company); Simmons
jeweler) and Chairman of Income Trust.
the Toronto Stock
Exchange.
---------------------------------------------------------------------------------------------------------------------------------
-------------------------
* Aberdeen Asia-Pacific Income Fund, Inc. and Aberdeen Australia Equity Fund,
Inc. have a common Investment Manager and Investment Adviser with the Fund,
and may thus be deemed to be part of the same "Fund Complex" as the Fund.
7
** Mr. Freedman is deemed to be an interested person because of his
ownership of securities of Aberdeen Asset Management PLC, the parent
company of the Fund's Investment Manager and Investment Adviser. Mr.
Gilbert is deemed to be an interested person because of his
affiliation with the Fund's Investment Manager and Investment Adviser.
+ Messrs. Elsum, Potter and Sacks are members of the Contract Review
Committee.
++ Messrs. Potter, Sacks and Scott are members of the Audit and Valuation
Committee.
(degree) Messrs. Miles and Potter are members of the Nominating Committee.
Please also see the information contained below under the heading "Further
Information Regarding Directors and Officers."
The Board of Directors recommends that holders of common stock vote FOR the
election of the Fund's two nominees as Class II Directors to the Fund's Board of
Directors.
PROPOSAL 2: ELECTION OF PREFERRED DIRECTORS
The Fund has outstanding 1,200 shares of Auction Market Preferred Stock, Series
W-7, with an aggregate liquidation preference of $30 million.
Section 18 of the 1940 Act requires that the holders of any preferred shares,
voting separately as a single class without regard to series, have the right to
elect at least two Directors at all times. The Board of Directors of the Fund,
including the Independent Directors, upon the recommendation of the Fund's
Nominating Committee, which is composed entirely of Independent Directors, has
nominated Dr. Anton E. Schrafl and John T. Sheehy to serve as Preferred
Directors, representing exclusively the holders of the Fund's preferred stock,
until the Annual Meeting of Stockholders to be held in 2004 and until their
successors are duly elected and qualify. The nominees have indicated an
intention to continue to serve if elected and have consented to be named in this
Proxy Statement.
It is the intention of the persons named on the enclosed proxy card to vote in
favor of the election of the persons indicated above to serve as Preferred
Directors. The Board of Directors of the Fund knows of no reason why either of
these nominees will be unable to serve, but in the event of any such inability,
the proxies received will be voted for such substituted nominees as the holders
of preferred stock shall recommend, and if no such recommendations are made,
such substituted nominees as the Board of Directors may recommend.
The names of the Fund's nominees for election as Preferred Directors, their
addresses, ages and principal occupations during the past five years are
provided in the table below. Both of the nominees are Independent Directors.
---------------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Term of Fund
Office Complex*
and Overseen by
Position(s) Length Director or
Held With of Time Principal Occupation(s) Nominee for Other Directorships Held by
Name, Address and Age the Fund Served During Past Five Years Director Director or Nominee for Director
---------------------------------------------------------------------------------------------------------------------------------
Dr. Anton E. Schrafl Preferred Current Dr. Schrafl was Deputy 2 Aberdeen Asia-Pacific Income
Wiesenstrasse 7 Stock term Chairman of Holcim Limited, Fund, Inc.; Aberdeen
8008 Zurich Director expires a global manufacturer and Asia-Pacific Income Investment
Switzerland 2003; distributor of cement and Company Limited.
Director allied products until May
Age: 70 since 2002. He currently serves
1993 as Chairman of the Board of
Directors of
8
---------------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Term of Fund
Office Complex*
and Overseen by
Position(s) Length Director or
Held With of Time Principal Occupation(s) Nominee for Other Directorships Held by
Name, Address and Age the Fund Served During Past Five Years Director Director or Nominee for Director
---------------------------------------------------------------------------------------------------------------------------------
Dynarest, AG, a corporation
focusing on investments. Dr.
Schrafl is also on the Board of
Directors of Organogenesis,
Inc., a medical products
company involved in
biotechnological tissue
engineering, and Apogee
Technology Inc., a
manufacturer of digital
amplifiers.
---------------------------------------------------------------------------------------------------------------------------------
John T. Sheehy+(degree) Preferred Current Mr. Sheehy has over 30 3 Aberdeen Australia Equity Fund,
560 Sylvan Avenue Stock term years' experience in Inc.; Aberdeen Asia-Pacific
Englewood Cliffs, NJ Director expires investment banking with Income Fund, Inc.; Aberdeen
07632 2003; companies such as J.P. Asia-Pacific Income Investment
Director Morgan & Company and Bear, Company Limited.
Age: 60 since Stearns & Co. Inc. His
1992 specialty areas include
securities valuation, public
offerings and private
placements of debt, and equity
securities, mergers and
acquisitions and management
buyout transactions. He has
been Senior Managing Director
of B.V. Murray and Company
(investment banking) since
2001, and Managing Member of
The Value Group LLC (private
equity) since 1997.
-------------------------------------------------------------------------------------------------------------------------------
-----------------------------
* Aberdeen Asia-Pacific Income Fund, Inc. and Aberdeen Australia Equity
Fund, Inc. have a common Investment Manager and Investment Adviser
with the Fund, and may thus be deemed to be part of the same "Fund
Complex" as the Fund.
+ Mr. Sheehy is a member of the Contract Review Committee.
(degree) Mr. Sheehy is a member of the Nominating Committee.
Please also see the information contained below under the heading "Further
Information Regarding Directors and Officers."
The Board of Directors recommends that holders of preferred stock vote FOR the
election of the Fund's two nominees as Preferred Directors to the Fund's Board
of Directors.
PROPOSAL 3: AMENDMENT AND RESTATEMENT OF THE ARTICLES SUPPLEMENTARY
The Fund currently has one series of Auction Market Preferred Stock, designated
Series W-7. This Series was created by Articles Supplementary, which form part
of the Fund's charter. Consistent with their terms, the Articles Supplementary
have been amended from time to time since they were adopted either by action of
the Board of Directors or by action of the stockholders. The Board of Directors
("Board") of the Fund has proposed that the Articles Supplementary creating the
Fund's Series W-7 AMPS, as amended from time to time ("Articles Supplementary"),
be further amended and then restated by means of filing Articles of Amendment
and
9
Restatement with the Maryland Department of Assessments and Taxation ("Amendment
and Restatement"). The Amendment and Restatement will include all of the
amendments made to date. In addition, the Board is proposing that stockholders
approve additional amendments at this time. The Fund has received written
assurances from the rating agencies that none of the amendments proposed will
adversely affect the Fund's current ratings if approved by shareholders and
implemented by the Fund.
The proposed additional amendments to be included in the Amendment and
Restatement, subject to stockholder approval, will have the following effects:
o to increase the maximum allowable rate of distributions to be
paid to the holders of the AMPS from 150% of the `AA'
Composite Commercial Paper Rate to the greater of (a) 200% of
the `AA' Composite Commercial Paper Rate or (b) 200 basis
points plus the `AA' Composite Commercial Paper Rate;
o to change the regular dividend period on the AMPS from seven days to
28 days;
o to allow the Fund to use derivatives to the fullest extent
previously approved by stockholders, subject to any
limitations imposed by the rating agencies in order for the
Fund to maintain the current ratings of the AMPS;
o to provide a default dividend period and applicable rate of
distributions on the AMPS in the event of certain force
majeure events;
o to allow the Fund to limit stockholder votes on charter
amendments unless such amendments were found to "materially
and adversely" affect the contractual rights of stockholders;
and
o to allow the Board to file amended and restated Articles
Supplementary, without further stockholder approval, after
adjustments are made by the Board, or a committee thereof, to
the definitions contained in such Articles Supplementary.
The proposed Amendment and Restatement, which includes the text of all of the
specific amendments to be made, is annexed as Exhibit B. By voting for this
Proposal 3, stockholders will be approving each of the specific amendments
included in the Amendment and Restatement and the Amendment and Restatement
itself.
The Board of Directors recommends that stockholders vote FOR this Proposal 3.
Set forth below is a further discussion of each of the categories of amendments
listed above. Unless the context otherwise requires, the capitalized terms used
but not defined in the discussion below will have the meaning ascribed to those
terms in the proposed Amendment and Restatement. The discussion below is
qualified in its entirety by reference to the proposed Amendment and Restatement
included as Exhibit B.
Increase the Maximum Rate of Distributions to Preferred Stockholders
Generally, the rate of distributions paid on the AMPS is set pursuant to a Dutch
auction process. This means that the lowest bid received during an auction of a
series of the AMPS that allows Sufficient Clearing Bids is the one that
determines the actual rate of distributions paid on that series of the AMPS
during any given Dividend Period. However, distributions on the AMPS may not
exceed the Maximum Applicable Rate. Thus, under normal market conditions, if
there are Sufficient Clearing Bids received in any given auction, the
distribution rate will be less than the Maximum Applicable Rate, which is
calculated as the product of the `AA' Composite Commercial Paper Rate (i.e., the
Reference Rate) and the applicable percentage (as shown in the table below):
10
Applicable
Credit Ratings Percentage
---------------------------------------------- Reference
Moody's S&P Rate
------------------------ -------------------- --------------
"aa3" or higher AA- or higher 150%
"a3" to "a1" A- to A+ 175%
"baa3" to "baa1" BBB- to BBB+ 250%
Below "baa3" Below BBB- 300%
Since the AMPS were first issued in July of 1992 and through January 15, 2003,
the average rate at which the AMPS have been bid is 4.58% which is the
equivalent of 97.6% of the average `AA' Composite Commercial Paper Rate for that
period. Following the announcement by the Federal Reserve of a 50 basis point
easing in interest rates on November 6, 2002, the AMPS auction rates dropped by
a similar magnitude. However, during the period from November 8, 2002 through
early 2003, the auction rates have come under steady upward pressure due to
unusual market conditions and have risen as high as 149.77% of the `AA'
Composite Commercial Paper Rate. As of January 22, 2003, the AMPS were bid at a
rate of 1.43% which was the equivalent of 113.3% of the `AA' Composite
Commercial Paper Rate on that date.
Common stockholders have generally benefited from the Fund's issuance of the
AMPS. Since the fiscal quarter beginning August 1, 1997, there have been periods
during which the shrinking yield differential between rates available in
Australia, Canada, New Zealand and the United Kingdom and rates available in the
U.S., combined with the depreciation of the Australian dollar, the Canadian
dollar, the New Zealand dollar and the Pound Sterling, have resulted in the AMPS
having a negative impact on returns to holders of common stock. [During the 12
months prior to January 31, 2003, the key investment trend was an end to the
unilateral strength of the U.S. dollar.] With U.S. interest rates at historic
lows, the differential between the cost of the AMPS and the rates at which the
Fund invests has been positive in recent months.
As mentioned above, last November the Federal Reserve abruptly lowered the
Federal Funds rate to historic lows, dragging down the commercial paper rates to
abnormally low levels. The AMPS, which compete with a large number of short-term
tax-exempt offerings, did not decline as much as the more liquid commercial
paper rates. This widened the spreads in yields between commercial paper rates
and AMPS to levels nearly precluding the normally recurring AMPS auctions that
provide essential investor liquidity.
Bids to purchase shares of the AMPS that exceed the Maximum Applicable Rate are
not accepted. As a result, if there are not enough purchase or hold orders
submitted at a rate below the Maximum Applicable Rate for all shares to be
cleared, Sufficient Clearing Bids have not been obtained. If there are not
Sufficient Clearing Bids made during any given auction, the auction is said to
have "failed." Under these circumstances, the distribution rate on the AMPS for
that Dividend Period will be equal to the Maximum Applicable Rate. The holders
of the AMPS during the Dividend Period immediately prior to the "failed" auction
will continue to hold the AMPS until the next regularly scheduled auction at
which Sufficient Clearing Bids are obtained. Under these circumstances, there
may be limited liquidity in an AMPS investment.
In order to maintain the liquidity of the AMPS, the Board has determined that it
is in the best interests of the Fund to amend the Articles Supplementary to
raise the Maximum Applicable Rate. It is anticipated that, once market
conditions return to their historically normal state, the average applicable
rate will once again be well below the Maximum Applicable Rate.
The Board considered the possibility of redeeming the AMPS in the event that the
Maximum Applicable Rate is reached and sustained for any length of time.
However, the Board rejected this option on the grounds that the AMPS have for
the most part contributed positively over the years to the returns received by
the holders of the Fund's common stock. In addition, the Board considered that
in order to redeem the AMPS, portfolio securities may need to be sold by the
Fund at inopportune times and significant unrealized foreign exchange
11
losses might have to be realized, lowering the amount of income available for
distribution to holders of the Fund's common stock. The Board also considered
the fact that reissuing the AMPS at a later date would be costly. After
balancing these potential costs against the costs to common stockholders of
raising the Maximum Applicable Rate (including the cost of this proxy
solicitation), the Board determined that this proposed amendment should be
presented to stockholders for a vote as part of the Amendment and Restatement.
The proposed amendment would change the calculation of the Maximum Applicable
Rate to the product of the Reference Rate and the greater of (a) the applicable
percentage of the Reference Rate or (b) the Applicable Spread plus the Reference
Rate (as shown in the table below):
Applicable Applicable
Percentage Spread Plus
Credit Ratings Reference Rate Reference Rate
---------------------------------------- ------------------ -----------------
Moody's S&P
--------------------- --------------
"aa3" or higher AA- or higher 200% 200 bps
"a3" to "a1" A- to A+ 210% 210 bps
"baa3" to "baa1" BBB- to BBB+ 300% 300 bps
Below "baa3" Below BBB- 325% 325 bps
Assuming the Fund continues to maintain a Aa/AA rating on the AMPS, the
practical effect of this change is shown in the table below:
Max. Rate Using the Max. Rate Using the Method Used to Determine
Reference Rate Applicable Percentage Applicable Spread Maximum Applicable Rate
-------------- --------------------- ------------------- ------------------------
1% 2% 3% Spread
2% 4% 4% Either
3% 6% 5% Percentage
Regular Dividend Period
Currently, a Regular Dividend Period for the Fund consists of seven days. Under
certain market conditions, however, the Fund may declare a Special Dividend
Period, consisting of more than seven days (e.g., a 28-day Dividend Period). In
order for the Fund to declare a Special Dividend Period, it must first obtain
permission from its Auction Agent and those Broker-Dealers who have entered into
Broker-Dealer Agreements with the Auction Agent with respect to the Fund.
Additionally, the Fund must give notice to the holders of the AMPS and must have
written confirmation from the Rating Agencies that such a Special Dividend
Period would not impair the then-current ratings of the AMPS. As of January 22,
2003, the Fund declared a Special Dividend Period which is scheduled to end on
February 19, 2003. Although the Fund anticipates that it will continue to
declare successive Special Dividend Periods, each for 28 days, for the next six
to 24 months, there can be no assurance that the Fund will seek a Special
Dividend Period at any given time or that, if a Special Dividend Period is
sought by the Fund, the Auction Agent and each of the applicable Broker-Dealers
will continue to grant the Fund permission to declare such Special Dividend
Periods.
Moreover, in the event that Sufficient Clearing Bids for an Auction are not
obtained, a Special Dividend Period may not be declared and the Dividend Period
for that Auction must be a Regular Dividend Period. Thereafter, each successive
Dividend Period must also be a Regular Dividend Period until Sufficient Clearing
Bids have been obtained.
The Board has proposed charter amendments that would have the affect of changing
the Regular Dividend Period from seven days to 28 days. If the proposed
amendments are approved, a Special Dividend Period would consist of (i) a
specified number of days (other than the number of days in the Regular Dividend
Period) evenly
12
divisible by seven, and not fewer than seven nor more than 364; or (ii) a
specified number of whole years not greater than five years.
The Fund may use interest rate swaps to hedge the Fund's liability with respect
to the AMPS. At present, the Fund has been authorized by the Board to hedge up
to one-third of the Fund's liability with respect to the AMPS. This allows the
Fund to lock in the relatively low current U.S. dollar interest rates with
respect to up to one-third of the Fund's outstanding AMPS. Pursuant to this
authority, the Fund has entered into an interest rate swap to hedge against the
liability with respect to one-third of the AMPS. This hedge is made more
effective by the fact that the Fund is also utilizing a mechanism in its charter
which allows it to declare a Special Dividend Period. As noted above, a lack of
Sufficient Clearing Bids would cause each affected Dividend Period to be a
Regular Dividend Period. The inability to use the Special Dividend Period
mechanism under such circumstances may limit the effectiveness of the interest
rate swap as a hedge. A 28-day Dividend Period would maximize the effectiveness
of the Fund's interest rate swap to hedge the AMPS. Moreover, amending the
Fund's charter to set the Regular Dividend Period to 28 days has the effect of
reducing the Fund's transaction costs associated with the monthly procedures
currently required for declaring a Special Dividend Period.
It is possible that, during certain interest rate climates, the holders of the
AMPS could be adversely affected by this change since Auctions will generally be
less frequent. Under the current Articles Supplementary, those Broker-Dealers
who have entered into Broker-Dealer Agreements with the Auction Agent with
respect to the Fund would presumably object to the declaration of a given
Special Dividend Period if market conditions were such that the AMPS would be
adversely affected by a longer Dividend Period. If Broker-Dealers object to the
declaration of a Special Dividend Period, the Special Dividend Period may not be
declared.
Derivatives
In March 1999, the Fund's stockholders approved a series of proposals allowing
the Fund, among other things, to use derivatives to manage currency and interest
rate risk, as well as to replicate or substitute for physical securities, such
as bonds, bills, cash and foreign exchange securities. The Fund's use of
derivatives continues to be limited by certain provisions of its Articles
Supplementary. Therefore, the proposed Amendment and Restatement includes
amendments that would allow the Fund to make better use of derivative
instruments. The use of derivatives would still be subject to any restrictions
imposed by the Rating Agencies in order for the Fund to maintain its current
ratings. The following amendments to the Articles Supplementary are included in
the proposed Amendment and Restatement:
o Removal of specific language in the Articles Supplementary
regarding the Fund's ability to lend securities or sell or
purchase futures or options other than Forward Contracts;
o Inclusion of a provision that states that the Fund may engage
in transactions in derivatives, subject to any limitations
imposed by the Rating Agencies. This proposed provision would
also allow derivatives to be included in a Rating Agency's
Eligible Portfolio Property if such Rating Agency has advised
the Fund in writing that the inclusion of such assets or
securities in Eligible Portfolio Property would not adversely
affect its respective then-current ratings of the shares of
AMPS. With respect to options, the Fund would be able to
purchase and sell (write) options, subject to any limitations
imposed by the Rating Agencies; and
o For purposes of the Amendment and Restatement, "derivatives"
include options, options on currency, futures (including, but
not limited to, U.S. Treasury Bond futures), options on
futures, forward contracts (including, but not limited to,
Forward Contracts), forward currency contracts, interest rate
swaps, currency swaps, other types of swaps (including, but
not limited to, swaps on securities, financial commodities and
indices), caps, collars, floors and currency-linked notes.
13
It should be noted that nothing contained in the Amendment and Restatement would
eliminate the need for the Fund to seek the written approval of the Rating
Agencies prior to utilizing any types of derivatives not previously approved in
writing by the Rating Agencies.
Force Majeure
The Amendment and Restatement provides that in the event that an Auction does
not occur on a regular auction date because of any act of God, strike, riot, act
of war, act of terrorism, equipment failure, power failure or damage or other
causes reasonably beyond the control of the Fund or the Auction Agent, each
Existing Holder as of that auction date will continue to hold the shares of AMPS
held by that Existing Holder until the next regularly scheduled auction date.
The Applicable Rate for any Dividend Period during which Existing Holders
continue to hold such shares of AMPS by operation of the force majeure provision
will be the same Applicable Rate as applied during the last Dividend Period
following an Auction at which there were Sufficient Clearing Bids prior to the
applicability of the force majeure provision.
Limitation of Stockholder Votes on Charter Amendments
The current Articles Supplementary provide that the affirmative vote of a
majority of the outstanding AMPS, voting separately as one class, is
required to amend, alter or repeal the provisions of the Charter so as to
adversely affect any of the contract rights of holders of the AMPS expressly
set forth in the Charter. If approved, the Amendment and Restatement would
provide that the affirmative vote of a majority of the outstanding AMPS,
voting separately as one class, is required to amend, alter or repeal the
provisions of the Charter so as to materially and adversely affect any of
the contract rights of holders of the AMPS expressly set forth in the
Charter. This change will allow the Fund the flexibility to make Charter
amendments that do not materially and adversely affect the holders of the
AMPS without having to go to the extra cost of soliciting the approval of
the holders of the AMPS. In all events, any Charter amendment would still
have to be made in accordance with the requirements of the Maryland General
Corporation Law and any other applicable provisions of the Charter.
Filing of Amended and Restated Articles Supplementary
As authorized by the Articles Supplementary, the Board, from time to time in the
last 10 years, has added, altered or deleted a number of terms and definitions
from the Articles Supplementary in connection with obtaining the appropriate
ratings for the AMPS. The Board has determined that it is in the best interests
of the Fund to amend and restate the Articles Supplementary. If approved, such
Articles of Amendment and Restatement would integrate all such prior changes
into one document. Moreover, if approved, the proposed Amendment and Restatement
would allow the Board, in its sole discretion and without a further stockholder
vote, to authorize, execute and file a restatement of the Articles Supplementary
with the Maryland State Department of Assessments and Taxation incorporating any
and all such adjustments, modifications, alterations or changes made since the
last such restatement.
The Board of Directors recommends that stockholders vote FOR this Proposal 3.
FURTHER INFORMATION REGARDING DIRECTORS AND OFFICERS
Officers of the Fund
The names of the officers of the Fund who are not Directors, their addresses,
ages and principal occupations during the past five years are provided in the
table below:
----------------------------- ------------- -------------------- ------------------------------------------------------
Position(s) Term of Office**
Held With and Length of Time
Name, Address and Age the Fund* Served Principal Occupation(s) During Past Five Years
----------------------------- ------------- -------------------- ------------------------------------------------------
Hugh Young President Since 2001 Managing Director of Aberdeen Asset Management PLC
21 Church Street (parent company of the Fund's Investment Manager and
#01-01 Capital Square Two Investment Adviser) (from 1991 to 2002); Managing
Singapore 049480 Director of Aberdeen Asset Management Asia Limited
(affiliate of the Fund's Investment Manager and
Age: 44 Investment Adviser) (since 1992); Managing Director
of Aberdeen International Fund Managers Limited
(affiliate of the Fund's Investment Manager and
Investment Adviser) (since 2000); Director of the
Investment Manager and the Investment Adviser (since
2001); Chairman of the Board of Directors of
Aberdeen Australia Equity Fund, Inc.
-----------------------------------------------------------------------------------------------------------------------
14
----------------------------- ------------- -------------------- ------------------------------------------------------
Position(s) Term of Office**
Held With and Length of Time
Name, Address and Age the Fund* Served Principal Occupation(s) During Past Five Years
----------------------------- ------------- -------------------- ------------------------------------------------------
Christian Pittard Treasurer Since 2001 Managing Director of the Fund's Investment Manager
P.O. Box 641 and (since 2001); Managing Director of Aberdeen Private
One Seaton Place Assistant Wealth Management (affiliate of the Fund's
St. Helier, Jersey JE4 8YJ Secretary Investment Manager and Investment Adviser);
Channel Islands Chartered Accountant, KPMG (from 1994 to 1998) and
Quorum Trust Group (1998).
Age: 29
-----------------------------------------------------------------------------------------------------------------------
Michael Karagianis Vice Since 2002 Vice President (since 2002) and Assistant Vice
One Bow Churchyard President President (from 2001 to 2002) of the Fund; Director
London EC4M 9HH of Economics and Investment Strategy of the Fund's
United Kingdom Investment Adviser (since 1999); Director of
Portfolio Investment of County Investment Management
Age: 39 (from 1995 to 1999).
-----------------------------------------------------------------------------------------------------------------------
Roy M. Randall Secretary Since 1992 Consultant to The Seidler Law Firm, Australian
Level 40, Chifley Tower counsel to the Fund (since 2003); Partner of
Two Chifley Square Stikeman, Elliott, Australian counsel to the Fund
Sydney, NSW 2000 (from 1997 through 2002).
Australia
Age: 66
-----------------------------------------------------------------------------------------------------------------------
----------------------------
* The named officer holds the same position(s) with Aberdeen Asia-Pacific
Income Fund, Inc. and Aberdeen Australia Equity Fund, Inc. both of which
may be deemed to be part of the same "Fund Complex" as the Fund.
** Officers hold their positions with the Fund until a successor has been duly
elected and qualified. Officers are generally elected annually at the
meeting of the Board of Directors next following the annual meeting of
stockholders. The officers were last elected on June 19, 2002.
Ownership of Securities
As of December 31, 2002, the Fund's Directors and executive officers, as a
group, owned less than 1% of the Fund's outstanding shares of common stock, and
no shares of the Fund's preferred stock. The information as to ownership of
securities which appears below is based on statements furnished to the Fund by
its Directors and executive officers.
As of December 31, 2002, the dollar range of equity securities owned
beneficially by each Director in the Fund and in any registered investment
companies overseen by the Director within the same family of investment
companies as the Fund is as follows:
Interested Directors
-------------------------------- -------------------------------------- ----------------------------------------------
Aggregate Dollar Range of Equity Securities
in All Registered Investment Companies
Dollar Range of Equity Overseen by Director in Family of Investment
Name of Director Securities in the Fund Companies *
-------------------------------- -------------------------------------- ----------------------------------------------
Laurence S. Freedman $1 to $10,000 $10,001 to $50,000
----------------------------------------------------------------------------------------------------------------------
Martin J. Gilbert $1 to $10,000 $10,001 to $50,000
----------------------------------------------------------------------------------------------------------------------
15
Independent Directors
-------------------------------- -------------------------------------- ---------------------------------------------
Aggregate Dollar Range of Equity Securities
in All Registered Investment Companies
Dollar Range of Equity Overseen by Director in Family of Investment
Name of Director Securities in the Fund Companies *
---------------------------------------------------------------------- ----------------------------------------------
David L. Elsum $10,001 to $50,000 $10,001 to $50,000
---------------------------------------------------------------------------------------------------------------------
Neville J. Miles $1 to $10,000 $10,001 to $50,000
---------------------------------------------------------------------------------------------------------------------
William J. Potter $1 to $10,000 $10,001 to $50,000
---------------------------------------------------------------------------------------------------------------------
Peter D. Sacks $1 to $10,000 $10,001 to $50,000
---------------------------------------------------------------------------------------------------------------------
Dr. Anton E. Schrafl $1 to $10,000 $10,001 to $50,000
---------------------------------------------------------------------------------------------------------------------
E. Duff Scott $10,001 to $50,000 $10,001 to $50,000
---------------------------------------------------------------------------------------------------------------------
John T. Sheehy $1 to $10,000 $10,001 to $50,000
---------------------------------------------------------------------------------------------------------------------
Warren C. Smith $50,001 to $100,000 $50,001 to $100,000
---------------------------------------------------------------------------------------------------------------------
----------------------------
* Aggregate Dollar Range shown includes equity securities of the Fund,
and of Aberdeen Asia-Pacific Income Fund, Inc. and Aberdeen Australia
Equity Fund, Inc., both of which have a common Investment Manager and
Investment Adviser with the Fund, but which do not hold themselves out
to investors as related companies to the Fund for purposes of
investment and investor services.
Messrs. Hugh Young and Christian Pittard serve as executive officers of the
Fund. As of December 31, 2002, the executive officers of the Fund owned no
shares of the Fund's Common Stock or Preferred Stock.
Committees and Board of Directors Meetings
The Board of Directors has a standing Audit and Valuation Committee, composed
entirely of Independent Directors. Each member is also "independent" within the
meaning of the New York Stock Exchange ("NYSE") listing standards. The Audit and
Valuation Committee pre-approves and reviews both the audit and non-audit work
of the Fund's independent accountants, submits recommendations to the Board of
Directors as to the selection of independent accountants and reviews compliance
of the Fund with regulations of the U.S. Securities and Exchange Commission
("SEC") and the Internal Revenue Service, and other related matters.
The Board of Directors has adopted an Audit Charter and a Valuation Charter for
its Audit and Valuation Committee. A copy of the Fund's Audit Charter is
attached to this Proxy Statement as Exhibit A. The Audit and Valuation Committee
has received the written disclosures and the letter required by Independence
Standards Board Standard No. 1 from PricewaterhouseCoopers LLP ("PwC"), the
Fund's independent accountants, and has discussed with PwC its independence. The
Audit and Valuation Committee has also reviewed and discussed the audited
financial statements with Fund management and PwC, and discussed certain matters
with PwC required to be discussed by Statement on Auditing Standards No. 61.
Based on the foregoing, the Audit and Valuation Committee recommended to the
Board of Directors that the Fund's audited financial statements be included in
the Fund's Annual Report to Stockholders for the fiscal year ended October 31,
2002. The members of the Fund's Audit and Valuation Committee are Messrs.
William J. Potter, Peter D. Sacks and E. Duff Scott.
The Board of Directors also has a standing Contract Review Committee, composed
entirely of Independent Directors. The Contract Review Committee reviews and
makes recommendations to the Board of Directors with respect to entering into,
renewal or amendment of the Fund's management agreement, advisory agreement,
administration agreement, investor relations services agreement and other
agreements. The members of the Fund's Contract Review Committee are Messrs.
David L. Elsum, William J. Potter, Peter D. Sacks and John T. Sheehy.
The Board of Directors also has a standing Nominating Committee, composed
entirely of Independent Directors. The Nominating Committee considers candidates
for service as Fund Directors and remuneration to be paid to Fund Directors. The
Nominating Committee does not consider nominees recommended by security holders.
The members of the Fund's Nominating Committee are Messrs. Neville J. Miles,
William J. Potter and John T. Sheehy.
16
During the Fund's fiscal year ended October 31, 2002, the Board of Directors
held four meetings, the Audit and Valuation Committee held two meetings, the
Contract Review Committee held no meetings, and the Nominating Committee held
three meetings. Each of the Directors then in office attended at least 75% of
the aggregate number of meetings of the Board of Directors and of all the
Committees of the Board on which he served.
Compensation of Directors and Certain Officers
The following table sets forth information regarding compensation of
Directors by the Fund and by the fund complex of which the Fund is a part for
the fiscal year ended October 31, 2002. Officers of the Fund and Directors who
are interested persons of the Fund do not receive any compensation directly from
the Fund or any other fund in the fund complex for performing their duties as
officers or Directors, respectively. In the column headed "Total Compensation
From Fund and Fund Complex Paid to Directors," the number in parentheses
indicates the total number of boards in the fund complex on which the Director
serves or served at any time during the fiscal year ended October 31, 2002.
Directors are paid a fee of $16,000 per year. Members of the Fund's Audit and
Valuation Committee, Contract Review Committee, and Nominating Committee receive
a fee of $500 per committee meeting attended, and the Chairman of each of these
Committees receives an additional fee of $500 per committee meeting attended.
Compensation Table
Fiscal Year Ended October 31, 2002
Pension or Total
Retirement Estimated Compensation From
Aggregate Benefits Accrued Annual Fund and Fund
Compensation As Part of Benefits Upon Complex Paid to
Name of Director From Fund Fund Expenses Retirement Directors
------------ ---------------- ------------- ------------------
David L. Elsum $ 16,000 N/A N/A $ 52,000(3)
Lawrence S. Freedman++ $ 0 N/A N/A $ 0(3)
Martin J. Gilbert $ 0 N/A N/A $ 0(2)
Neville J. Miles $ 21,000 N/A N/A $ 66,500(3)
William J. Potter $ 21,000 N/A N/A $ 61,500(3)
Sir David Rowe-Ham* $ 12,000 N/A N/A $ 23,000(2)
Peter D. Sacks $ 17,500 N/A N/A $ 55,000(3)
E. Duff Scott $ 17,000 N/A N/A $ 17,000(1)
Warren C. Smith $ 16,000 N/A N/A $ 16,000(1)
Hugh Young* $ 0 N/A N/A $ 0(2)
Preferred Directors:
Dr. Anton E. Schrafl $ 16,000 N/A N/A $ 22,000(2)
John T. Sheehy $ 19,000 N/A N/A $ 63,000(3)
----------------------
++ Mr. Freedman is paid consulting fees by the Fund's Investment Manager equal
to the fees paid to the Fund's Independent Directors of funds in the fund
complex of which Mr. Freedman is a director. For the fiscal year ended
October 31, 2002, the amount of the consulting fees paid to Mr. Freedman
was an aggregate of $32,000 with respect to the two funds of which Mr.
Freedman is a director in the fund complex, of which $16,000 was paid with
respect to the Fund.
* Sir David Rowe-Ham resigned from the Board of Directors effective August 1,
2002. Mr. Hugh Young resigned from the Board of Directors effective
September 12, 2002.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section
30(h) of the 1940 Act, as applied to the Fund, require the Fund's officers,
Directors, the Investment Manager and Investment Adviser, affiliates of the
Investment Manager or Investment Adviser, and persons who beneficially own more
than 10% of a registered class of the Fund's outstanding securities ("Reporting
Persons"), to file reports of ownership of the Fund's securities and
17
changes in such ownership with the SEC and the NYSE. Such persons are required
by SEC regulations to furnish the Fund with copies of all such filings.
Based solely on its review of the copies of such forms received by it and
written representations from certain Reporting Persons that no year-end reports
were required for those persons, the Fund believes that during the fiscal year
ended October 31, 2002, its Reporting Persons complied with all applicable
filing requirements.
Relationship of Directors or Nominees with the Investment Adviser and the
Investment Manager. Aberdeen Asset Managers (C.I.) Limited serves as investment
manager to the Fund (the "Investment Manager") and Aberdeen Asset Management
Limited serves as investment adviser to the Fund (the "Investment Adviser")
pursuant to a management agreement dated December 22, 2000 and an advisory
agreement dated December 22, 2000, respectively. The Investment Manager is a
Jersey, Channel Islands corporation organized in October 1985 with its
registered office located at 17 Bond Street, St. Helier, Jersey, Channel
Islands. The Investment Adviser is a wholly-owned subsidiary of Aberdeen Asset
Management Holdings Limited ("AAMHL"), an Australian corporation. The registered
offices of the Investment Adviser and AAMHL are located at Level 6, 201 Kent
Street, Sydney, N.S.W., Australia. Both the Investment Manager and AAMHL are
wholly-owned subsidiaries of Aberdeen Asset Management PLC, a United Kingdom
corporation. The registered offices of Aberdeen Asset Management PLC are located
at One Albyn Place, Aberdeen, Scotland AB10 1YG.
Mr. Martin Gilbert, a Director of the Fund, also serves as a director of the
Investment Manager and the Investment Adviser and as the Chief Executive and an
Executive Director of Aberdeen Asset Management PLC, the parent company of the
Investment Manager and the Investment Adviser. Mr. Gilbert is also a stockholder
of Aberdeen Asset Management PLC. Mr. Hugh Young, President of the Fund, also
serves as a director of the Investment Manager and the Investment Adviser. Mr.
Young is a stockholder of Aberdeen Asset Management PLC.
Under the terms of an Investor Relations Services Agreement, Aberdeen Fund
Managers, Inc. (doing business under the name Aberdeen Asset Management, Inc.}
an affiliate of the Investment Manager and the Investment Adviser, provides
investor relations services to the Fund for a monthly retainer of $4,000, plus
out-of-pocket expenses.
On December 22, 2000, all of the shares of the Investment Manager, of the parent
of the Investment Adviser, and of EquitiLink International (Channel Islands)
Limited ("EICIL") were transferred to Aberdeen Asset Management PLC, pursuant to
a Share Sale Agreement between Aberdeen on the one side, and entities of which
Messrs. Laurence S. Freedman and Brian M. Sherman are the principal
stockholders, and the stockholders of EICIL, on the other side. Total
consideration for the sale was US $80 million, subject to certain adjustments.
The consideration was paid in a combination of cash and preference shares issued
by Aberdeen. At the time of the execution of the Share Sale Agreement, Messrs.
Freedman and Sherman were Directors and the principal stockholders of the
Investment Manager, and also served as, respectively, Joint Managing Director,
and Joint Managing Director and Chairman, of the Investment Adviser. In
connection with this sale, Messrs. Freedman and Sherman resigned as Joint
Managing Directors of the Investment Adviser and as Directors of the Investment
Manager.
In 2001, entities of which Messrs. Freedman and Sherman are the principal
stockholders sold (i) 275,000 shares of the Fund's Common Stock to Real Estate
Opportunities Fund, a fund managed by an affiliate of the Fund's Investment
Manager and Investment Adviser, for $2,447,500, and (ii) 130,897 shares of the
Fund's Common Stock to American Monthly Income Trust Limited, a fund managed by
an affiliate of the Fund's Investment Manager and Investment Adviser, for
$1,164,983.
18
INFORMATION REGARDING INDEPENDENT ACCOUNTANTS
The Board of Directors of the Fund, upon recommendation of the Audit and
Valuation Committee, has selected PricewaterhouseCoopers LLP, independent
accountants, to audit the financial statements of the Fund for the fiscal year
ending October 31, 2003.
During the fiscal year ended October 31, 2002, the fees for services rendered by
PwC were:
------------------- ------------------------------------ -----------------------
Financial Information Systems All Other Fees*
Audit Fees Design and Implementation Fees
------------------- ------------------------------------ -----------------------
$78,770 None $58,750
------------------- ------------------------------------ -----------------------
* This amount includes fees for services rendered by PwC to the Fund, the
Investment Manager and Investment Adviser, and entities controlling,
controlled by, or under common control with, the Investment Manager and
Investment Adviser that provide services to the Fund.
The Audit and Valuation Committee of the Fund has reviewed information presented
by the Fund's independent accountants that addressed the matters set forth in
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, and considered whether the provision of non-audit services to the
Fund and of professional services to the Fund's Investment Adviser and to
entities controlling, controlled by, and under common control with, the Fund's
Investment Adviser that provide services to the Fund is compatible with
maintaining the independence of the Fund's independent accountants.
Representatives from PwC are expected to be present at the Meeting and will have
the opportunity to respond to questions from stockholders and to make a
statement if they so desire.
The Fund knows of no direct or indirect interest of PwC in the Fund.
ADDITIONAL INFORMATION
Administrator. The Fund's administrator is Princeton Administrators, L.P., Box
9095, Princeton, NJ 08543.
Expenses. The expense of preparation, printing and mailing of the enclosed proxy
card and accompanying Notice and Proxy Statement will be borne by the Fund. The
Fund will reimburse banks, brokers and others for their reasonable expenses in
forwarding proxy solicitation material to the beneficial owners of the shares of
the Fund. In order to obtain the necessary quorum at the Meeting, supplementary
solicitation may be made by mail, telephone, telegraph or personal interview.
Such solicitation may be conducted by, among others, officers, Directors and
employees of the Fund, the Investment Manager, the Investment Adviser or State
Street Bank and Trust Company, the Transfer Agent of the Fund. Georgeson
Shareholder Communications, Inc. ("Georgeson") will be retained to assist in the
solicitation of proxies. Georgeson will be paid approximately $_____ by the Fund
and the Fund will reimburse Georgeson for its related expenses.
Solicitation and Voting of Proxies. Solicitation of proxies is being made
primarily by the mailing of this Proxy Statement with its enclosures on or about
February ___, 2003. As mentioned above, Georgeson will be engaged to assist in
the solicitation of proxies. As the meeting date approaches, certain
stockholders of the Fund may receive a call from a representative of Georgeson
if the Fund has not yet received their vote. Authorization to permit Georgeson
to execute proxies may be obtained by telephonic or electronically transmitted
instructions from stockholders of the Fund. Proxies that are obtained
telephonically will be recorded in accordance with procedures. Management of the
Fund believes that these procedures are reasonably designed to
19
ensure that the identity of the stockholder casting the vote is accurately
determined and that the voting instructions of the stockholder are accurately
determined.
If a stockholder wishes to participate in the Meeting, but does not wish to give
a proxy by telephone, fax or internet, such stockholder may still submit the
proxy card originally sent with the Proxy Statement or attend in person. Any
proxy given by a stockholder, whether in writing, by telephone, fax or via the
internet, is revocable. A stockholder may revoke the accompanying proxy or a
proxy given telephonically, by fax or via the internet at any time prior to its
use by submitting a properly executed, subsequently dated proxy, giving written
notice to the Secretary of the Fund, or by attending the meeting and voting in
person.
Beneficial Ownership. To the best of the Fund's knowledge, based upon filings
with the SEC as of January 31, 2003, the only beneficial owners of more than
five percent of the voting securities of the Fund was:
----------------------------------------------------------------------------------------------------------------------
Name and Address of Number of Shares
Title of Class Beneficial Owner Beneficially Owned Percent of Class
------------------------------ ----------------------------- ---------------------------- ----------------------------
Common Stock, par value Wachovia Corporation 960,754 %
$0.01 per share One Wachovia Center
Charlotte, NC 28288-0137
----------------------------------------------------------------------------------------------------------------------
Common Stock, par value First Union Corporation 1,324,220 %
$0.01 per share One First Union Center
Charlotte, NC 28228-0137
----------------------------------------------------------------------------------------------------------------------
Stockholder Proposals. If a stockholder intends to present a proposal at the
Annual Meeting of Stockholders of the Fund to be held in 2004 and desires to
have the proposal included in the Fund's proxy statement and form of proxy for
that meeting, the stockholder must deliver the proposal to the Secretary of the
Fund at the office of the Fund, 800 Scudders Mill Road, Plainsboro, New Jersey
08536 and such proposal must be received by the Secretary no later than [date],
2003.
Stockholders wishing to present proposals at the Annual Meeting of Stockholders
of the Fund to be held in 2004 which they do not wish to be included in the
Fund's proxy materials must send written notice of such proposals to the
Secretary of the Fund at the office of the Fund, 800 Scudders Mill Road,
Plainsboro, New Jersey 08356, and such notice must be received by the Secretary
no sooner than November 21, 2003 and no later than December 21, 2003 in the form
prescribed in the Fund's bylaws.
OTHER BUSINESS
The Board of Directors knows of no business to be brought before the Meeting
other than as set forth above. If, however, any other matters properly come
before the Meeting, it is the intention of the persons named on the enclosed
proxy card to vote such proxies on such matters in accordance with their best
judgment.
By Order of the Board of Directors,
Roy M. Randall
Secretary
800 Scudders Mill Road
Plainsboro, New Jersey 08536
February ___, 2003
20
EXHIBIT A
Aberdeen Global Income Fund, Inc.
Audit and Valuation Committee
AUDIT CHARTER
Mission
The mission of the Audit and Valuation Committee (the "Committee") of Aberdeen
Global Income Fund, Inc. (the "Fund"), under this Audit Charter, is to oversee
the Fund's accounting and financial reporting policies and practices, its
internal controls and, as appropriate, the internal controls of certain service
providers, and to oversee the quality and objectivity of the Fund's financial
statements and the independent audit thereof. The Committee will also report to
the Board of Directors (the "Board"), if necessary, any relationships between
the auditor and the Fund, or any other relationships, which come to the
Committee's attention that may adversely affect the independence of the auditor.
The function of the Committee is to provide oversight; it is the responsibility
of the Fund and the Fund's investment manager and investment adviser to maintain
appropriate systems for accounting and internal control, and it is the
responsibility of the Fund's independent auditors to plan and carry out a proper
audit. The independent auditors are directly accountable to the Committee.
Committee Membership
The Committee shall be composed of at least three members. Each member must have
been determined not to be an "interested person" (as that term is defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended ("1940 Act"))
of the Fund (an "Independent Director") and, in addition, each member shall have
the additional qualifications indicated below. The President of the Fund,
although not a member of the Committee, will nonetheless be expected to have a
significant role in assisting the Committee to discharge its responsibilities,
including ensuring adequate access to, and support from, the staff of the Fund's
investment manager, Aberdeen Asset Managers (C.I.) Limited (the "Manager"), and
the staff of the Fund's investment adviser, Aberdeen Asset Management Limited
(the "Adviser").
Qualifications of Committee Members
1. Members of the Committee may not be officers of the Fund and should be
free of any relationships that would interfere with the exercise of
independent judgment. A director with any of the following
relationships will not be considered independent for this purpose:
A. Employee. A director who is or has been an employee
--------
(including non-employee executive officers) of the Fund or any
of its affiliates may not serve on the Committee until three
years following the termination of his or her employment. An
affiliate includes a subsidiary, sibling company, predecessor,
parent company, or former parent company.
B. Business Relationship. A director (i) who is a partner,
----------------------
controlling stockholder, or executive officer of an organization
that has a business relationship with the Fund, or (ii) who has a
direct business relationship with the Fund (e.g., a consultant)
may serve on the Committee only if the Fund's Board determines in
its business judgment that the relationship does not interfere with
the director's exercise of independent judgment. In
A-1
making a determination regarding the independence of a
director pursuant to this paragraph, the Board will consider,
among other things, the materiality of the relationship to the
Fund, to the director, and, if applicable, to the organization
with which the director is affiliated.
"Business relationships" can include commercial, industrial,
banking, consulting, legal, accounting and other
relationships. A director can have this relationship directly
with the Fund, or the director can be a partner, officer or
employee of an organization that has such a relationship. The
director may serve on the Committee without the
above-referenced Board determination after three years
following the termination of, as applicable, either (1) the
relationship between the organization with which the director
is affiliated and the Fund, (2) the relationship between the
director and his or her partnership status, shareholder
interest or executive officer position, or (3) the direct
business relationship between the director and the Fund.
C. Cross Compensation Committee Link. A director who is employed as
-----------------------------------
an executive of another corporation where any of the Fund's
executives serves on that Fund's compensation committee may not
serve on the Committee.
D. Immediate Family. A director who is an immediate family member
----------------
of an individual who is an executive officer of the Fund or
any of its affiliates cannot serve on the Committee until
three years following the termination of such employment
relationship. An immediate family member includes a person's
spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than employees) who shares
such person's home.
2. Notwithstanding the requirements of Parts A through D above, one
director who is no longer an employee or who is an immediate family
member of a former executive officer of the Fund or its affiliates, but
is not considered independent pursuant to these provisions due to the
three-year restriction period, may be appointed, under exceptional and
limited circumstances, to the Committee if the Fund's Board determines
in its business judgment that membership on the Committee by the
individual is required in the best interests of the Fund and its
shareholders, and the Fund discloses, in the next annual proxy
statement subsequent to such determination, the nature of the
relationship and the reasons for that determination.
3. Each member of the Committee must be financially literate, or become
financially literate within a reasonable period of time after his or
her appointment to the Committee, as such qualification is interpreted
by the Fund's Board in its business judgment. At least one member of
the Committee must have accounting or related financial experience, as
the Fund's Board interprets such qualification in its business
judgment.
4. Unless exempted by order of the SEC, each member of the Committee may
not, other than in his or her capacity as a member of the Committee,
the Board, or any other committee of the Board accept any consulting,
advisory, or other compensatory fee from the Fund.
5. If at least one member of the Committee is not a "financial expert" (as
that term is defined in the rules and regulations of the SEC), the
Fund's periodic reports shall disclose the reason why.
Duties and Powers
To carry out its mission under this Audit Charter, the Committee shall, to the
extent it deems appropriate, carry out the following functions:
A-2
1. To recommend annually to the Board the selection, retention or
termination of independent auditors and, in connection therewith, to
evaluate the independence of the auditors, including whether the
auditors provide any consulting, auditing or tax services to the
Manager or the Adviser, and to receive the auditors' specific
representations as to their independence, delineating all relationships
between the auditor and the Fund, consistent with Independence
Standards Board ("ISB") Standard No. 1.1 The Committee is responsible
for actively engaging in a dialogue with the auditor with respect to
any disclosed relationships or services that may impact the objectivity
and independence of the auditor and for taking, or recommending that
the full Board take, appropriate action to oversee the independence of
the outside auditor;
2. To review in advance, and consider approval of, any and all proposals
by management of the Fund or the Manager or the Adviser that the Fund,
the Manager or the Adviser, or their affiliated persons, employ the
independent auditor to render "permissible non-audit services"2 to the
Fund and to consider whether such services are consistent with the
independent auditor's independence.3 The Committee may delegate to one
or more of its members ("Delegates") authority to pre-approve
permissible non-audit services to be provided to the Fund. Any
pre-approval determination of a Delegate shall be presented to the
full Committee at its next meeting. The Committee shall communicate
any pre-approval made by it or a Delegate to the Fund's Manager, who
will ensure that the appropriate disclosure is made in the Fund's
periodic reports required by Section 13(a) of the Securities Exchange
Act of 1934, as amended, and other documents as required under the
federal securities laws;
3. To recommend new independent auditors, should it prove necessary, subject
to ratification by the Board and shareholder approval, if required;
------------------
1 ISB Standard No. 1 requires the auditor to annually: (1) disclose to
the Committee, in writing, all relationships between the auditor and
its related entities and the Fund and its related entities that in the
auditor's professional judgment may reasonably be thought to bear on
independence; (2) confirm in the letter that, in its professional
judgment, it is independent of the Fund within the meaning of the
Securities Acts administered by the SEC; and (3) discuss the auditor's
independence with the audit committee.
2 "Permissible non-audit services" include any professional services,
including tax services, provided to the Fund by the independent
auditor, other than those provided to the Fund in connection with an
audit or a review of the financial statements of the Fund. Permissible
non-audit services may not include: (i) bookkeeping or other services
related to the accounting records or financial statements of the Fund;
(ii) financial information systems design and implementation; (iii)
appraisal or valuation services, fairness opinions or
contribution-in-kind reports; (iv) actuarial services; (v) internal
audit outsourcing services; (vi) management functions or human
resources; (vii) broker or dealer, investment adviser or investment
banking services; (viii) legal services and expert services unrelated
to the audit; and (ix) any other service the Public Company Accounting
Oversight Board determines, by regulation, is impermissible.
3 Pre-approval by the Committee of any permissible non-audit services is
not required so long as: (i) the aggregate amount of all such
permissible non-audit services provided to the Fund constitutes not
more than 5% of the total amount of revenues paid by the Fund to its
auditor during the fiscal year in which the permissible non-audit
services are provided; (ii) the permissible non-audit services were not
recognized by the Fund at the time of the engagement to be non-audit
services; and (iii) such services are promptly brought to the attention
of the Committee and approved by the Committee or its Delegate(s) prior
to the completion of the audit.
A-3
4. To review, in advance and in consultation with the independent auditor,
the staffing of the audit of the Fund's financial statements and obtain
from the independent auditors a written representation that they have
appointed a lead auditor and/or review partner who has not acted in
such capacity for the Fund in each of the Fund's previous five fiscal
years;
5. To meet with the Fund's independent auditors, including private
meetings, as necessary (i) to review the arrangements for and scope of
the annual audit and any special audits, and the fees proposed to be
charged in connection with such services, (ii) to discuss any matters
of concern relating to the Fund's financial statements, including any
adjustments to such statements recommended by the auditors, or other
results of said audit(s), including matters required to be discussed by
the Statements on Auditing Standards ("SAS") No. 61,4 (iii) to consider
the auditors' comments with respect to the Fund's financial policies,
procedures and internal accounting controls and management's responses
thereto, (iv) to review the form of opinion the auditors propose to
render to the Board and shareholders, and (v) to review the performance
of the auditor;
6. To consider the effect upon the Fund of any changes in accounting
principles or practices proposed by management or the auditors;
7. To consider, in consultation with the independent auditor, (i) material
questions of choice with respect to appropriate accounting principles and
practices to be used in the preparation of the financial statements of
the Fund and the effect upon the Fund of any proposed changes in
accounting principles or practices, (ii) all critical accounting
policies and practices to be used; (iii) all alternative treatments of
financial information within generally accepted accounting principles
that have been discussed with management officials of the Fund, the
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent auditors;
(iv) reasons for major year-to-year variations in financial
statements; (v) reports of any significant accounting accruals,
reserves, estimates made by management, and provisions for contingent
liabilities; and (vi) any other material written communications
between the independent auditor and management, such as any management
letter or schedule of unadjusted differences.
8. To review the fees charged by the auditors for audit and permissible
non-audit services;
9. To review the Fund's system of internal controls, including (i) the
security of tangible and intangible Fund assets and the security of
computer systems and facilities; (ii) instances of employee defalcation
and violations of the Code of Ethics and other Fund policies and
procedures; and (iii) reports from Fund legal counsel with respect to
compliance with laws and regulations, significant litigation, and
possible impact on financial results;
10. To establish rules and procedures necessary for the Committee to fulfill
its responsibilities and conduct its business;
------------------
4 SAS 61 requires independent auditors to communicate certain matters
related to the conduct of an audit to those who have responsibility for
oversight of the financial reporting process, specifically the audit
committee. Among the matters to be communicated to the audit committee
are: (1) methods used to account for significant unusual transactions;
(2) the effect of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or
consensus; (3) the process used by management in formulating
particularly sensitive accounting estimates and the basis for the
auditor's conclusions regarding the reasonableness of those estimates;
and (4) disagreements with management over the application of
accounting principles, the basis for management's accounting estimates,
and the disclosures in the financial statements.
A-4
11. To investigate improprieties or suspected improprieties in Fund
operations, as they are presented to the Committee or brought to the
attention of the Committee;
12. To review the Fund's tax compliance and status, including the status
of the Fund's position relative to tax audits and significant issues
disputed by tax authorities;
13. To investigate matters brought to its attention within the scope of its
duties;
14. To develop, establish and periodically review procedures for: (i) the
receipt, retention and treatment of complaints received by the Fund
from any source regarding accounting, internal accounting controls, or
auditing matters; and (ii) the confidential, anonymous submission by
employees of the Fund or its service providers of concerns regarding
questionable accounting or auditing matters related to the Fund;
15. To assure that all its actions are recorded in minutes of its meetings
and maintained with the Fund's records; and
16. To report its activities to the full Board on a regular basis and to
make such recommendations with respect to the above and other matters
as the Committee may deem necessary or appropriate.
Other Powers and Responsibilities
1. The Committee normally shall meet in person twice yearly, in June and
December, prior to the meetings of the full Board, and may meet at such
other time or times as the Committee or Board may determine appropriate
or necessary, and is empowered to hold special meetings as
circumstances require.
2. Each December, the Committee shall make a report indicating whether the
Committee (i) reviewed and discussed the financial statements with
management; (ii) discussed the matters required by SAS 61, as modified
or supplemented; and (iii) received from the auditors the letter and
written disclosure required by ISB Standard No. 1, and discussed with
the auditors their independence. The Committee's report should also
indicate whether the Committee, based on its review and its discussions
with management and the auditors, recommends to the Board that the
financial statements be included in the Fund's annual report for the
last fiscal year.
3. The Fund's officers shall provide, or arrange to provide, such
information, data and service as the Committee may request. The
Committee shall conduct interviews or discussions as it deems
appropriate with personnel of the Fund, and/or others whose views would
be considered helpful to the Committee. The Committee may ask
management and representatives of the service providers to attend
meetings as necessary.
4. The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including authority to engage legal
counsel and to retain experts or other persons with specific competence
at the expense of the Fund.
5. The Committee shall review this Charter at least annually and recommend
any changes to the full Board of Directors.
December 11, 2002
A-5
EXHIBIT B
ABERDEEN GLOBAL INCOME FUND, INC.
FORM OF ARTICLES OF AMENDMENT AND RESTATEMENT
Aberdeen Global Income Fund, Inc., a Maryland corporation, having its
principal office in this State in Baltimore City (hereinafter referred to as the
"Corporation"), hereby certifies to the Maryland State Department of Assessments
and Taxation, that:
FIRST: The Corporation desires to amend and restate the Articles
Supplementary creating its Auction Market Preferred Stock, Series W-7, as
amended to date and as currently in effect, consistent with Sections 2-607,
2-608 and 2-609 of the Maryland General Corporation Law; and
SECOND: The Articles Supplementary creating the Series W-7 of the
Corporation's Auction Market Preferred Stock were filed with the Maryland State
Department of Assessments and Taxation on July 27, 1992 and such Articles
Supplementary have been amended from time to time in accordance with its terms
and the requirements of the Maryland General Corporation Law, as applicable; and
THIRD: The provisions set forth in these Articles of Amendment and
Restatement include all the provisions of the Articles Supplementary listed
above currently in effect with respect to the Corporation's Auction Market
Preferred Stock, Series W-7; and
FOURTH: The Articles Supplementary creating the Corporation's Auction
Market Preferred Stock, Series W-7, are hereby amended and restated to read in
their entirety as follows:
* * * *
ABERDEEN GLOBAL INCOME FUND, INC.
AMENDED AND RESTATED
ARTICLES SUPPLEMENTARY CREATING ONE SERIES OF
AUCTION MARKET PREFERRED STOCK*
Aberdeen Global Income Fund, Inc., a Maryland corporation having its
principal Maryland office in the City of Baltimore in the State of Maryland (the
"Corporation"), certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article V(b) of its charter, the Board of Directors has
previously authorized the issuance of one series of up to 1,500 shares of its
authorized preferred stock, par value $.001 per share, liquidation preference
$25,000 per share, plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) thereon, designated Auction Market Preferred
Stock, Series W-7.
SECOND: Pursuant to section 2-411 of the Maryland General Corporation Law
and authority granted by Article IV, Section 1 of the Corporation's By-Laws, the
Board of Directors of the Corporation has appointed a pricing committee (the
"AMPS Pricing Committee") and has authorized such AMPS Pricing Committee to fix,
consistent with, and subject to, the authorization referred to in
----------
* Registered Trademark of Merrill Lynch & Co., Inc.
Article FIRST of these Articles Supplementary, the terms of the shares of
Auction Market Preferred Stock, Series W-7.
THIRD: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the shares
of such series of preferred stock are as follows:
DESIGNATION
SERIES W-7: A series of up to 1,200 shares of preferred stock, par value
$.001 per share, liquidation preference $25,000 per share plus an amount equal
to accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series W-7." Each share of
Auction Market Preferred Stock, Series W-7 shall be issued on the Date of
Original Issue (as herein defined); have an Initial Dividend Payment Date (as
herein defined) of August 6, 1992; and have such other preferences, limitations
and relative voting rights, in addition to those required by applicable law or
set forth in the Corporation's Articles of Incorporation applicable to preferred
stock of the Corporation, as are set forth in these Articles Supplementary. The
Auction Market Preferred Stock, Series W-7 shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series W-7 shall be identical except as provided in paragraph 3 of these
Articles Supplementary.
1. Definitions.
(a) Capitalized terms not defined in this paragraph 1 shall have the
respective meanings specified in paragraph 8(a) hereof. Unless the context or
use indicates another or different meaning or intent, the following terms shall
have the following meanings, whether used in the singular or plural:
"'AA' Composite Commercial Paper Rate," on any Valuation Date, means (i)
the Interest Equivalent of the rate on commercial paper placed on behalf of
issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's, or the
equivalent of such rating by another nationally recognized rating agency, as
such rate is made available on a discount basis or otherwise by the Federal
Reserve Bank of New York for the Business Day immediately preceding such date,
or (ii) in the event that the Federal Reserve Bank of New York does not make
available such a rate, then the arithmetic average of the Interest Equivalent of
the rate on commercial paper placed on behalf of such issuers, as quoted to the
Auction Agent on a discount basis or otherwise by the Commercial Paper Dealers
for the close of business on the Business Day immediately preceding such date.
If any Commercial Paper Dealer does not quote a rate required to determine the
"AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate
will be determined on the basis of the quotation or quotations furnished by any
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers
selected by the Corporation to provide such rate or rates not being supplied by
the Commercial Paper Dealer. If the number of Dividend Period Days shall be (i)
7 or more but fewer than 49 days, such rate shall be the Interest Equivalent on
the 30-day rate on such commercial paper; (ii) 49 or more but fewer than 70
days, such rate shall be the Interest Equivalent of the 60-day rate on such
commercial paper; (iii) 70 or more days but fewer than 85 days, such rate shall
be the arithmetic average of the Interest Equivalent on the 60-day and 90-day
rates on such commercial paper; (iv) 85 or more days but fewer than 99 days,
such rate shall be the Interest Equivalent of the 90-day rate on such commercial
paper; (v) 99 or more days but fewer then 120 days, such rate shall be the
arithmetic average of the Interest Equivalent of the 90-day and 120-day rates on
such commercial paper; (vi) 120 or more days but fewer than 141 days, such rate
shall be the Interest Equivalent of the 120-day rate on such commercial paper;
(vii) 141 or more days but fewer than 162 days, such rate
2
shall be the arithmetic average of the Interest Equivalent of the 120-day and
180-day rates on such commercial paper; and (viii) 162 or more days but fewer
than 183 days, such rate shall be the Interest Equivalent of the 180-day rate on
such commercial paper.
"Accountant's Confirmation" has the meaning set forth in paragraph
7(b)(iii) hereof.
"Administrator" shall mean Princeton Administrators, L.P. or any successor
administrator to the Corporation who acts in such capacity.
"Affiliate" shall mean any Person known to the Auction Agent to be
controlled by, in control of, or under common control with, the Corporation.
"Agent Member" means the member of the Securities Depository that will act
on behalf of a Beneficial Owner or a Potential Beneficial Owner.
"AMPS" means the Auction Market Preferred Stock, Series W-7 of the
Corporation, where appropriate, any other series of the Corporation's Auction
Market Preferred Stock.
"AMPS Basic Maintenance Amount" means, as of any Valuation Date, the dollar
amount equal to the sum of (i) the product of the number of shares of AMPS
outstanding on such Valuation Date multiplied by the sum of (A) $25,000 and (B)
any applicable redemption premium attributable to the designation of a Premium
Call Period; (ii) the aggregate amount of cash dividends (whether or not earned
or declared) that will have accumulated for each share of AMPS Outstanding, in
each case, to (but not including) the end of the current Dividend Period that
follows such Valuation Date; (iii) the aggregate amount of cash dividends that
would accumulate at the then current Maximum Applicable Rate on any shares of
AMPS Outstanding from the end of such Dividend Period through the 48th day after
such Valuation Date, multiplied by the larger of the potential dividend rate
increase factors (currently 304%) determined from time to time by Moody's and
S&P (except that if such Valuation Date occurs during a Non-Payment Period, the
cash dividend for purposes of calculation would accumulate at the then current
Non-Payment Period Rate); (iv) the aggregate principal amount of any
then-outstanding indebtedness of the Corporation for money borrowed; (v) the
amount of anticipated expenses of the Corporation for the 90 days subsequent to
such Valuation Date; and (vi) the greater of $50,000 or the Corporation's
current liabilities as of such Valuation Date not otherwise reflected in any of
(i) through (v) above.
"AMPS Basic Maintenance Cure Date," with respect to the failure by the
Corporation to maintain the AMPS Basic Maintenance Amount (as required by
paragraph 7(b) of these Articles Supplementary) as of a given Valuation Date,
means the fifth Business Day following such Valuation Date.
"AMPS Basic Maintenance Report" means a report executed by the Corporation
with respect to the valuation (in U.S. dollars) of the Eligible Portfolio
Property, as described in paragraph 7(b) hereof; provided, that all or any
portion of any such report may be prepared by the Custodian, Aberdeen Asset
Management Limited, the Administrator and/or Aberdeen Asset Managers (CI)
Limited; provided further that such AMPS Basic Maintenance Report may be
delivered to the Auction Agent and the Rating Agencies in summary form, however,
the Corporation shall retain a copy of the full AMPS Basic Maintenance Report in
its files and make such report available to its Independent Accountants and the
Rating Agencies upon their request.
3
"AMPS Interest Rate Swap" means a contractual agreement whereby the
Corporation contracts with an Eligible AMPS Interest Rate Swap Counterparty to
engage, for a period of time not to exceed two years, in an interest rate swap
with a notional value of up to one-third of the value of the aggregate
liquidation preference of all of the AMPS (in any and all series) Outstanding at
the time the interest rate swap commences. If the Corporation fails to maintain
the AMPS Basic Maintenance Amount (as required by paragraph 7(b) hereof) as of
each Valuation Date, and will not be able to cure such failure by the AMPS Basic
Maintenance Cure Date, the Corporation must terminate any then-outstanding AMPS
Interest Rate Swaps by the close of business on the AMPS Basic Maintenance Cure
Date.
"ANNIE MAEs" are securities issued against mortgage pools by Australian
National Mortgage Pool Agency Ltd., an affiliate of Security Pacific National
Bank.
"Applicable Percentage" has the meaning set forth in paragraph 8(a)(vii)
hereof.
"Applicable Rate" means the rate per annum at which cash dividends are
payable on the AMPS for any Dividend Period, which rate, after the Initial
Dividend Period, shall be determined by the Auction Agent in accordance with
paragraph 8(d) hereof.
"Applicable Spread" has the meaning set forth in paragraph 8(a)(vii)
hereof.
"Articles of Incorporation" means the Articles of Incorporation of the
Corporation, as amended and restated from time to time, including as amended by
these Articles Supplementary.
"Asian Yankee Bonds" means, in the case of Moody's, Yankee Bonds that are
issued by companies from China, Hong Kong, India, Indonesia, Korea, Malaysia,
Thailand and The Philippines and such other countries as are approved in writing
by Moody's from time to time, and, in the case of S&P, Yankee Bonds that are (i)
issued by issuers from China, Hong Kong, India, Indonesia, Korea, Malaysia,
Thailand and The Philippines and such other countries as are approved in writing
by S&P from time to time, and (ii) are subject to the following ratings
limitations (which are cumulative):
----------------------------------------------------------------
% of total Discounted Value of
Eligible Portfolio Property allowed at
Rating each ratings level
----------------------------------------------------------------
Aa3/AA- or better 100%
----------------------------------------------------------------
Below Aa3/AA- 50%
----------------------------------------------------------------
Below A3/A- 25%
----------------------------------------------------------------
Below BBB3/BBB- 10%
----------------------------------------------------------------
"Auction" means each operation of the Auction Procedures.
"Auction Agent" means Deutsche Bank Trust Company Americas unless and until
another commercial bank, trust company or other financial institution appointed
by a resolution of the Board of Directors of the Corporation or a duly
authorized committee thereof enters into an agreement with the Corporation to
follow the Auction Procedures for the purpose of determining the Applicable Rate
and to act as transfer agent, registrar, paying agent and redemption agent for
the AMPS.
"Auction Date" has the meaning specified in paragraph 8(a) hereof.
"Auction Procedures" means the procedures for conducting Auctions set forth
in paragraph 8 hereof.
4
"Australian Bank Bills" means bills of exchange (as defined in the Bills of
Exchange Act of the Commonwealth of Australia) issued, accepted or endorsed by
Australian banks with (x) in the case of S&P (i) a rating from S&P at least as
high as S&P's then-current rating for the AMPS or (ii) in the case of any Bank
Bill with a remaining term to maturity from the Valuation Date of 365 days or
less, a rating from S&P at least as high as S&P's short term rating comparable
to its then-current rating for the AMPS and (y) in the case of Moody's (i) a
long term foreign currency debt rating from Moody's of at least Aa2 or (ii) in
the case of any Bank Bill with a remaining term to maturity from the Valuation
Date of 180 days or less, a rating from Moody' s of Prime-1 or (iii) any other
rating as Moody's shall approve in writing.
"Australian Convertible or Exchangeable Eurobonds" means securities which
are denominated in Australian Currency issued by the New South Wales Treasury
Corporation or the Queensland Treasury Corporation which confer upon the holder
an option to exchange such securities for, respectively, a like principal amount
of New South Wales Treasury Inscribed Stock or Queensland Treasury Corporation
Inscribed Stock of identical maturity and coupon.
"Australian Corporate Bonds" means debt obligations of Australian
corporations (other than Australian Government Securities, Australian
Semi-Government Securities, Australian Bank Bills, Australian Eurobonds,
Australian Exchangeable Eurobonds and. Australian Short Term Securities)
provided, that such debt obligations shall not be deemed to be Eligible
Portfolio Property by S&P unless they have the following characteristics: (a)
the principal amount outstanding on the Valuation Date is at least equal to A$50
million, (b) the security is publicly traded, (c) the security is non-callable,
or, if the security is callable, the basis for pricing is to the call date, (d)
the security has a Tender Panel, (e) the maturity date of the security is not
later than the 10th anniversary of the Valuation Date of such security and (f)
the security is issued by one of the following issuers:
(i) Issuers with a public long term S&P rating or whose parent
has a public long term rating and there is an explicit guarantee backing
the subsidiary's debt service payments ("Guaranteed Australian Corporate
Bonds"). These issuers currently include:
FANMAC Premier Trust Co. No. 1-22 and any subsequent issues
rated by S&P - Australian Ratings
Ford Credit Australia
National Australia Bank
Commonwealth Bank of Australia
Telstra Corp. Limited
(ii) Issuers, which shall be designated in writing from time to
time by S&P, without a public long term S&P rating but whose parent has a
long term S&P rating but has not explicitly guaranteed the subsidiary's
debt service payments ("Non-Guaranteed Corporate Bonds").
In addition, if the determination is being made for S&P, (a) not more than
10% of the aggregate Discounted Value of the Eligible Portfolio Property of the
Corporation can consist of Australian Corporate Bonds issued by a single issuer,
(b) not more than 50% (if the issue is rated AAA by S&P) or 33.3% (if the issue
is rated AA or A by S&P) or 20% (if the issue is rated BBB by S&P) of the
aggregate Discounted Value of the Eligible Portfolio Property of the Corporation
can consist of Australian Corporate Bonds from issues representing a single
industry, (c) not more than 5% of the then-outstanding principal amount of any
one issue can be included in Eligible Portfolio Property, (d)
5
not more than 20% of the outstanding aggregate principal amount of the
Australian Corporate Bonds held by the Corporation and included in Eligible
Portfolio Property shall be comprised of securities with a then-outstanding
issue size of less than A$100 million, and (e) such corporate debt obligations
are subject to the following ratings limitations (which are cumulative):
----------------------------------------------------------------
% of total Discounted Value of
Eligible Portfolio Property allowed at
Rating each ratings level
----------------------------------------------------------------
Aa3/AA- or better 100%
----------------------------------------------------------------
Below Aa3/AA- 50%
----------------------------------------------------------------
Below A3/A- 25%
----------------------------------------------------------------
Below BBB3/BBB- 10%
----------------------------------------------------------------
"Australian Currency" means such coin or currency of Australia as at the
time shall be legal tender for payment of public and private debts, as well as
cash deposits with Offshore Banking Units of Banque Nationale de Paris.
"Australian Eurobonds" means, in the case of Moody's, debt securities
(including Australian Exchangeable Eurobonds) which are denominated in
Australian Currency and which have the following characteristics: (a) the
principal amount outstanding on the Valuation Date is at least equal to A$50
million, (b) the security is publicly traded, (c) the security is non-callable,
and (d) 90% or more of the Australian Eurobonds meeting the qualifications of
clauses (a) and (b) are rated at least Aa2 by Moody's; and in the case of S&P,
debt securities (including guaranteed and non-guaranteed Eurobonds) which are
denominated in Australian Currency, and which have the following
characteristics: (a) the principal amount outstanding on the Valuation Date is
at least equal to A$50 million, (b) the security is publicly tradable, (c) the
security is non-callable, or, if the security is callable, the basis for pricing
is to the call date, (d) the maturity date of the security is not later than the
10th anniversary of the Valuation Date of such security, and (e) the security is
issued by one of the following issuers:
(i) Issuers with a public long term S&P rating or whose parent
has a public long term S&P rating and there is an explicit guarantee
backing the subsidiary's debt service payments ("Guaranteed Australian
Eurobonds"). These issuers currently include:
ABN Amro Australia Ltd.
ANZ Banking Group
Australian Industry Development Corp.
Australian Telecom
Barclays Bank Plc
Coca Cola Amatil Ltd.
Commerzbank US Finance Inc.
Commonwealth Bank of Australia
Eksportfinas A/S
Eurofina
European Investment Bank
Export Finance & Insurance Corp.
Federal Airports Corp.
Finnish Export Credit Corp.
General Electric Capital Corp.
6
GG Securities Ltd.
Guiness Finance BV
International Bank for Reconstruction and Development
McDonald's Australia Ltd.
Mobil Australia Finance Company Inc.
National Australian Bank
New South Wales Treasury Corp.
Primary Industry Bank Australia Ltd.
Prudential Funding Corp.
Rural & Industry Bank of Western Australia
South Australia Government Financing Authority
SBC Warburg Australia Holdings Ltd.
Shell Australia Ltd.
State Bank of New South Wales
State Bank of South Australia Ltd.
State Electricity of Victoria
Sweden (Kingdom of)
Swedish Export Credit Corp.
Tasmanian Public Finance Corp.
Toronto Dominion Australia Ltd.
Toyota Finance Australia Ltd.
Treasury Corporation of Victoria
Western Australian Treasury Corp.
(ii) Issuers, which shall be designated in writing from time to
time by S&P, without a public long term S&P rating but whose parent has a
long term S&P rating but has not explicitly guaranteed the subsidiary's
debt service payments ("Australian Non-Guaranteed Eurobonds").
In addition, if the determination is being made by S&P, (a) not more than
10% of the aggregate Discounted Value of the Eligible Portfolio Property of the
Corporation can consist of Australian Eurobonds from a single issuer, (b) not
more than 50% (if the issue is rated AAA by S&P) or 33.3% (if the issue is rated
AA or A by S&P) or 20% (if the issue is rated BBB by S&P) of the aggregate
Discounted Value of the Eligible Portfolio Property of the Corporation can
consist of Australian Eurobonds from issues representing a single industry, (c)
not more than 5% of the then outstanding principal amount of any one issue can
be included in Eligible Portfolio Property, (d) not more than 20% of the
outstanding aggregate principal amount of the Australian Eurobonds held by the
Corporation and included in Eligible Portfolio Property shall be comprised of
securities with an outstanding issue size of less than A$50 million, and (e)
such Australian Eurobonds are subject to the following ratings limitations
(which are cumulative):
-------------------------------------------------------------
% of total Discounted Value of
Eligible Portfolio Property allowed at
Rating each ratings level
-------------------------------------------------------------
Aa3/AA- or better 100%
-------------------------------------------------------------
Below Aa3/AA- 50%
-------------------------------------------------------------
Below A3/A- 25%
-------------------------------------------------------------
Below BBB3/BBB- 10%
-------------------------------------------------------------
7
"Australian Government Securities" means, in the case of S&P, all publicly
traded securities issued and guaranteed by the Government of the Commonwealth of
Australia with fixed maturities (i.e., no perpetuals) and in the case of
Moody's, any publicly traded security which is (i) either issued by the
Government of the Commonwealth of Australia and is rated Aa by Moody's or is
guaranteed by the Government of the Commonwealth of Australia (ii) is
denominated and payable in Australian Currency or is convertible into a security
constituting Eligible Portfolio Property by Moody's and (iii) is not a variable
rate, index-linked, zero coupon or stripped security.
"Australian Ratings" means Australian Ratings Pty Ltd or its successors.
"Australian Securities" means ANNIE MAEs, Australian Bank Bills, Australian
Convertible or Exchangeable Eurobonds, Australian Corporate Bonds, Australian
Eurobonds, Australian Government Securities, Australian Semi-Government
Securities, Australian Short Term Securities, MMSs, MTCs and NMMC Securities.
"Australian Semi-Government Securities" means publicly traded
semi-government securities with a fixed maturity (i.e., no perpetuals) issued by
the following entities which, except as indicated are explicitly guaranteed by
the Government of the Commonwealth of Australia or the respective Australian
State and which, in the case of S&P, include Australian Exchangeable Eurobonds
and in the case of Moody's are (i) either rated Aa by Moody's or are guaranteed
by either the Commonwealth of Australia and rated Aa or any semi-sovereign
Australian entity whose domestic long term debt is rated Aa by Moody's, (ii) are
denominated and payable in Australian currency or are convertible into a
security constituting Eligible Portfolio Property by Moody's and (iii) are not a
variable rate, index-linked, zero coupon or stripped security.
(1) Electricity Trust of South Australia, a body
established under the Electricity Trust of South Australia Act
1946 (South Australia).
(2) New South Wales Treasury Corporation, a corporation
constituted under section 4 of the Treasury Corporation Act of
1983 (New South Wales), including its Australian Convertible
Eurobond issues, in the case of S&P.
(3) A Territory authority being an authority within the
meaning of that term under section 43 of the Northern Territory
(Self Government) Act (Commonwealth) provided that the specific
issue is guaranteed by the Treasurer of the Commonwealth of
Australia.
(4) Queensland Treasury Corporation, a corporation
established under the Treasury Corporation Act 1988 (Qld),
including its Australian Convertible Eurobond issues, in the case
of S&P.
(5) South Australian Government Financing Authority, an
authority established under the Government Financing Authority
Act 1982 (South Australia).
(6) State Electricity Commission of Victoria, a commission
established under the State Electricity Commission Act 1958
(Victoria).
8
(7) The Australian Telecommunications Commission, a
commission established under section 4 of the Telecommunications
Act 1975 (Commonwealth).
(8) (with respect to S&P only) and without any guarantee by
the Commonwealth of Australia or the respective Australian State:
Australian and Overseas Telecommunications Corporation, Limited.
(9) Victorian Public Authorities Finance Agency, an agency
constituted under section 3 of the Victorian Public Authorities
Act 1984 (Victoria).
(10) Australian Industry Development Corporation, a body
established under section 5 of the Australian Industries
Development Corporation Act (Commonwealth).
(11) The Western Australian Treasury Corporation.
(12) Tasmanian Public Finance Corp.
(13) (with respect to S&P only) FANMAC Premier Trust Co.
(Nos. 1-22) and any subsequent issues rated by S&P - Australian
Ratings.
(14) (with respect to S&P only) Australian Wool Corporation.
(15) Commonwealth Bank of Australia.
(16) State Bank of New South Wales.
(17) Securities issued by the Australian State Government of
Victoria through the Treasury Corporation of Victoria.
"Australian Short Term Securities" means promissory notes and other short
term commercial paper issued by Australian institutions which, for purposes of
S&P, are rated A-1+ by S&P or have a long term rating from S&P at least as high
as their then-current comparable rating of AMPS and, for purposes of Moody's,
are rated Prime-1 by Moody's or have a long term foreign currency debt rating
from Moody's of at least Aa3 and a maturity of less than 270 days in the case of
commercial paper.
"Authorized Newspaper" means The Wall Street Journal, or if not published
on such date, The New York Times, or if neither of such papers is published on
such date, a newspaper, printed in the English language, of general circulation
in the Borough of Manhattan, the City of New York, that carries financial news
and is customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays.
"Beneficial Owner" means a customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer (or, if applicable, the Auction Agent) as a holder
of shares of AMPS or a Broker-Dealer that holds AMPS for its own account.
9
"Board of Directors" means the Board of Directors of the Corporation or,
except as used in paragraphs 3(a) and 6 hereof, any duly authorized and
empowered committee thereof, including the AMPS Pricing Committee.
"Brady Bonds" means debt obligations, generally denominated in U.S.
dollars, issued under the framework of the "Brady Plan" that are rated A- or
better by S&P.
"Broker-Dealer" shall mean any broker-dealer, or other entity permitted by
law to perform the functions required of a Broker-Dealer in paragraph 8 hereof,
that has been selected by the Corporation and has entered into a Broker-Dealer
Agreement with the Auction Agent that remains effective.
"Broker-Dealer Agreement" shall mean an agreement between the Auction Agent
and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in paragraph 8 hereof.
"Business Day" means a day on which the New York Stock Exchange is open for
trading and which is not a Saturday, Sunday or other day on which it is
authorized or obligated by law to close.
"Canadian Currency" means such coin or currency of Canada as at the time
shall be legal tender for payment of public and private debts, as well as time
deposits denominated in such currency.
"Canadian Government Securities" means, in the case of S&P, all publicly
traded securities issued and guaranteed by the Government of Canada with fixed
maturities (i.e., no perpetuals) and which is non-callable and in the case of
Moody's, (i) any publicly traded security which is either issued by the
Government of Canada and is rated at least Aa1 by Moody's or is guaranteed by
the Government of Canada or any semi-sovereign Canadian entity whose domestic
currency long term debt is rated at least Aa1 by Moody's (ii) is denominated and
payable in Canadian currency or is convertible into a security constituting
Eligible Portfolio Property by Moody's and (iii) is not a variable rate,
index-linked, zero coupon or stripped security.
"Canadian Provincial Securities" means securities which are denominated and
payable in Canadian Currency, and are direct obligations of, or fully guaranteed
by, the full faith and credit of the appropriate Canadian Province, (including
securities issued by provincially owned crown corporations carrying the same
rating as the appropriate Canadian Province) (i) provided, that in the case of
Moody's, the appropriate Province is rated at least Baa1 by Moody's, the
securities are not callable or pay-in-kind of zero coupon bonds, and, provided
further, that the minimum issue size for Newfoundland, Prince Edward Island,
Nova Scotia and New Brunswick Canadian Provincial Securities is C$150 million
and for other Canadian Provincial Securities is C$500 million, that investment
in Newfoundland, Prince Edward Island, New Scotia and New Brunswick Canadian
Provincial Securities is limited to 6.25% of total Eligible Portfolio Property
and that investments in a single Province rated Baa1 shall not exceed 5% of
total Eligible Portfolio Property; investments in a single Province rated Baa1
or A shall not exceed in the aggregate 15% of total Eligible Portfolio Property;
investments in a single Province rated Baa1, A or Aa shall not exceed in the
aggregate 20% of total Eligible Portfolio Property and investments in a single
Province rated Baa1, A, Aa or Aaa shall not exceed in the aggregate 25% of total
Eligible Portfolio Property, and (ii) provided that, in the case of S&P,
Canadian Provincial Securities do not include securities issued by Prince Edward
Island, that the appropriate Province has a senior unsecured rating of at least
"BBB" and provided further, that such security is publicly traded, is a
non-callable domestic or global issue, has a minimum issue size of $100 million
and, in the case of securities issued by the Province of Ontario or Quebec, such
10
securities represent no more than 25% of the assets of the Corporation and, in
the case of any other Canadian Province, represent no more than 15% of the
assets of the Corporation.
"Canadian Securities" means Canadian Government Securities and Canadian
Provincial Securities.
"Cash" means such coin or currency of the United States of America as at
the time shall be legal tender for payment of public and private debts.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and such other commercial paper dealer or dealers as the
Corporation may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means shares of the common stock, par value $.001 per share,
of the Corporation.
"Commonwealth Yankee Bonds" means, in the case of Moody's, Yankee Bonds
that are issued by companies from Australia, Canada, New Zealand and the United
Kingdom and such other countries as are approved in writing by Moody's from time
to time, and, in the case of S&P, Yankee Bonds that are (i) issued by issuers
from Australia, Canada, New Zealand and the United Kingdom and such other
countries as are approved in writing by S&P from time to time, and (ii) are
subject to the following ratings limitations (which are cumulative):
-----------------------------------------------------------------
% of total Discounted Value of
Eligible Portfolio Property allowed at
Rating each ratings level
-----------------------------------------------------------------
Aa3/AA- or better 100%
-----------------------------------------------------------------
Below Aa3/AA- 50%
-----------------------------------------------------------------
Below A3/A- 25%
-----------------------------------------------------------------
Below BBB3/BBB- 10%
-----------------------------------------------------------------
"Corporate Bonds" means debt obligations of U.S. corporations (other than
Short Term Money Market Instruments or U.S. Government Obligations), which
corporate debt obligations (a) provide for the periodic payment of interest
thereon in cash, (b) do not provide for conversion or exchange into equity
capital at any time over their respective lives, (c) have been registered under
the Securities Act of 1933, as amended, and (d) have not had notice given in
respect thereof that any such corporate debt obligations are the subject of an
offer by the issuer thereof of exchange or tender for cash, securities or any
other type of consideration (except that corporate debt obligations and Yankee
Bonds, together, in an amount not exceeding 10% of the aggregate value of the
Corporation's assets at any time shall not be subject to the provisions of this
clause (d)). Such corporate debt obligations are subject to the following
ratings limitations (which are cumulative) in the case of Moody's and S&P,
respectively:
11
----------------------------------------------------------------------------------
% of total Discounted Value % of total Discounted Value of
of Eligible Portfolio Eligible Portfolio Property
Property allowed at each allowed at each ratings level
Rating ratings level for Moody's for S&P
----------------------------------------------------------------------------------
Aa3/AA- or better 100% 100%
----------------------------------------------------------------------------------
Below Aa3/AA- 0% 50%
----------------------------------------------------------------------------------
Below A3/A- 0% 25%
----------------------------------------------------------------------------------
Below BBB3/BBB- 0% 10%
----------------------------------------------------------------------------------
In addition, no corporate debt obligation held by the Corporation shall be
deemed a Corporate Bond (i) if it fails to meet the criteria in column (1) below
or (ii) to the extent (and only to the proportionate extent) the acquisition or
holding thereof by the Corporation causes the Corporation to exceed any
applicable limitation set forth in column (2) or (3) below as of any relevant
Valuation Date (provided that in the event that the Corporation shall exceed any
such limitation, the Corporation shall designate, in its sole discretion, the
particular Corporate Bond(s) and/or portions thereof which shall be deemed to
have caused the Corporation to exceed such limitation):
Column 1 Column 2 Column 3
------------------------ ------------------------ -----------------------
Maximum
Maximum Percent of Value
Percent of Value of Corporation
of Corporation Assets, Including
Assets, Including Eligible Portfolio
Minimum Original Eligible Portfolio Property,
Issue Size of Property, Invested in any
Rating Each Issue Invested in any One Industry
(1) ($ in millions) One Issuer(2) Category(2)
------------------------------- ------------------------ ------------------------ -----------------------
Aaa/AAA................... $ 100 10.0% 50.0%
Aa/AA..................... $ 100 10.0% 33.3%
----------
(1) In the event that a Corporate Bond has received a different rating from
each of the Rating Agencies, the lower of the two ratings will be
controlling. Rating designations include (+) or (-) modifiers to the rating
where appropriate.
(2) The referenced percentages represent maximum cumulative totals for the
related rating category and each lower rating category.
"Corporation" means Aberdeen Global Income Fund, Inc., a Maryland
corporation.
"Cure Date" means the AMPS Basic Maintenance Cure Date or the 1940 Act Cure
Date, as the case may be.
"Custodian" means State Street Bank and Trust Company or any successor
custodian to the Corporation who acts in such capacity.
"Date of Original Issue" means, with respect to any share of AMPS, the date
on which the Corporation originally issues such share.
"Deposit Securities" means Cash, U.S. Government Obligations, Repurchase
Agreements and Short Term Money Market Instruments. Except for purposes of
determining compliance with the
12
AMPS Basic Maintenance Amount, each Deposit Security shall be deemed to have a
value equal to its principal or face amount payable at maturity plus any
interest payable thereon after delivery of such Deposit Security but only if
payable on or prior to the applicable payment date in advance of which the
relevant deposit is made.
"Derivatives" include options, options on currency, futures (including, but
not limited to, U.S. Treasury Bond futures), options on futures, forward
contracts (including, but not limited to, Forward Contracts as defined herein),
forward currency contracts, interest rate swaps, currency swaps, other types of
swaps (including, but not limited to, swaps on securities, financial commodities
and indices), caps, collars, floors and currency-linked notes.
"Discount Factor" means, for any asset held by the Corporation, the number
set forth opposite each such type of asset in the following table or such other
factor required under the guidelines established by the Rating Agencies from
time to time (it being understood that any asset held by the Corporation and
either not listed in the following table or not identified as a type of Eligible
Portfolio Property in writing by a Rating Agency shall have a Discounted Value
of zero for each such Rating Agency).:
--------------------------------------------------------------------------------------------------------------------
MOODY'S S&P
TERM TO DISCOUNT DISCOUNT
ISSUE SIZE MATURITY FACTOR FACTOR
--------------------------------------------------------------------------------------------------------------------
CASH AND SHORT TERM MONEY MARKET INSTRUMENTS: (OTHER THAN COMMERCIAL PAPER)
--------------------------------------------------------------------------------------------------------------------
N/A *** 46 days 1.000(1) 1.000
--------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER:
--------------------------------------------------------------------------------------------------------------------
N/A *** 46 days 1.150 1.000
--------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS:
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.000 1.000
--------------------------------------------------------------------------------------------------------------------
AUSTRALIAN GOVERNMENT SECURITIES: (2)
--------------------------------------------------------------------------------------------------------------------
Any * 46 days 1.000(1) 1.000
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 46 days, * 2 years 1.730 1.470
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 46 days, * 2 years 1.730 1.340
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 46 days, * 2 years 1.520 1.340
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 2 years, * 5 years 1.730 1.580
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 2 years, * 5 years 1.730 1.436
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 2 years, * 5 years 1.520 1.436
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 5 years, * 10 years 1.730 1.608
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 5 years, * 10 years 1.730 1.462
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 5 years, * 10 years 1.520 1.462
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 10 years, * 20 years 1.730 1.679
--------------------------------------------------------------------------------------------------------------------
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
13
--------------------------------------------------------------------------------------------------------------------
MOODY'S S&P
TERM TO DISCOUNT DISCOUNT
ISSUE SIZE MATURITY FACTOR FACTOR
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 10 years, * 20 years 1.730 1.526
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 10 years, * 20 years 1.520 1.526
--------------------------------------------------------------------------------------------------------------------
Australian Semi-Government Securities: (2)(3) (other than of Tasmania in the case of both Moody's and S&P, and of
the Australian State Government of Victoria in the case of Moody's)
--------------------------------------------------------------------------------------------------------------------
Any * 46 days 1.000(1) 1.000
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 46 days, * 2 years 1.730 1.639
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 46 days, * 2 years 1.730 1.490
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 46 days, * 2 years 1.520 1.490
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 2 years, * 5 years 1.730 1.745
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 2 years, * 5 years 1.730 1.586
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 2 years, * 5 years 1.520 1.586
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 5 years, * 10 years 1.730 1.773
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 5 years, * 10 years 1.730 1.612
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 5 years, * 10 years 1.520 1.612
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 10 years, * 20 years 1.730 1.844
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 10 years, * 20 years 1.730 1.676
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 10 years, * 20 years 1.520 1.676
--------------------------------------------------------------------------------------------------------------------
Australian Semi-Government Securities: (2)(4) (Tasmanian and, with respect to Moody's only, Australian Semi-
Government Securities issued by the Australian State Government of Victoria)
--------------------------------------------------------------------------------------------------------------------
Any * 46 days 1.050 1.000
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 46 days, * 2 years 1.820 1.694
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 46 days, * 2 years 1.820 1.540
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 46 days, * 2 years 1.600 1.540
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 2 years, * 5 years 1.820 1.800
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 2 years, * 5 years 1.820 1.636
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 2 years, * 5 years 1.600 1.636
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 5 years, * 10 years 1.820 1.828
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 5 years, * 10 years 1.820 1.662
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 5 years, * 10 years 1.600 1.662
--------------------------------------------------------------------------------------------------------------------
* A$100,000,000 **** 10 years, * 20 years 1.820 1.899
--------------------------------------------------------------------------------------------------------------------
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
14
--------------------------------------------------------------------------------------------------------------------
MOODY'S S&P
TERM TO DISCOUNT DISCOUNT
ISSUE SIZE MATURITY FACTOR FACTOR
--------------------------------------------------------------------------------------------------------------------
**** A$100,000,000, *** A$150,000,000 **** 10 years, * 20 years 1.820 1.726
--------------------------------------------------------------------------------------------------------------------
** A$150,000,000 **** 10 years, * 20 years 1.600 1.726
--------------------------------------------------------------------------------------------------------------------
AUSTRALIAN BANK BILLS:
--------------------------------------------------------------------------------------------------------------------
N/A *** 46 days 1.000(1) 1.000
--------------------------------------------------------------------------------------------------------------------
N/A 47-56 days 1.350 1.400
--------------------------------------------------------------------------------------------------------------------
N/A 57-90 days 1.350 1.400
--------------------------------------------------------------------------------------------------------------------
N/A 91-180 days 1.350 1.450
--------------------------------------------------------------------------------------------------------------------
AUSTRALIAN CURRENCY:
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.350(5) 1.570
--------------------------------------------------------------------------------------------------------------------
AUSTRALIAN EUROBONDS:
--------------------------------------------------------------------------------------------------------------------
N/A *** 7 year 1.600 (6)(7)
--------------------------------------------------------------------------------------------------------------------
N/A ** 7 years 2.000 (6)(7)
--------------------------------------------------------------------------------------------------------------------
AUSTRALIAN CONVERTIBLE OR EXCHANGEABLE EUROBONDS:
--------------------------------------------------------------------------------------------------------------------
(8) (9)
--------------------------------------------------------------------------------------------------------------------
GUARANTEED AUSTRALIAN EUROBONDS: (6)
--------------------------------------------------------------------------------------------------------------------
Any * 56 days N/A 2.000
--------------------------------------------------------------------------------------------------------------------
*** A$50,000,000 ** 56 days N/A 1.900
--------------------------------------------------------------------------------------------------------------------
** A$50,000,000 ** 56 days N/A 1.000
--------------------------------------------------------------------------------------------------------------------
AUSTRALIAN NON-GUARANTEED EUROBONDS: (6)
--------------------------------------------------------------------------------------------------------------------
Any * 56 days N/A 2.150
--------------------------------------------------------------------------------------------------------------------
*** A$50,000,000 ** 56 days N/A 2.000
--------------------------------------------------------------------------------------------------------------------
** A$50,000,000 ** 56 days N/A 1.000
--------------------------------------------------------------------------------------------------------------------
GUARANTEED AUSTRALIAN CORPORATE BONDS: (6)
--------------------------------------------------------------------------------------------------------------------
Any * 56 days N/A 1.700
--------------------------------------------------------------------------------------------------------------------
*** A$100,000,000 ** 56 days N/A 1.600
--------------------------------------------------------------------------------------------------------------------
** A$100,000,000 ** 56 days N/A 1.000
--------------------------------------------------------------------------------------------------------------------
NON-GUARANTEED AUSTRALIAN CORPORATE BONDS: (6)
--------------------------------------------------------------------------------------------------------------------
Any * 56 days N/A 1.800
--------------------------------------------------------------------------------------------------------------------
*** A$100,000,000 ** 56 days N/A 1.700
--------------------------------------------------------------------------------------------------------------------
** A$100,000,000 ** 56 days N/A 1.000
--------------------------------------------------------------------------------------------------------------------
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
15
--------------------------------------------------------------------------------------------------------------------
MOODY'S S&P
TERM TO DISCOUNT DISCOUNT
ISSUE SIZE MATURITY FACTOR FACTOR
--------------------------------------------------------------------------------------------------------------------
CANADIAN CURRENCY
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.070 1.110
--------------------------------------------------------------------------------------------------------------------
CANADIAN GOVERNMENT SECURITIES: (10)(11)
--------------------------------------------------------------------------------------------------------------------
Any * 46 days 1.000(1) 1.000
--------------------------------------------------------------------------------------------------------------------
* C$200,000,000 **** 46 days, * 3 years 1.290 N/A
--------------------------------------------------------------------------------------------------------------------
**** C$200,000,000, * C$500,000,000 **** 46 days, * 3 years 1.290 1.203
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 46 days, * 3 years 1.290 1.094
--------------------------------------------------------------------------------------------------------------------
* C$200,000,000 **** 3 years, * 5 years 1.420 N/A
--------------------------------------------------------------------------------------------------------------------
**** C$200,000,000, * C$500,000,000 **** 3 years, * 5 years 1.420 1.305
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 3 years, * 5 years 1.420 1.186
--------------------------------------------------------------------------------------------------------------------
* C$200,000,000 **** 5 years, * 7 years 1.420 N/A
--------------------------------------------------------------------------------------------------------------------
**** C$200,000,000, * C$500,000,000 **** 5 years, * 7 years 1.420 1.305
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 5 years, * 7 years 1.420 1.186
--------------------------------------------------------------------------------------------------------------------
* C$200,000,000 **** 7 years, * 10 years 1.510 N/A
--------------------------------------------------------------------------------------------------------------------
**** C$200,000,000, * C$500,000,000 **** 7 years, * 10 years 1.510 1.305
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 7 years, * 10 years 1.510 1.186
--------------------------------------------------------------------------------------------------------------------
* C$200,000,000 **** 10 years, * 15 years 1.510 N/A
--------------------------------------------------------------------------------------------------------------------
**** C$200,000,000, * C$500,000,000 **** 10 years, * 15 years 1.510 1.459
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 10 years, * 15 years 1.510 1.326
--------------------------------------------------------------------------------------------------------------------
* C$200,000,000 **** 15 years 1.820 N/A
--------------------------------------------------------------------------------------------------------------------
**** C$200,000,000, * C$500,000,000 **** 15 years 1.820 1.459
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 15 years 1.820 1.326
--------------------------------------------------------------------------------------------------------------------
CANADIAN PROVINCIAL SECURITIES: (S&P ONLY) (10)(11)
--------------------------------------------------------------------------------------------------------------------
Any * 46 days N/A 1.000
--------------------------------------------------------------------------------------------------------------------
**** C$100,000,000 **** 46 days, * 3 years N/A 1.286
--------------------------------------------------------------------------------------------------------------------
**** C$100,000,000 **** 5 years, * 7 years N/A 1.286
--------------------------------------------------------------------------------------------------------------------
**** C$100,000,000 **** 7 years, * 10 years N/A 1.312
--------------------------------------------------------------------------------------------------------------------
**** C$100,000,000 **** 10 years, * 15 years N/A 1.312
--------------------------------------------------------------------------------------------------------------------
**** C$100,000,000 **** 15 years N/A 1.426
--------------------------------------------------------------------------------------------------------------------
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
16
--------------------------------------------------------------------------------------------------------------------
MOODY'S S&P
TERM TO DISCOUNT DISCOUNT
ISSUE SIZE MATURITY FACTOR FACTOR
--------------------------------------------------------------------------------------------------------------------
CANADIAN PROVINCIAL SECURITIES: (MOODY'S ONLY) (10)(11)
--------------------------------------------------------------------------------------------------------------------
Any * 46 days 1.000(1) N/A
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 46 days, * 3 years 1.290 N/A
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 5 years, * 7 years 1.420 N/A
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 7 years, * 10 years 1.420 N/A
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 10 years, * 15 years 1.510 N/A
--------------------------------------------------------------------------------------------------------------------
**** C$500,000,000 **** 15 years 1.820 N/A
--------------------------------------------------------------------------------------------------------------------
GNMA CERTIFICATES WITH FIXED INTEREST RATES:
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.500 1.300
--------------------------------------------------------------------------------------------------------------------
GNMA CERTIFICATES WITH ADJUSTABLE INTEREST RATES:
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.450 1.300
--------------------------------------------------------------------------------------------------------------------
FHLMC AND FNMA CERTIFICATES WITH FIXED INTEREST RATES:
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.590 1.350
--------------------------------------------------------------------------------------------------------------------
FHLMC AND FNMA CERTIFICATES WITH ADJUSTABLE INTEREST RATES:
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.290 1.350
--------------------------------------------------------------------------------------------------------------------
FHLMC MULTIFAMILY SECURITIES:
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.650 1.650
--------------------------------------------------------------------------------------------------------------------
FHLMC AND FNMA CERTIFICATES WITH VARIABLE INTEREST RATES:
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.500 1.350
--------------------------------------------------------------------------------------------------------------------
GNMA GRADUATED PAYMENT SECURITIES: (12)(13)
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.500 1.500
--------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM CURRENCY:
--------------------------------------------------------------------------------------------------------------------
N/A N/A 1.160 1.600
--------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM GOVERNMENT SECURITIES: (14)
--------------------------------------------------------------------------------------------------------------------
Any * 46 days 1.000(1) 1.000
--------------------------------------------------------------------------------------------------------------------
*** (pound)500,000,000 **** 46 days, * 3 years 1.440 N/A
--------------------------------------------------------------------------------------------------------------------
**** (pound)500,000,000, * (pound)700,000,000 **** 46 days, * 3 years 1.440 1.415
--------------------------------------------------------------------------------------------------------------------
**** (pound)700,000,000 **** 46 days, * 3 years 1.440 1.286
--------------------------------------------------------------------------------------------------------------------
*** (pound)500,000,000 **** 3 years, * 5 years 1.530 N/A
--------------------------------------------------------------------------------------------------------------------
**** (pound)500,000,000, * (pound)700,000,000 **** 3 years, * 5 years 1.530 1.415
--------------------------------------------------------------------------------------------------------------------
* LESS THAN
** GREATER THAN
17
--------------------------------------------------------------------------------------------------------------------
MOODY'S S&P
TERM TO DISCOUNT DISCOUNT
ISSUE SIZE MATURITY FACTOR FACTOR
--------------------------------------------------------------------------------------------------------------------
**** (pound)700,000,000 **** 3 years, * 5 years 1.530 1.286
--------------------------------------------------------------------------------------------------------------------
*** (pound)500,000,000 **** 5 years, * 7 years 1.630 N/A
--------------------------------------------------------------------------------------------------------------------
**** (pound)500,000,000, * (pound)700,000,000 **** 5 years, * 7 years 1.630 1.443
--------------------------------------------------------------------------------------------------------------------
**** (pound)700,000,000 **** 5 years, * 7 years 1.630 1.312
--------------------------------------------------------------------------------------------------------------------
*** (pound)500,000,000 **** 7 years, * 10 years 1.680 N/A
--------------------------------------------------------------------------------------------------------------------
**** (pound)500,000,000, * (pound)700,000,000 **** 7 years, * 10 years 1.680 1.443
--------------------------------------------------------------------------------------------------------------------
**** (pound)700,000,000 **** 7 years, * 10 years 1.680 1.312
--------------------------------------------------------------------------------------------------------------------
*** (pound)500,000,000 **** 10 years, * 15 years 1.680 N/A
--------------------------------------------------------------------------------------------------------------------
**** (pound)500,000,000, * (pound)700,000,000 **** 10 years, * 15 years 1.680 1.507
--------------------------------------------------------------------------------------------------------------------
**** (pound)700,000,000 **** 10 years, * 15 years 1.680 1.370
--------------------------------------------------------------------------------------------------------------------
*** (pound)500,000,000 **** 15 years l.680 N/A
--------------------------------------------------------------------------------------------------------------------
**** (pound)500,000,000, * (pound)700,000,000 **** 15 years 1.680 1.569
--------------------------------------------------------------------------------------------------------------------
**** (pound)700,000,000 **** 15 years 1.680 1.426
--------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS:
--------------------------------------------------------------------------------------------------------------------
Any *** 90 days 1.060 1.000
--------------------------------------------------------------------------------------------------------------------
Any ** 90 days, *** 1 year 1.060 1.060
--------------------------------------------------------------------------------------------------------------------
Any ** 1 year, *** 2 years 1.110 1.200
--------------------------------------------------------------------------------------------------------------------
Any ** 2 years, *** 3 years 1.150 1.200
--------------------------------------------------------------------------------------------------------------------
Any ** 2 years, *** 3 years 1.200 1.200
--------------------------------------------------------------------------------------------------------------------
Any ** 3 years, *** 5 years 1.240 1.200
--------------------------------------------------------------------------------------------------------------------
Any ** 5 years, *** 7 years 1.290 1.250
--------------------------------------------------------------------------------------------------------------------
Any ** 7 years, *** 10 years 1.340 1.250
--------------------------------------------------------------------------------------------------------------------
Any ** 10 years, *** 15 years 1.370 1.300
--------------------------------------------------------------------------------------------------------------------
Any ** 15 years, *** 20 years 1.410 1.380
--------------------------------------------------------------------------------------------------------------------
Any ** 20 years, *** 30 years 1.420 1.380
--------------------------------------------------------------------------------------------------------------------
BRADY BONDS: (6)
--------------------------------------------------------------------------------------------------------------------
N/A (15)
--------------------------------------------------------------------------------------------------------------------
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
18
--------------------------------------------------------------------------------------------------------------------
MOODY'S S&P
TERM TO DISCOUNT DISCOUNT
ISSUE SIZE MATURITY FACTOR FACTOR
--------------------------------------------------------------------------------------------------------------------
ASIAN YANKEE BONDS AND COMMONWEALTH YANKEE BONDS: (MOODY'S ONLY)
--------------------------------------------------------------------------------------------------------------------
Issued by Australia, Canada, China, Hong Kong, 2.400 N/A
India, Indonesia, Korea, Malaysia, New Zealand,
Thailand, The Philippines and the United Kingdom
--------------------------------------------------------------------------------------------------------------------
ASIAN YANKEE BONDS AND COMMONWEALTH YANKEE BONDS: (S&P ONLY)
--------------------------------------------------------------------------------------------------------------------
Issued by Australia, Canada, China, Hong Kong,
India, Indonesia, Korea, Malaysia, New Zealand,
Thailand, The Philippines and the United Kingdom AAA N/A 1.420
---------------------------------------------------------------
AA N/A 1.470
---------------------------------------------------------------
A N/A 1.520
---------------------------------------------------------------
BBB N/A 1.570
---------------------------------------------------------------
BB N/A 1.640
---------------------------------------------------------------
B N/A 1.710
---------------------------------------------------------------
B- N/A 1.780
---------------------------------------------------------------
CCC+ N/A 1.850
--------------------------------------------------------------------------------------------------------------------
AMPS INTEREST RATE SWAPS:
--------------------------------------------------------------------------------------------------------------------
*** 1/3 liquidation value of outstanding AMPS *** 2 years 1.18/1.22(16) 1.0526(17)
--------------------------------------------------------------------------------------------------------------------
NEW ZEALAND GOVERNMENT SECURITIES: (18)
--------------------------------------------------------------------------------------------------------------------
Any * 46 days 1.000(1) 1.000
--------------------------------------------------------------------------------------------------------------------
* NZ$100,000,000 **** 46 days, * 2 years 1.730 1.470
--------------------------------------------------------------------------------------------------------------------
**** NZ$100,000,000, *** NZ$150,000,000 **** 46 days, * 2 years 1.730 1.340
--------------------------------------------------------------------------------------------------------------------
** NZ$150,000,000 **** 46 days, * 2 years 1.520 1.340
--------------------------------------------------------------------------------------------------------------------
* NZ$100,000,000 **** 2 years, * 5 years 1.730 1.580
--------------------------------------------------------------------------------------------------------------------
**** NZ$100,000,000, *** NZ$150,000,000 **** 2 years, * 5 years 1.730 1.436
--------------------------------------------------------------------------------------------------------------------
** NZ$150,000,000 **** 2 years, * 5 years 1.520 1.436
--------------------------------------------------------------------------------------------------------------------
* NZ$100,000,000 **** 5 years, * 10 years 1.730 1.608
--------------------------------------------------------------------------------------------------------------------
**** NZ$100,000,000, *** NZ$150,000,000 **** 5 years, * 10 years 1.730 1.462
--------------------------------------------------------------------------------------------------------------------
** NZ$150,000,000 **** 5 years, * 10 years 1.520 1.462
--------------------------------------------------------------------------------------------------------------------
* NZ$100,000,000 **** 10 years, * 20 years 1.730 1.679
--------------------------------------------------------------------------------------------------------------------
**** NZ$100,000,000, *** NZ$150,000,000 **** 10 years, * 20 years 1.730 1.526
--------------------------------------------------------------------------------------------------------------------
** NZ$150,000,000 **** 10 years, * 20 years 1.520 1.526
--------------------------------------------------------------------------------------------------------------------
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
19
----------
(1) In the case of Moody's, the remaining term to maturity of Eligible
Portfolio Property with a Moody's Discount Factor of 1.000 shall be
measured from the last Valuation Date on which the AMPS Basic Maintenance
Amount was met for the purpose of determining the number of shares of AMPS
to be redeemed which would result in satisfaction of the AMPS Basic
Maintenance Amount.
(2) Provided that in the case of S&P, the current outstanding issue size (as
determined on each Quarterly Surprise Valuation Date) is equal to or
greater than A$10,000,000.
(3) Excluding securities of Hydro-Electricity Commission of Tasmania, Tasmanian
Public Finance Corp. and Tasmanian Development Authority.
(4) Including securities of Hydro-Electricity Commission of Tasmania, Tasmanian
Public Finance Corp. and Tasmanian Development Authority.
(5) If any Overseas Banking Unit constituting Australian Currency has a
maturity of more than 46 days from the Valuation Date, the principal amount
of the cash deposit shall be offset by an amount equal to the penalty for
early withdrawal and in the event interest earned on any Overseas Banking
Unit is not exempt from interest withholding tax, the Corporation may not
include interest earned as a component of the value of the deposit unless
taxes incurred on interest earned have been paid.
(6) The discount factor in the table assumes that the security has a rating of
Aa3 or better in the case of Moody's and AA- or better in the case of S&P.
In the case of S&P, these types of securities may be contained in Eligible
Portfolio Property, even if they have lower ratings, subject to the
following percentage restrictions (which are cumulative):
-----------------------------------------------------------------
% of total Discounted Value of
Eligible Portfolio Property allowed at
Rating each ratings level
-----------------------------------------------------------------
Aa3/AA- or better 100%
-----------------------------------------------------------------
Below Aa3/AA- 50%
-----------------------------------------------------------------
Below A3/A- 25%
-----------------------------------------------------------------
Below BBB3/BBB- 10%
-----------------------------------------------------------------
Discount factors to be applied on these securities, to the extent they are
rated less than AA- by S&P, are listed in the "Leveraged Funds Market Value
Ratings" publication dated December, 1997.
(7) See Australian Guaranteed and Non-Guaranteed Eurobonds.
(8) Included in Australian Eurobonds.
(9) Included in Australian Semi-Government categories.
(10) In the case of Moody's, with an original principal balance of at least
C$150,000,000.
(11) In the case of Moody's assets with a remaining maturity of greater than 20
years may not constitute more than 5% of Eligible Portfolio Property and,
in the case of S&P the applicable
20
discount factor shown is for Canadian Provincial Securities for the
Provinces of British Columbia, Ontario and Quebec (the "Base Discount").
The applicable discount factor for the Provinces of Alberta and New
Brunswick is 110% of the Base Discount, for the Provinces of Manitoba and
Sasketshawan 125% of Base Discount and for the Provinces of Newfoundland
and Nova Scotia, 135% of Base Discount.
(12) Unless the Rating Agencies shall agree in writing, GNMA Graduated Payment
Securities with a coupon rate lower than 5% shall not be included in
Eligible Portfolio Property.
(13) A Discount Factor of 1.50 applies in the case of GNMA Graduated Payment
Securities as to which the Corporation notifies the Auction Agent that
scheduled principal payments are being made to holders; in the case of GNMA
Graduated Payment Securities as to which the Corporation notifies the
Auction Agent that scheduled principal payments are not being made to
holders, the Discount Factor shall be that which is determined in writing
by the Rating Agencies.
(14) In the case of Moody's, with an original principal balance of at
least(pound)600,000,000.
(15) In the case of S&P, discount factors to be applied are listed in the
"Leveraged Funds Market Value Ratings" publication dated December, 1997.
(16) With respect to Moody's, a Discount Factor of 1.18 will be applied when the
Eligible AMPS Interest Rate Swap Counterparty is rated Aaa, and a Discount
Factor of 1.22 will be applied when the Eligible AMPS Interest Rate Swap
Counterparty is rated Aa1 - Aa3, to the extent the AMPS Interest Rate Swap
is "in the money" based on the then-current marked to market valuation of
the AMPS Interest Rate Swap provided by the Eligible AMPS Interest Rate
Swap Counterparty. To the extent that the AMPS Interest Rate Swap is "out
of the money," 100% of the Market Value of the AMPS Interest Rate Swap will
be deemed a current liability of the Corporation for purposes of
calculating the AMPS Basic Maintenance Amount and will not be included in
Eligible Portfolio Property.
(17) With respect to S&P, to the extent the AMPS Interest Rate Swap is "in the
money" based on the then-current marked to market valuation of the AMPS
Interest Rate Swap provided by the Eligible AMPS Interest Rate Swap
Counterparty, the Discount Factor in the table should be applied. To the
extent that the AMPS Interest Rate Swap is "out of the money," 100% of the
Market Value of the AMPS Interest Rate Swap will be deemed a current
liability of the Corporation for purposes of calculating the AMPS Basic
Maintenance Amount and will not be included in Eligible Portfolio Property.
(18) Provided that, in the case of S&P, the current outstanding issue size (as
determined on each Quarterly Surprise Valuation Date) is equal to greater
than NZ$10,000,000.
"Discounted Value," with respect to any asset held by the Corporation,
means the quotient of the Market Value of such asset divided by the applicable
Discount Factor; provided that in no event shall the Discounted Value of any
asset constituting Eligible Portfolio Property as of any date exceed the unpaid
principal balance or face amount of such asset as of that date; provided further
that the Discounted Value of all Australian Securities, Canadian Securities,
United Kingdom Securities and New Zealand Securities shall be further discounted
by the Discount Factor applicable to, respectively, Australian Currency,
Canadian Currency, United Kingdom Currency and New Zealand Currency.
21
"Dividend Payment Date," with respect to the AMPS, means each date of
payment of dividends as provided in paragraph 3(b)(i) hereof.
"Dividend Period" means the Initial Dividend Period, any Regular Dividend
Period, and any Special Dividend Period.
"Dollar" or "$" shall mean U.S. dollars. Amounts in Canadian, Australian or
New Zealand dollars or United Kingdom pounds sterling shall be converted to U.S.
dollars at the rates reported by the Pricing Service for the Valuation Date or
such other source as shall have been approved in writing by the Rating Agencies.
"Eligible AMPS Interest Rate Swap Counterparty" means (i) with respect to
S&P, a counterparty with at least an A-1+ short term rating or, alternatively,
an AA- long term rating from S&P ; and (ii) with respect to Moody's, a
counterparty with at least an Aa3 long term rating from Moody's. In the event
that an Eligible AMPS Interest Rate Swap Counterparty's ratings are downgraded
below A-1+ or AA- by S&P, or Aa3 by Moody's, respectively, the counterparty will
cease to be an Eligible AMPS Interest Rate Swap Counterparty and the
counterparty must be replaced promptly. In the event that an Eligible AMPS
Interest Rate Swap Counterparty terminates a swap early for reasons related to
its rating status (other than a downgrade), the counterparty will cease to be an
Eligible AMPS Interest Rate Swap Counterparty and the counterparty must be
replaced promptly.
"Eligible Portfolio Property" means Australian Bank Bills, Australian
Currency, Australian Convertible or Exchangeable Eurobonds, Australian
Eurobonds, Australian Government Securities, Australian Semi-Government
Securities, Canadian Currency, Canadian Securities, Cash, New Zealand Government
Securities, United Kingdom Currency, United Kingdom Securities, U.S. Government
Obligations, Repurchase Agreements, Brady Bonds, Asian Yankee Bonds,
Commonwealth Yankee Bonds, AMPS Interest Rate Swaps (to the extent they are "in
the money"), Short Term Money Market Instruments, FNMA Certificates, FHLMC
Certificates, FHLMC Multifamily Securities, GNMA Certificates, and GNMA
Graduated Payment Securities and, if the calculation is being made for S&P,
Australian Corporate Bonds; provided, (i) if the determination is being made by
Moody's, (x) that no more than 20% in the aggregate of the total Discounted
Value of Eligible Portfolio Property shall consist of Australian Government
and/or Australian Semi-Government Securities with a current outstanding issue
size less than A$150,000,000 and/or New Zealand Government Securities with a
current outstanding issue size less than NZ$150,000,000 and (y) not more than
10% in the aggregate of the total Discounted Value of Eligible Portfolio
Property shall consist of Australian Semi-Government Securities described under
item 12 of such definition and (ii) if the determination is being made for S&P,
(x) that no Australian Government Securities or Australian Semi-Government
Securities contained in Eligible Portfolio Property shall have a current
outstanding issue size less than A$10,000,000 (as determined on each Quarterly
Surprise Valuation Date); (y) that no New Zealand Government Securities
contained in Eligible Portfolio Property shall have a current outstanding issue
size less than NZ$10,000,000 (as determined on each Quarterly Surprise Valuation
Date); and (z) that not more than 10% in the aggregate of the total Discounted
Value of the Eligible Portfolio Property shall consist of Australian
Semi-Government Securities issued by any single issuer (except that in the case
of New South Wales Treasury Corporation, such percentage shall be 25%) and that
not more than 20% in the aggregate of the total Market Value of the Eligible
Portfolio Property shall consist of Australian Semi-Government Securities
guaranteed by any single state (except that in the case of each of Victoria and
New South Wales, such percentage shall be 25%). The Board of Directors shall
have the authority to specify from time to time other assets as Eligible
Portfolio Property if the Rating Agencies advise the Corporation in writing that
the specification will not adversely affect their
22
respective then-current ratings of the AMPS; it being understood that the
components of Eligible Portfolio Property may differ between S&P and Moody's.
"Existing Holder" means a Broker-Dealer or any such other Person as may be
permitted by the Corporation that is listed as the holder of record of shares of
AMPS in the records of the Auction Agent.
"Failure to Cure" shall mean a failure by the Corporation to maintain the
AMPS Basic Maintenance Amount or the 1940 Act AMPS Asset Coverage Requirement,
as the case may be, which failure is not cured by the relevant Cure Date.
"FANMAC Certificates" are securities issued by a trustee against housing
loans made through the New South Wales Department of Housing and consist of a
series of closed trusts or pools. The mortgage manager is the First Australian
National Mortgage Acceptance Corporation Ltd. ("FANMAC"). FANMAC is owned
partially by the Government of the State of New South Wales with the remainder
owned by other institutions. The Government of the State of New South Wales has
provided the FANMAC Trust with an assurance as to availability of funds to meet
payments. The securities have been rated by Australian Ratings and S&P. FANMAC
securities are subject to a call provision under which borrowers (mortgagors)
can repay early and the investors in a particular pool can be repaid on a pro
rata basis.
"FHLMC" means the Federal Home Loan Mortgage Corporation created by Title
III of the Emergency Home Finance Act of 1970, and includes any successor
thereto.
"FHLMC Certificate" means a mortgage participation certificate in physical
or book-entry form, the timely payment of interest on and the ultimate
collection of principal of which is guaranteed by FHLMC, and which evidences a
proportional undivided interest in, or participation interest in, specified
pools of fixed-, variable- or adjustable-rate, fully amortizing, level pay
mortgage loans with terms up to 30 years, secured by first liens on one- to
four-family residences.
"FHLMC Multifamily Security" means a "Plan B Multifamily Security" in
physical or book-entry form, the timely payment of interest on and the ultimate
collection of principal of which is guaranteed by FHLMC, and which evidences a
proportional undivided interest in, or participation interest in, specified
pools of fixed-rate, fully amortizing, level pay mortgage loans with terms up to
30 years, secured by first-priority mortgages on multifamily residences
containing five or more units and which are designed primarily for residential
use, the inclusion of which in the Eligible Portfolio Property will not, in and
of itself, impair, or cause the AMPS to fail to retain, the rating assigned to
such AMPS by each of the Rating Agencies, as evidenced by a letter to such
effect from each of the Rating Agencies.
"FNMA" means the Federal National Mortgage Association, a United States
Government-sponsored private corporation established pursuant to Title VIII of
the Housing and Urban Development Act of 1968, and includes any successor
thereto.
"FNMA Certificate" means a mortgage pass-through certificate in physical or
book-entry form, the full and timely payment of principal of and interest on
which is guaranteed by FNMA, and which evidences a proportional undivided
interest in specified pools of fixed-, variable- or adjustable-rate, fully
amortizing, level pay mortgage loans with terms up to 30 years, secured by first
liens on one- to four-family residences.
23
"Forward Contract" means a contract, entered into following a Failure to
Cure, between the Corporation and a commercial bank or other financial
institution whose short term debt is rated at least A-l+ by S&P or whose long
term debt is rated at least AA by S&P (an "Eligible Bank"), which provides that
the Corporation will sell a specified amount of Australian Currency, Canadian
Currency, United Kingdom Currency or New Zealand Currency to such Eligible Bank
on a specified date for a specified amount of U.S. dollars. The date of payment
in U.S. dollars shall not be later than the 30th day following the Valuation
Date related to the Failure to Cure and the amount of U.S. dollars shall be
sufficient to redeem all shares of AMPS required to be redeemed. On the Date of
Original Issue and on each Quarterly Surprise Valuation Date thereafter, the
Corporation will confirm in writing to S&P that the Corporation has a
credit-line with an Eligible Bank (the "Credit Line Test"). The Credit Line Test
shall be deemed to be satisfied on any date if the Corporation has delivered
such confirmation to S&P on the Date of Original Issue or the most recent
Quarterly Surprise Valuation Date, as the case may be.
"GNMA" means the Government National Mortgage Association, and includes any
successor thereto.
"GNMA Certificate" means a fully modified pass-through certificate in
physical or book-entry form, the full and timely payment of principal of and
interest on which is guaranteed by GNMA and which evidences a proportional
undivided interest in specified pools of fixed-, variable- or adjustable-rate,
fully amortizing, level pay mortgage loans with terms up to 30 years, secured by
first liens on one- to four-family residences.
"GNMA Graduated Payment Security" means a fully modified pass-through
certificate in physical or book-entry form, the full and timely payment of
principal of and interest on which is guaranteed by GNMA, which obligation is
backed by the full faith and credit of the United States, and which evidences a
proportional undivided interest in specified pools of graduated payment mortgage
loans with terms up to 30 years, with payments that increase annually at a
predetermined rate for up to the first five or ten years of the mortgage loan
and that are secured by first-priority mortgages on one- to four-unit
residences; provided that such loans shall be past the graduated payment period.
"GNMA Multifamily Security" means a fully modified certificate in physical
or book-entry form, the full and timely payment of principal of and interest on
which is guaranteed by GNMA, which obligation is backed by the full faith and
credit of the United States, and which evidences a proportional undivided
interest in specified pools of fixed-rate mortgage, level pay loans with terms
up to 30 years secured by first-priority mortgages on multifamily residences,
the inclusion of which in the Eligible Portfolio Property will not, in and of
itself, impair or cause the AMPS to fail to retain the rating assigned to such
AMPS by each of the Rating Agencies as evidenced by a letter to such effect from
each of the Rating Agencies.
"Holder" means a Person identified as a holder of shares of AMPS in the
Stock Register.
"Independent Accountant" means a nationally recognized accountant, or firm
of accountants, that is, with respect to the Corporation, an independent public
accountant or firm of independent public accountants under the Securities Act of
1933, as amended.
"Industry Category" means, as to any Corporate Bond, any of the industry
categories set forth in the following table:
24
(1) Aerospace and Defense: Major Contractor, Subsystems,
Research, Aircraft Manufacturing, Arms, Ammunition;
(2) Automobile: Automotive Equipment, Auto-Manufacturing,
Auto Parts Manufacturing, Personal Use Trailers, Motor Homes,
Dealers;
(3) Banking: Bank Holding, Savings and Loans, Consumer
Credit, Small Loan, Agency, Factoring, Receivables;
(4) Beverage, Food and Tobacco: Beer and Ale, Distillers,
Wines and Liquors, Distributors, Soft Drink Syrup, Bottlers,
Bakery, Mill Sugar, Canned Foods, Corn Refiners, Dairy Products,
Meat Products, Poultry Products, Snacks, Packaged Foods,
Distributors, Candy, Gum, Seafood, Frozen Food, Cigarettes,
Cigars, Leaf/Snuff, Vegetable Oil;
(5) Buildings and Real Estate: Brick, Cement, Climate
Controls, Contracting, Engineering, Construction, Hardware,
Forest Products (building-related only), Plumbing, Roofing,
Wallboard, Real Estate, Real Estate Development, REITs, Land
Development;
(6) Chemicals, Plastics and Rubber: Chemicals
(non-agriculture), Industrial Gases, Sulphur, Plastics, Plastic
Products, Abrasives, Coatings, Paints, Varnish, Fabricating;
(7) Containers, Packaging and Glass: Glass, Fiberglass,
Containers made of: Glass, Metal, Paper, Plastic, Wood or
Fiberglass;
(8) Personal and Non-Durable Consumer Products
(Manufacturing Only): Soaps, Perfumes, Cosmetics, Toiletries,
Cleaning Supplies, School Supplies;
(9) Diversified/Conglomerate Manufacturing;
(10) Diversified/Conglomerate Service;
(11) Diversified Natural Resources, Precious Metals and
Minerals: Fabricating, Distribution, Mining and Sales;
(12) Ecological: Pollution Control, Waste Removal, Waste
Treatment, Waste Disposal;
(13) Electronics: Computer Hardware, Electric Equipment,
Components, Controllers, Motors, Household Appliances,
Information Service Communication Systems, Radios, TVs, Tape
Machines, Speakers, Printers, Drivers, Technology;
(14) Finance: Investment Brokerage, Leasing, Syndicating,
Securities;
(15) Farming and Agriculture: Livestock, Grains, Produce,
Agricultural Chemicals, Agricultural Equipment, Fertilizers;
25
(16) Grocery: Grocery Stores, Convenience Food Stores;
(17) Healthcare, Education and Childcare: Ethical Drugs,
Proprietary Drugs, Research, Health Care Centers, Nursing Homes,
HMOs, Hospitals, Hospital Supplies, Medical Equipment;
(18) Home and Office Furnishings, Housewares, and Durable
Consumer Products: Carpets, Floor Coverings, Furniture, Cooking,
Ranges;
(19) Hotels, Motels, Inns and Gaming;
(20) Insurance: Life, Property and Casualty, Broker, Agent,
Surety;
(21) Leisure, Amusement, Motion Pictures, Entertainment:
Boating, Bowling, Billiards, Musical Instruments, Fishing, Photo
Equipment, Records, Tapes, Sports, Outdoor Equipment (Camping),
Tourism, Resorts, Games, Toy Manufacturing, Motion Picture
Production Theaters, Motion Picture Distribution;
(22) Machinery (Non-Agriculture, Non-Construction,
Non-Electronic): Industrial, Machine Tools, Steam Generators;
(23) Mining, Steel, Iron and Non-Precious Metals: Coal,
Copper, Lead, Uranium, Zinc, Aluminum, Stainless Steel,
Integrated Steel, Ore Production, Refractories, Steel Mill
Machinery, Mini-Mills, Fabricating, Distribution and Sales;
(24) Oil and Gas: Crude Producer, Retailer, Well Supply,
Service and Drilling;
(25) Personal, Food and Miscellaneous Services;
(26) Printing, Publishing and Broadcasting: Graphic Arts,
Paper, Paper Products, Business Forms, Magazines, Books,
Periodicals, Newspapers, Textbooks, Radio, TV, Cable,
Broadcasting Equipment;
(27) Cargo Transport: Rail, Shipping, Railroads, Rail-care
Builders, Ship Builders, Containers, Container Builders, Parts,
Overnight Mail, Trucking, Truck Manufacturing, Trailer
Manufacturing, Air Cargo, Transport;
(28) Retail Stores: Apparel, Toy, Variety, Drugs,
Department, Mail Order Catalog, Showroom;
(29) Telecommunications: Local, Long Distance, Independent,
Telephone, Telegraph, Satellite, Equipment, Research, Cellular;
(30) Textiles and Leather: Producer, Synthetic Fiber,
Apparel Manufacturer, Leather Shoes;
(31) Personal Transportation: Air, Bus, Rail, Car Rental;
and
26
(32) Utilities: Electric, Water, Hydro Power, Gas,
Diversified.
"Initial Dividend Payment Date" has the meaning set forth in paragraph
3(b)(i) hereof.
"Initial Dividend Period" has the meaning specified in paragraph 3(c)(i)
hereof.
"Initial Dividend Rate," with respect to the AMPS, means the rate per annum
specified herein applicable to the Initial Dividend Period.
"Interest Equivalent" means a yield on a 360-day basis of a discount basis
security which is equal to the yield on an equivalent interest-bearing security.
"Investment Company Act" means the Investment Company Act of 1940 (15 U.S.
Code Sections 80 et seq.), as amended from time to time.
"Investment Manager" means Aberdeen Asset Managers (CI) Limited or any
successor manager to the Corporation who acts in such capacity in conformance
with Section 15 of the Investment Company Act.
"Lien" has the meaning set forth in paragraph 3(d)(iii) hereof.
"Long Term Dividend Period" means a Special Dividend Period consisting of a
specified period of whole years not greater than five years.
"Mandatory Redemption Price" means $25,000 per share of AMPS plus an amount
equal to accumulated but unpaid dividends (whether or not earned or declared) to
the date fixed for redemption.
"Market Value" means the amount determined with respect to specific assets
of the Corporation in the manner set forth below, it being understood that
Market Value shall include any interest accrued thereon but, in the case of
Moody's, only if the next interest coupon on such asset is due and payable
within 47 days of the Reporting Date, and that a designated Pricing Service may
be used where indicated.
(a) as to Australian, Canadian and United Kingdom Securities, the
Administrator or the Custodian shall value such securities at the last trade
price quoted by a designated Pricing Service if such trade price reflects a
trade on, or within one local business day prior to, the Reporting Date. If no
such trade price is available, the Administrator or the Custodian shall value
such securities, where practicable, at the bid prices or the mean between the
bid and asked price quoted by a designated Pricing Service on the Reporting
Date, or if such quotes are not readily available, at fair value as determined
by a designated Pricing Service (or the Administrator or Custodian if the Rating
Agencies so permit) using methods which include: consideration of yields or
prices of assets of comparable quality, type of issue, coupon, maturity and
rating; indications as to value from dealers; and general market conditions.
Either the Administrator or the Custodian or a designated Pricing Service may
employ electronic data processing techniques and/or a matrix system to determine
valuations. In the event the Administrator or the Custodian or a designated
Pricing Service is unable to value a security, the security shall be valued at
the lower of two dealer bids (both of which shall be in writing or by telecopy,
telex or other electronic transcription, computer obtained quotation reduced to
written form or similar means) provided to the Corporation, by two recognized
securities dealers in either (i) Australia, with respect to Australian
Securities, (ii) Canada, with respect to Canadian Securities or (iii)
27
the United Kingdom, with respect to United Kingdom Securities, such securities
dealers making a market in the applicable securities.
(b) as to GNMA Certificates, GNMA Graduated Payment Securities, FNMA
Certificates, FHLMC Certificates and FHLMC Multifamily Securities, the Pricing
Service (or the Administrator or the Custodian, if the Rating Agencies so
permit) shall value such securities as the product of (i) the aggregate unpaid
principal amount of the mortgage loans evidenced by each such certificate or
security, as the case may be, as of the close of business in New York City on
the last Business Day prior to such Valuation Date and (ii) the lower of the bid
prices for the same kind of certificate or, if not available, some other
security having, as nearly as practicable, comparable interest rates and
maturities, as quoted to the Corporation by two nationally recognized securities
dealers, who are members of the National Association of Securities Dealers
selected by the Corporation and making a market therein, with at least one such
quotation in writing plus, (x) if the determination is being made for Moody's,
accrued interest to the Valuation Date if the next interest coupon on such
security is due and payable within 46 days of such Valuation Date and (y) if the
determination is being made for S&P, accrued interest;
(c) as to Australian, Canadian and United Kingdom Currency and as to Cash,
demand deposits (and in the case of S&P only, bankers' acceptances) included in
Short Term Money Market Instruments, the Administrator or the Custodian shall
value such currency or securities as the face value thereof;
(d) as to next Business Day repurchase agreements, the face value thereof;
(e) as to U.S. Government Obligations, the Administrator or the Custodian
shall value such securities at the bid prices quoted by a designated Pricing
Service or the mean between the bid and asked price quoted by a designated
Pricing Service on the Reporting Date, or if such quotes are not readily
available, at fair value as determined by a designated Pricing Service (or the
Administrator or the Custodian, if the Rating Agencies so permit) using methods
which include: consideration of yields or prices of assets of comparable
quality, type of issue, coupon, maturity and rating; indications as to value
from dealers; and general market conditions. Either the Administrator, the
Custodian or a designated Pricing Service may employ electronic data processing
techniques and/or a matrix system to determine valuations. In the event the
Administrator or the Custodian or a designated Pricing Service is unable to
value a security, the security shall be valued at the lower of two dealer bids
(at least one of which shall be in writing or by telecopy or other electronic
transcription, computer obtained quotation reduced to written form or similar
means) provided for the Corporation by two nationally recognized securities
dealers, who are members of the National Association of Securities Dealers
selected by the Corporation and making a market therein; and
(f) as to AMPS Interest Rate Swaps, the Administrator shall determine the
net value of the interest rate swaps on a daily marked-to-market basis in
accordance with their Valuation Procedures, as such Valuation Procedures may be
amended from time by the Board of Directors of the Corporation, based on price
information received from the Eligible AMPS Interest Rate Swap Counterparty.
Without amending the Articles of Incorporation, (i) the calculation of the
Market Value of an asset constituting Eligible Portfolio Property may be changed
to any method recognized by the Rating Agencies from that set forth in these
Articles Supplementary and (ii) a method recognized by the Rating Agencies for
calculating the Market Value of any asset identified as Eligible Portfolio
Property
28
may be specified if the Rating Agencies advise the Corporation in writing that
the change or specification will not adversely affect their respective
then-current ratings of the AMPS.
"Maximum Applicable Rate," with respect to AMPS, has the meaning set forth
in paragraph 8(a)(vii) hereof.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"MMSs" are mortgage-backed securities issued against mortgage pools by
MGICA Securities Ltd., a wholly-owned subsidiary of AMP Society Ltd., an
Australian insurance company, and rated by Australian Ratings.
"MTCs" are securities issued against specific mortgages by a trustee and
are similar to "pass-through" certificates. MTCs are issued on a continuous
basis, insured by Australian insurance companies against both mortgage default
and an early call, and rated by Australian Ratings.
"New Zealand Currency" means such coin or currency of the Government of the
Commonwealth of New Zealand as at the time shall be legal tender for payment of
public and private debts.
"New Zealand Government Securities" means, in the case of S&P, all publicly
traded securities issued and guaranteed by the Government of the Commonwealth of
New Zealand with fixed maturities (i.e., no perpetuals) and, in the case of
Moody's, any publicly traded security which is (i) either issued by the
Government of the Commonwealth of New Zealand and is rated Aa by Moody's or is
guaranteed by the Government of the Commonwealth of New Zealand, (ii) are
denominated and payable in New Zealand Currency or are convertible into a
security constituting Eligible Portfolio Property by Moody's, and (iii) are not
a variable rate, index-linked, zero coupon or stripped security.
"New Zealand Securities" means New Zealand Government Securities, New
Zealand semi-government securities and other securities determined from time to
time in writing by the Rating Agencies.
"1940 Act AMPS Asset Coverage Ratio" means, as of the Valuation Date, the
ratio of the Fund's net assets to its senior securities representing
indebtedness plus the liquidation value of its Preferred Stock, including the
shares of AMPS.
"1940 Act AMPS Asset Coverage Requirement" means the requirement that the
Corporation maintain, with respect to shares of AMPS, as of the last Friday of
each month in which any shares of AMPS are Outstanding, asset coverage of at
least 200% with respect to senior securities representing indebtedness plus the
liquidation value of its Preferred Stock, including the shares of AMPS (or such
other asset coverage as may in the future be specified in or under the
Investment Company Act as the minimum asset coverage for senior securities which
are stock of a closed-end investment company as a condition of paying dividends
on its common stock).
"1940 Act Cure Date," with respect to the failure by the Corporation to
maintain the 1940 Act AMPS Asset Coverage Requirement (as required by paragraph
7(a) hereof) as of the last Valuation Date of each month, means the last
Valuation Date of the following month.
"NMMC Securities" are securities issued by National Mortgage Market
Corporation Ltd. ("NMMC"), which include AUSSIE MACs, which are medium term
bearer securities, and National
29
Mortgage Market Bonds. NMMC is a private company which is owned partially by the
Government of the State of Victoria and partially by private institutions. Both
AUSSIE MACs and National Mortgage Bonds are rated by Australian Ratings.
"Non-Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions."
"Non-Payment Period" means, with respect to the AMPS, any period commencing
on and including the day on which the Corporation shall fail to (i) declare,
prior to the close of business on the second Business Day preceding any Dividend
Payment Date, for payment on or (to the extent permitted by paragraph 3(c)(i)
hereof) within three Business Days after such Dividend Payment Date to the
Holders as of 12:00 noon, New York City time, on the Business Day preceding such
Dividend Payment Date, the full amount of any dividend on shares of AMPS payable
on such Dividend Payment Date or (ii) deposit, irrevocably in trust, in same-day
funds, with the Auction Agent by 12:00 noon, New York City time, (A) on such
Dividend Payment Date the full amount of any cash dividend on such shares
payable (if declared) on such Dividend Payment Date or (B) on any redemption
date for any shares of AMPS called for redemption, the Mandatory Redemption
Price per share of such AMPS or, in the case of an optional redemption, the
Optional Redemption Price per share, and ending on and including the Business
Day on which, by 12:00 noon, New York City time, all unpaid cash dividends and
unpaid redemption prices shall have been so deposited or shall have otherwise
been made available to Holders in same-day funds; provided that, a Non-Payment
Period shall not end unless the Corporation shall have given at least five days'
but no more than 30 days' written notice of such deposit or availability to the
Auction Agent, all Existing Holders (at their addresses appearing in the Stock
Books) and the Securities Depository. Notwithstanding the foregoing, the failure
by the Corporation to deposit funds as provided for by clauses (ii)(A) or
(ii)(B) above within three Business Days after any Dividend Payment Date or
redemption date, as the case may be, in each case to the extent contemplated by
paragraph 3(c)(i) hereof shall not constitute a "Non-Payment Period."
"Non-Payment Period Rate" means, initially, 300% of the applicable
Reference Rate provided that the Board of Directors of the Corporation shall
have the authority to adjust, modify, alter or change from time to time the
initial Non-Payment Period Rate if the Board of Directors of the Corporation
determines and Moody's and S&P (and any Substitute Rating Agency in lieu of
Moody's or S&P in the event either of such parties shall not rate the AMPS)
advise the Corporation in writing that such adjustment, modification, alteration
or change will not adversely affect their then-current ratings on the AMPS.
"Normal Dividend Payment Date" has the meaning set forth in paragraph
3(b)(i) hereof.
"Notice of Redemption" means any notice with respect to the redemption of
shares of AMPS pursuant to paragraph 5 hereof.
"Notice of Revocation" has the meaning set forth in paragraph 3(c)(iii)
hereof.
"Notice of Special Dividend Period" has the meaning set forth in paragraph
3(c)(iii) hereof.
"Offshore Banking Units" means cash deposits denominated in the currency of
Australia deposited with an Australian branch of a foreign bank authorized to
operate as an offshore banking unit by the Government of Australia's Australian
Taxation Office which, in the case of Moody's is (i) a branch carrying the same
credit rating as the parent bank, (ii) is a deposit rated at least P-1 under
circumstances in which the rating of the deposit is capped at the sovereign
rating ceiling of the parent
30
bank's home country, as well as the bank deposit rating ceiling of Australia, or
(iii) is a deposit held by a branch whose parent bank is rated at least Aa3/P-1
under circumstances in which the rating of the parent bank is capped at the
sovereign rating ceiling of the parent bank's home country, as well as the bank
deposit rating ceiling of Australia and which, to date, are limited to cash
deposits with an overseas banking unit of Banque Nationale de Paris.
"Optional Redemption Price" shall mean $25,000 per share plus an amount
equal to accumulated but unpaid dividends (whether or not earned or declared) to
the date fixed for redemption plus any applicable redemption premium
attributable to the designation of a Premium Call Period.
"Other Permitted Assets" means Australian Corporate Bonds, Australian
Eurobonds, Australian Convertible or Exchangeable Eurobonds, Australian Short
Term Securities, Derivatives, New Zealand Securities, FANMAC Certificates, NMMC
Securities, MTCs, MMSs, ANNIE MAEs, GNMA Multifamily Securities and Corporate
Bonds.
"Outstanding" means, as of any date (i) with respect to AMPS, shares of
AMPS theretofore issued by the Corporation except, without duplication, (A) any
shares of AMPS theretofore cancelled or delivered to the Auction Agent for
cancellation, or redeemed by the Corporation, or as to which a Notice of
Redemption shall have been given and moneys shall have been deposited in trust
by the Corporation pursuant to paragraph 5(f) and (B) any shares of AMPS as to
which the Corporation or any Affiliate thereof shall be an Existing Holder,
provided that shares of AMPS held by an Affiliate shall be deemed Outstanding
for purposes of calculating the AMPS Basic Maintenance Amount and (ii) with
respect to shares of other Preferred Stock, has the equivalent meaning.
"Paying Agent" means Deutsche Bank Trust Company Americas and its
successors or any other paying agent appointed by the Corporation to perform the
functions performed by the Paying Agent.
"Person" means an individual, a corporation, a company, a voluntary
association, a partnership, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision thereof.
"Potential Beneficial Owner" means a customer of a Broker-Dealer or a
Broker-Dealer that is not a Beneficial Owner of shares of AMPS but that wishes
to purchase such shares, or that is a Beneficial Owner that wishes to purchase
additional shares of AMPS.
"Potential Holder" shall mean any Broker-Dealer or any such other Person as
may be permitted by the Corporation, including any Existing Holder, who may be
interested in acquiring shares of AMPS (or, in the case of an Existing Holder,
additional shares of AMPS).
"Preferred Stock" means the preferred stock of the Corporation, including
the AMPS.
"Premium Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions."
"Pricing Service" shall mean any of FT Interactive, Reuters Information
Services, Inc., Telerate Systems, Inc., Bloomberg L.P. or Wood Gundy Inc. or any
other pricing service designated by the Board of Directors of the Corporation
provided the Corporation obtains written assurance from S&P and Moody's that
such designation will not impair the rating then assigned by S&P and Moody's to
the AMPS.
31
"Quarterly Surprise Valuation Date" means, so long as any shares of AMPS
are Outstanding, any Valuation Date during the quarter ended January, April,
July or October of each year.
"Rating" means a rating assigned by S&P or Moody's to a particular security
or to a particular issuer; provided, however, in the case of S&P, a particular
unrated security will be deemed to have received the rating S&P has assigned to
a rated debt security if S&P shall have received a letter from the President,
Vice President, or Treasurer of the Corporation certifying that the unrated
issue is identical to the rated issue in respect of (i) its terms, (ii) its
ranking, (iii) its issuer and (iv) guarantees and any other support mechanisms
provided by the issuer or any third party to enhance the credit of the rated
security.
"Rating Agencies" means Moody's and S&P or their successors so long as such
rating agency is then rating the AMPS.
"Reference Rate" means: (i) with respect to a Regular Dividend Period or a
Short Term Dividend Period having fewer than 183 days, the applicable "AA"
Composite Commercial Paper Rate, (ii) with respect to any Short Term Dividend
Period having 183 or more but fewer than 364 days, the applicable U.S. Treasury
Bill Rate and (iii) with respect to any Long Term Dividend Period, the
applicable U.S. Treasury Note Rate.
"Regular Dividend Period" means, with respect to the AMPS, a Dividend
Period consisting of 28 days.
"Reporting Date," with respect to any price referred to in the definition
of the Market Value of an item of Eligible Portfolio Property, shall mean the
date as of which the Market Value of such item of Eligible Portfolio Property is
to be determined.
"Repurchase Agreements" means, repurchase obligations with respect to a
U.S. Government Obligation, FNMA Certificate, FHLMC Certificate or GNMA
Certificate under which the Fund buys such securities from counterparties who
agree to buy back such securities within one Business Day from the date such
repurchase obligations were entered into where the counterparty is either (i) a
depository institution the deposits of which (x) are insured by the Federal
Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation, (y) the commercial paper or other unsecured short term debt
obligations of which are rated Prime-1 by Moody's and A-1+ by S&P, and (z) the
long term debt obligations of which are rated at least A-2 by Moody's; or (ii) a
broker-dealer registered as such with the Securities and Exchange Commission
under the Securities Act of 1934, as amended, (x) the commercial paper or other
unsecured short term debt obligation of which are rated Prime-1 by Moody's and
A-1+ by S&P and (y) the long term debt obligations of which are rated at least
A-2 by Moody's.
"Request for Special Dividend Period" has the meaning set forth in
paragraph 3(c)(iii) hereof.
"Response" has the meaning set forth in paragraph 3(c)(iii) hereof.
"S&P" means Standard & Poor's Rating Group or its successors.
"Securities Depository" means The Depository Trust Company and any
successor thereto.
32
"Short Term Dividend Period" means a Dividend Period consisting of a
specified number of days (other than the number of days in the applicable
Regular Dividend Period), evenly divisible by seven and not fewer than seven or
more than 364.
"Short Term Money Market Instruments" means the following kinds of
instruments, if on the date of purchase or other acquisition by the Corporation
of such instrument the remaining term to maturity thereof is not more than 30
days:
(a) demand deposits in, certificates of deposit of, and (in the case of
S&P only) bankers' acceptances issued by, any depository institution, the
deposits of which are insured by the Federal Deposit Insurance Corporation or
the Federal Savings and Loan Insurance Corporation, provided that, at the time
of the Corporation's investment therein, the commercial paper or other unsecured
short term debt obligations of such depository institution are rated Prime-1 by
Moody's and A-1+ by S&P and are issued by institutions whose long term debt
obligations are rated at least A2 by Moody's; and
(b) commercial paper rated at the time of the Corporation's investment
therein Prime-1 by Moody's and A-1+ by S&P and issued by institutions whose long
term debt obligations are rated at least A2 by Moody's; provided, however, that
in the case of Moody's such commercial paper must have a maturity of 270 days or
less.
"Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than the number of days in the applicable
Regular Dividend Period), evenly divisible by seven, and not fewer than seven
nor more than 364 or (ii) a specified number of whole years not greater than
five years (in each case subject to adjustment as provided in paragraph
3(b)(i)).
"Specific Redemption Provisions" means, with respect to a Special Dividend
Period either, or any combination of, (i) a period (a "Non-Call Period")
determined by the Board of Directors of the Corporation, after consultation with
the Auction Agent and the Broker-Dealers, during which the shares of AMPS
subject to such Dividend Period shall not be subject to redemption at the option
of the Corporation and (ii) a period (a "Premium Call Period"), consisting of a
number of whole years and determined by the Board of Directors after
consultation with the Auction Agent and the Broker-Dealers, during each year of
which the shares of AMPS subject to such Dividend Period shall be redeemable at
the Corporation's option at a price per share equal to $25,000 plus accumulated
but unpaid dividends plus a premium expressed as a percentage of $25,000, as
determined by the Board of Directors of the Corporation after consultation with
the Auction Agent and the Broker-Dealers.
"Stock Books" means the books maintained by the Auction Agent setting forth
at all times a current list, as determined by the Auction Agent, of Existing
Holders of the AMPS.
"Stock Register" means the register of Holders maintained on behalf of the
Corporation by the Auction Agent in its capacity as transfer agent and registrar
for the AMPS.
"Subsequent Dividend Period" has the meaning specified in paragraph 3(c)(i)
hereof.
"Substitute Commercial Paper Dealers" means such substitute Commercial
Paper Dealer or Dealers as the Corporation may from time to time appoint or, in
lieu of any thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized securities rating agency or two nationally recognized
securities rating agencies, respectively, selected
33
by Merrill Lynch, Pierce, Fenner & Smith Incorporated, or its affiliate or
successor, in consultation with the Corporation, to act as the substitute rating
agency or substitute rating agencies, as the case may be, to determine the
credit ratings of the shares of AMPS.
"Tender Panel" shall mean, for purposes of these Articles Supplementary, a
group of financial institutions that bid to purchase an issuer's security, which
makes a market for the security.
"United Kingdom Currency" means such coin or currency of the United Kingdom
as at the time shall be legal tender for payment of public and private debts, as
well as time deposits denominated in such currency.
"United Kingdom Government Securities" means, in the case of S&P, all
publicly traded securities issued and guaranteed by the Government of the United
Kingdom with fixed maturities (i.e., no perpetuals) and which are non-callable,
non-convertible and not index-linked and in the case of Moody's, any publicly
traded security which is (i) either issued by the Government of the United
Kingdom and is rated Aaa by Moody's or is guaranteed by the Government of the
United Kingdom or any semi-sovereign United Kingdom entity whose domestic
currency long term debt is rated Aaa by Moody's (ii) is denominated and payable
in United Kingdom Currency or is convertible into a security constituting
Eligible Portfolio Property and (iii) is not a variable rate, index-linked, zero
coupon or stripped security.
"United Kingdom Securities" means all United Kingdom Government Securities.
"U.S. Government Obligations" means direct obligations of the United
States, provided that such direct obligations are entitled to the full faith and
credit of the United States and that any such obligations, other than United
States Treasury Bills, provide for the periodic payment of interest and the full
payment of principal at maturity or call for redemption.
"U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent of
the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 p.m. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on
any date means the Interest Equivalent of the yield as calculated by reference
to the arithmetic average of the bid price quotations of the actively traded
Treasury Bill with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by bid price quotations as of any time on
the Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the Auction
Agent.
"U.S. Treasury Note Rate," on any date means (i) the yield as calculated by
reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 p.m. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Note
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by
34
the bid price quotations as of any time on the Business Day immediately
preceding such date, obtained from at least three recognized primary U.S.
Government securities dealers selected by the Auction Agent.
"Valuation Date" means each Friday or, if such day is not a Business Day,
the next preceding Business Day, provided, that the first Valuation Date may
occur on any other date established by the Corporation; provided, further, that
such date shall not be earlier than four Business Days prior to, and not later
than, the Date of Original Issue.
"Voting Period" has the meaning specified in paragraph 6(b) hereof.
"Yankee Bonds" means bonds issued by foreign governments or provinces,
supranational agencies or foreign corporations, offered and sold in the United
States and denominated in U.S. dollars, which bonds (a) provide for the periodic
payment of interest thereon in cash, (b) do not provide for conversion or
exchange into equity capital at any time over their respective lives, (c) have
been registered under the Securities Act of 1933, as amended, (d) have a
remaining term to maturity of 30 years or less, and (e) have not had notice
given in respect thereof that any such corporate debt obligations are the
subject of an offer by the issuer thereof of exchange or tender for cash,
securities or any other type of consideration (except that Yankee Bonds and
Corporate Bonds, together, in an amount not exceeding 10% of the aggregate value
of the Corporation's assets at any time shall not be subject to the provisions
of this clause (e)). In addition, no debt obligation held by the Corporation
shall be deemed a Yankee Bond (i) if it fails to meet the criteria in column (1)
below or (ii) to the extent (and only to the proportionate extent) the
acquisition or holding thereof by the Corporation causes the Corporation to
exceed any applicable limitation set forth in column (2) or (3) below as of any
relevant Valuation Date (provided that in the event that the Corporation shall
exceed any such limitation, the Corporation shall designate, in its sole
discretion, the particular Yankee Bond(s) and/or portions thereof which shall be
deemed to have caused the Corporation to exceed such limitation):
Column 1 Column 2 Column 3
------------------------ ------------------------ -----------------------
Maximum
Maximum Percent of Value
Percent of Value of Corporation
of Corporation Assets, Including
Assets, Including Eligible Port-
Eligible Port- folio Property,
Minimum Original folio Property, Invested in any
Rating Issue Size of Invested in any One Industry
(1) Each Issue One Issuer (2) Category (2)
------------------------------- ------------------------ ------------------------ -----------------------
($ in millions)
Aaa/AAA.................. $ 100 10.0% 50.0%
Aa/AA.................... 100 10.0 33.3
(1) In the event that a Yankee Bond has received a different rating from each
of the Rating Agencies, the lower of the two ratings will be controlling.
Rating designations include (+) or (-) modifiers to the rating where
appropriate.
(2) The referenced percentages represent maximum cumulative totals for the
related rating category and each lower rating category.
(b) The foregoing definitions in Paragraph 1(a) have been established by
the Board of Directors of the Corporation in order to obtain a "Aa" rating from
Moody's and a "AA" rating from
35
S&P on the AMPS on the Date of Original Issue and to maintain such ratings; and
the Board of Directors of the Corporation shall have the authority to adjust,
modify, alter or change from time to time the foregoing definitions and the
restrictions and guidelines set forth thereunder and to add additional
definitions or delete definitions if, where relevant to the rating accorded by
Moody's and S&P or any Substitute Rating Agency, such agency advises the
Corporation in writing that such adjustment, modification, alteration, change,
addition or deletion will not adversely affect its then-current rating on the
AMPS. Following the effective date of any such adjustment, modification,
alteration or change, the Board of Directors of the Corporation, in its sole
discretion and without a shareholder vote, may authorize, execute and file with
the Maryland State Department of Assessments and Taxation a restatement of these
Articles Supplementary incorporating any and all such adjustments,
modifications, alterations or changes made since the last such restatement;
provided that the failure to file such a restatement will in no way affect the
effectiveness of any adjustment, modification, alteration or change made
pursuant to this paragraph.
2. Fractional Shares. No fractional shares of AMPS shall be issued.
3. Dividends.
(a) Holders of shares of AMPS shall be entitled to receive, when, as, and
if declared by the Board of Directors of the Corporation, out of funds legally
available therefor, cumulative cash dividends at the Applicable Rate per annum
(determined as set forth below), and no more, payable on the respective dates
set forth below. Dividends on the shares of AMPS so declared and payable shall
be paid in preference to and in priority over any dividends declared and payable
on the Common Stock.
(b) (i) Cash dividends on shares of AMPS shall accumulate from the
Date of Original Issue and shall be payable, when, as, and if declared by the
Board of Directors commencing on the Initial Dividend Payment Date. Accumulated
dividends shall be payable commencing on August 6, 1992 (the 7th day after the
Date of Original Issue), with respect to the Auction Market Preferred Stock,
Series W-7 (hereinafter, such date is referred to as the "Initial Dividend
Payment Date"). Following the Initial Dividend Payment Date, the dividends on
the AMPS will be payable, at the option of the Corporation, either (A) with
respect to any Regular Dividend Period or any Short Term Dividend Period of 91
or fewer days, on the day next succeeding the last day thereof, (B) with respect
to any Short Term Dividend Period of more than 91 and fewer than 365 days, on
the 92nd day thereof, the 183rd day thereof, if any, the 274th day thereof, if
any, and on the day next succeeding the last day thereof and (C) with respect to
any Long Term Dividend Period, quarterly on the first day of each January,
April, July and October during such Long Term Dividend Period and on the day
next succeeding the last day thereof (each such date referred to in clause (A),
(B) or (C) being herein referred to as a "Normal Dividend Payment Date"), except
that if such Normal Dividend Payment Date is not a Business Day, dividends
payable on such Normal Dividend Payment Date shall be paid on the first Business
Day succeeding such Normal Dividend Payment Date. The Initial Dividend Period,
Regular Dividend Periods and Special Dividend Periods are hereinafter sometimes
referred to as Dividend Periods. Each dividend payment date determined as
provided above is hereinafter referred to as a "Dividend Payment Date."
(ii) Each dividend shall be paid to Holders as they appear in the
Stock Register as of 12:00 noon, New York City time, on the Business Day
preceding the dividend Payment Date. Dividends in arrears for any past
Dividend Period may be declared and paid at any time, without reference to
any regular Dividend Payment Date, to the Holders as they appear on the
36
Stock Register on a date, not exceeding 15 days prior to the payment date
therefor, as may be fixed by the Board of Directors of the Corporation.
(c) (i) During the period from and including the Date of Original
Issue to, but excluding, the Initial Dividend Payment Date (the "Initial
Dividend Period"), the Applicable Rate shall be the Initial Dividend Rate. The
Applicable Rate for the Auction Market Preferred Stock, Series W-7 shall be
3.50% per annum for the Initial Dividend Period. Commencing on the Initial
Dividend Payment Date, the Applicable Rate for each subsequent dividend period
(hereinafter referred to as a "Subsequent Dividend Period"), which Subsequent
Dividend Period shall commence on and include a Dividend Payment Date and shall
end on and include the calendar day prior to the next Dividend Payment Date,
shall be equal to the rate per annum that results from implementation of the
Auction Procedures.
The Applicable Dividend Rate for each Dividend Period commencing
during a Non-Payment Period shall be equal to the Non-Payment Period Rate;
and each Dividend Period, commencing after the first day of, and during, a
Non-Payment Period shall be a Regular Dividend Period. Any amount of any
dividend due on any Dividend Payment Date (if, prior to the close of
business on the second Business Day preceding such Dividend Payment Date,
the Corporation has declared such dividend payable on such Divided Payment
Date to the Holders of such shares of AMPS as of 12:00 noon, New York City
time, on the Business Day preceding such Dividend Payment Date) or
redemption price with respect to any shares of AMPS not paid to such
Holders when due may be paid to such Holders in the same form of funds by
12:00 noon, New York City time, on any of the first three Business Days
after such Dividend Payment Date or due date, as the case may be, provided
that, such amount is accompanied by a late charge calculated for such
period of non-payment at the Non-Payment Period Rate applied to the amount
of such non-payment based on the actual number of days comprising such
period divided by 365. For the purposes of the foregoing, payment to a
person in same-day funds on any Business Day at any time shall be
considered equivalent to payment to such person in New York Clearing House
(next-day) funds at the same time on the preceding Business Day, and any
payment made after 12:00 noon, New York City time, on any Business Day
shall be considered to have been made instead in the same form of funds and
to the same person before 12:00 noon, New York City time, on the next
Business Day.
(ii) The amount of cash dividends per share of AMPS payable (if
declared) on each Dividend Payment Date of each Regular Dividend Period and
each Short Term Dividend Period shall be computed by multiplying the
Applicable Rate for such Dividend Period by a fraction, the numerator of
which will be the number of days in such Dividend Period such share was
outstanding and the denominator of which will be 365, multiplying the
amount so obtained by $25,000, and rounding the amount so obtained to the
nearest cent. During any Long Term Dividend Period, the amount of dividends
per share payable on any Dividend Payment Date shall be computed on the
basis of a year consisting of twelve 30-day months.
(iii) With respect to each Dividend Period that is a Special
Dividend Period, the Corporation may, at its sole option and to the extent
permitted by law, by telephonic and written notice (a "Request for Special
Dividend Period") to the Auction Agent and to each Broker-Dealer, request
that the next succeeding Dividend Period for the AMPS be a number of days
(other than the number of days in the applicable Regular Dividend Period),
evenly divisible by seven, and not fewer than seven or more than 364 in the
case of a Short Term Dividend Period or a number of whole years not greater
than five years in the case of a Long
37
Term Dividend Period, specified in such notice, provided that for any
Auction occurring after the initial Auction, the Corporation may not give a
Request for Special Dividend Period (and any such request shall be null and
void) unless the Corporation has received written confirmation from Moody's
and S&P that such action would not impair the ratings then assigned to the
AMPS by Moody's and S&P and unless Sufficient Clearing Bids were made in
the last occurring Auction and unless full cumulative dividends and any
amounts due with respect to redemptions payable prior to such date have
been paid in full. Such Request for Special Dividend Period, in the case of
a Short Term Dividend Period, shall be given on or prior to the fourth day
but not more than seven days prior to an Auction Date for the AMPS and, in
the case of a Long Term Dividend Period, shall be given on or prior to the
14th day but not more than 28 days prior to an Auction Date for the AMPS.
Upon receiving such Request for Special Dividend Period, the
Broker-Dealer(s) shall jointly determine whether, given the factors set
forth below, it is advisable that the Corporation issue a Notice of Special
Dividend Period for the AMPS as contemplated by such Request for Special
Dividend Period and the Optional Redemption Price of the AMPS during such
Special Dividend Period and the Specific Redemption Provisions and shall
give the Corporation and the Auction Agent written notice (a "Response") of
such determination by no later than the third day prior to such Auction
Date. In making such determination the Broker-Dealer(s) will consider (A)
existing short term and long term market rates and indices of such short
term and long term rates, (B) existing market supply and demand for short
term and long term securities, (C) existing yield curves for short term and
long term securities comparable to the AMPS, (D) industry and financial
conditions which may affect the AMPS, (E) the investment objective of the
Corporation, and (F) the Dividend Periods and dividend rates at which
current and potential beneficial holders of the AMPS would remain or become
beneficial holders. If the Broker-Dealer(s) shall not give the Corporation
and the Auction Agent a Response by such third day or if the Response
states that given the factors set forth above it is not advisable that the
Corporation give a Notice of Special Dividend Period for the AMPS, the
Corporation may not give a Notice of Special Dividend Period in respect of
such Request for Special Dividend Period. In the event the Response
indicates that it is advisable that the Corporation give a Notice of
Special Dividend Period for the AMPS, the Corporation may by no later than
the second day prior to such Auction Date give a notice (a "Notice of
Special Dividend Period") to the Auction Agent, the Securities Depository
and each Broker-Dealer which notice will specify (A) the duration of the
Special Dividend Period, (B) the Optional Redemption Price as specified in
the related Response and (C) the Specific Redemption Provisions, if any, as
specified in the related Response. The Corporation shall not give a Notice
of Special Dividend Period or, if the Corporation shall have already given
a Notice of Special Dividend Period, the Corporation is required to give
telephonic and written notice (a "Notice of Revocation") to the Auction
Agent, each Broker-Dealer, and the Securities Depository on or prior to the
Business Day prior to the relevant Auction Date if (x) either the 1940 Act
AMPS Asset Coverage is not satisfied or the Corporation shall fail to
maintain the AMPS Basic Maintenance Amount on each of the two Valuation
Dates immediately preceding the Business Day prior to the relevant Auction
Date on an actual basis and on a pro forma basis giving effect to the
proposed Special Dividend Period (using as a pro forma dividend rate with
respect to such special Dividend Period the dividend rate which the
Broker-Dealers shall advise the Corporation is an approximately equal rate
for securities similar to the AMPS with an equal dividend period), provided
that in calculating the aggregate Discounted Value of Eligible Portfolio
Property, the Moody's exposure period shall be deemed to be one week longer
than the period utilized to produce the discount factors assigned by
Moody's under the definition of Discount Factors found in paragraph 1(a),
(y) sufficient funds for the payment of dividends payable on the
immediately succeeding Dividend
38
Payment Date have not been irrevocably deposited with the Auction Agent by
the close of business on the third Business Day preceding the related
Auction Date or (z) the Broker-Dealer(s) jointly advise the Corporation
that after consideration of the factors listed above they have concluded
that it is advisable to give a Notice of Revocation. If the Corporation is
prohibited from giving a Notice of Special Dividend Period as a result of
any of the factors enumerated in clause (x), (y) or (z) of the prior
sentence or if the Corporation gives a Notice of Revocation with respect to
a Notice of Special Dividend Period for the AMPS, the next succeeding
Dividend Period for that series will be a Regular Dividend Period. In
addition, in the event Sufficient Clearing bids are not made in the
applicable Auction or such Auction is not held for any reason, such next
succeeding Dividend Period will be a Regular Dividend Period and the
Corporation may not again give a Notice of Special Dividend Period for the
AMPS (and any such attempted notice shall be null and void) until
Sufficient Clearing Bids have been made in an Auction with respect to a
Regular Dividend Period.
(d) (i) Holders shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of full cumulative dividends and
applicable late charge, as herein provided, on the shares of AMPS. Except for
the late charge payable pursuant to paragraph 3(c)(i) hereof, no interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment on the shares of AMPS that may be in arrears.
(ii) For so long as any share of AMPS is Outstanding, the
Corporation shall not declare, pay or set apart for payment any dividend or
other distribution (other than a dividend or distribution paid in shares
of, or options, warrants or rights to subscribe for or purchase, Common
Stock or other stock, if any, ranking junior to the shares of AMPS as to
dividends or upon liquidation) in respect of the Common Stock or any other
stock of the Corporation ranking junior to or on a parity with the shares
of AMPS as to dividends or upon liquidation, or call for redemption,
redeem, purchase or otherwise acquire for consideration any shares of the
Common Stock or any other such junior stock (except by conversion into or
exchange for stock of the Corporation ranking junior to the shares of AMPS
as to dividends and upon liquidation), unless, in each case, immediately
thereafter, (A) the AMPS Basic Maintenance Amount would be met, (B) the
1940 Act AMPS Assets Coverage Requirement would be met, (C) all mandatory
redemptions of shares of Preferred Stock pursuant to paragraph 5(b) hereof
have been completed, and (D) all accumulated and unpaid dividends for all
past dividend periods for all Preferred Stock shall have been or are
contemporaneously paid in full (or declared and sufficient Deposit
Securities have been set apart for their payment). Prior to the payment of
any such dividend or other distribution, the Corporation will provide the
Auction Agent and the Rating Agencies with an AMPS Basic Maintenance Report
(which may be the regular weekly report) and a certificate demonstrating
compliance with the foregoing conditions.
(iii) For so long as any shares of AMPS are Outstanding, the
Corporation shall not create, incur or suffer to exist, or agree to create,
incur or suffer to exist, or consent to cause or permit in the future (upon
the happening of a contingency or otherwise) the creation, incurrence or
existence of any lien, mortgage, pledge, charge, security interest,
security agreement, conditional sale or trust receipt or other material
encumbrance of any kind (collectively "Liens") upon any of its Eligible
Portfolio Property, except for (A) Liens the validity of which are being
contested in good faith by appropriate proceedings, (B) Liens for taxes
that are not then due and payable or that can be paid thereafter without
penalty, (C) Liens to secure payment for services rendered by the Auction
Agent in connection with the AMPS, and (D) Liens otherwise incurred in
connection with borrowings made in the ordinary course of
39
business in accordance with the Corporation's stated investment objective,
policies and restrictions.
(iv) Any dividend payment made on the shares of AMPS shall first
be credited against the dividends accumulated with respect to the earliest
Dividend Period for which dividends have not been paid.
(v) For so long as the AMPS shall be rated by S&P or Moody's,
the Corporation shall not:
(A) issue any other series or class of stock which is
senior to the AMPS;
(B) issue any series or class of stock which is on a parity
with the shares of AMPS unless it has been advised in writing by the
Rating Agencies that such issuance will not adversely affect their
respective then-current ratings of the AMPS; or
(C) engage in short sales or reverse repurchase agreements.
(e) Not later than 12:00 noon, New York City time, on the Business Day
next preceding each Dividend Payment Date, the Corporation shall deposit with
the Paying Agent Deposit Securities constituting immediately available funds in
an amount sufficient to pay the dividends that are payable on such Dividend
Payment Date. The Corporation may direct the Paying Agent with respect to the
investment of any such Deposit Securities, provided that the proceeds of any
such investment will be available at the opening of business on such Dividend
Payment Date in immediately available funds.
(f) The Board of Directors, or any duly authorized committee thereof, may
make or change allocations of income and/or any designation of sources with
respect to dividends declared on the AMPS, if, in its sole judgment, it deems it
advisable to do so for the purpose of maintaining the qualification of the
Corporation as a regulated investment company for federal income tax purposes
and/or to avoid tax consequences which, in the sole judgment of the Board of
Directors, would be adverse to the Corporation or its shareholders.
4. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the Holders of shares of AMPS
shall be entitled to receive, out of the assets of the Corporation available for
distribution to shareholders, before any distribution or payment is made upon
any Common Stock or any other capital stock of the Corporation ranking junior to
the AMPS as to liquidation payments, the sum of $25,000 per share, plus an
amount equal to all unpaid dividends accumulated to and including the date fixed
for such distribution or payment (whether or not earned or declared by the
Corporation, but excluding interest thereon), but such Holders shall be entitled
to no further participation in any distribution or payment in connection with
any such liquidation, dissolution or winding up.
(b) If, upon any such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets of the Corporation
available for distribution among the Holders of all Outstanding shares of AMPS
shall be insufficient to permit the payment in full of such Holders of the
amounts to which they are entitled, then such available assets shall be
distributed among the Holders of shares of Preferred Stock, including the AMPS,
ratably in any such distribution of assets
40
according to the respective amounts which would be payable on all such shares if
all amounts thereon were paid in full.
(c) Neither the consolidation or merger of the Corporation with or into
any other corporation or entity, nor the sale, lease or exchange by the
Corporation of all, substantially all, or any part of the property or assets of
the Corporation, shall be deemed or construed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation for purposes of this
paragraph 4.
5. Redemption.
Shares of the AMPS shall be redeemable by the Corporation as provided
below:
(a) To the extent permitted under the Investment Company Act and Maryland
law, the Corporation at its option, upon filing with the Commission, mailing and
publishing a Notice of Redemption as described in paragraph 5(e) hereof, may
redeem shares of AMPS, in whole or in part, on the next succeeding scheduled
Dividend Payment Dates for those shares of AMPS called for redemption, out of
funds legally available therefor, at the Optional Redemption Price per share,
provided that no share of AMPS may be redeemed at the option of the Corporation
during a Non-Call Period to which such share is subject. The Corporation may not
give a Notice of Redemption relating to an optional redemption as described in
this paragraph 5 unless, at the time of giving such Notice of Redemption, the
Corporation has available Deposit Securities with maturity or tender dates not
later than the day preceding the applicable redemption date and having a value
not less than the amount due to Holders of shares of AMPS by reason of the
redemption of their shares on such redemption date.
(b) The Corporation shall redeem, out of funds legally available therefor,
at the Mandatory Redemption Price, shares of AMPS to the extent permitted under
the Investment Company Act and Maryland law, on a date fixed by the Board of
Directors applicable to those shares of AMPS called for redemption, if the
Corporation fails to maintain the AMPS Basic Maintenance Amount or 1940 Act AMPS
Asset Coverage Requirement, as the case may be, and such failure is not cured on
or before the AMPS Basic Maintenance Cure Date or the 1940 Act Cure Date
(hereinafter respectively referred to as a "Cure Date"), as the case may be, as
reflected in an AMPS Basic Maintenance Report delivered to the Auction Agent and
the Rating Agencies and confirmed by the Corporation's Independent Accountants.
The number of shares of AMPS to be redeemed shall be equal to the lesser of (i)
the minimum number of shares of AMPS the redemption of which, if deemed to have
occurred immediately prior to the opening of business on the Cure Date, together
with all shares of other Preferred Stock subject to redemption or retirement,
would result in the satisfaction of the AMPS Basic Maintenance Amount or the
1940 Act AMPS Asset Coverage Requirement, as the case may be, on such Cure Date
(provided that, if there is no such minimum number of shares of AMPS and shares
of other Preferred Stock the redemption of which would have such result, all
shares of AMPS together with all shares of other Preferred Stock subject to
redemption or retirement then Outstanding shall be redeemed), and (ii) the
maximum number of shares of AMPS, together with all shares of other Preferred
Stock subject to redemption or retirement, that can be redeemed out of funds
expected to be legally available therefor on such redemption date. In
determining the number of shares of AMPS required to be redeemed in accordance
with the foregoing, the Corporation shall allocate the amount required to be
redeemed which would result in the achievement of (x) the 1940 Act AMPS Asset
Coverage Requirement, and (y) the AMPS Basic Maintenance Amount, pro rata, among
the AMPS and any other Preferred Stock, subject to redemption pursuant to
provisions similar to those contained in this paragraph 5(b); provided that,
shares of AMPS which may not be redeemed at the option of the Corporation due to
the designation of a Non-Call Period applicable to such shares (A) will be
subject
41
to mandatory redemption only to the extent that other shares are not available
to satisfy the number of shares required to be redeemed and (B) will be selected
for redemption in an ascending order of outstanding number of days in the
Non-Call Period (with shares with the lowest number of days to be redeemed
first) and by lot in the event of shares having an equal number of days in such
Non-Call Period. The Corporation shall effect such redemption on a Business Day
which is not later than 30 days after such Cure Date, except that if the
Corporation does not have funds legally available for the redemption of all of
the required number of shares of AMPS and shares of other Preferred Stock which
are subject to mandatory redemption or the Corporation otherwise is unable to
effect such redemption on or prior to such 30th day after such Cure Date, the
Corporation shall redeem those shares of AMPS which it is unable to redeem on
the earliest practicable date on which it is able to effect such redemption out
of funds legally available therefor.
(c) Notwithstanding any other provision of this paragraph 5, no shares of
AMPS may be redeemed other than as specified below, unless (i) all accumulated
and unpaid dividends on all Outstanding shares of AMPS and all remaining
Outstanding shares of other Preferred Stock for all past dividend periods shall
have been or are contemporaneously paid or declared and Deposit Securities
maturing on or prior to the date fixed for redemption are set apart for the
payment of such dividends and (ii) if redemption thereof would result in the
Corporation's failure to maintain the 1940 Act AMPS Asset Coverage Requirement
and the AMPS Basic Maintenance Amount; provided, however, that the Corporation
without regard to such limitations, (x) may redeem, purchase or otherwise
acquire shares of AMPS (A) with other Preferred Stock as a whole, pursuant to an
optional redemption or (B) pursuant to a purchase or exchange offer made for all
of the Outstanding shares of AMPS and other Preferred Stock, and (y) shall
redeem, purchase or otherwise acquire shares of AMPS with other Preferred Stock
as a whole if required pursuant to a mandatory redemption, to the extent
permitted under the Investment Company Act, Maryland law and the Articles of
Incorporation. In the event that less than all the outstanding shares of AMPS
are to be redeemed and there is more than one Holder, the shares of AMPS to be
redeemed shall be selected by lot, on a pro rata basis, or in such other manner
as will not discriminate unfairly against any record holder of shares of such
AMPS.
(d) So long as the AMPS shall be rated by Moody's, the Corporation shall,
by the fifth Business Day after a Failure to Cure, be required to hold an
amount, composed of Cash or any other asset constituting Eligible Portfolio
Property which has a Moody's Discount Factor as of such fifth Business Day of
1.000 and which matures prior to the date set for redemption which has an
aggregate Discounted Value at least equal to the redemption payment for the
shares of AMPS to be redeemed; provided, however, that this obligation may be
satisfied by depositing Cash in trust as contemplated by paragraph 5(f) below;
and provided further that the Corporation shall sell assets prior to such fifth
Business Day if necessary to meet the requirements of this paragraph (d), it
being understood that in no event shall it sell any asset prior to maturity
which had a Moody's Discount Factor of 1.000 measured as of the last Valuation
Date on which the AMPS Basic Maintenance Amount was met if it would be necessary
to utilize such asset in order to make any redemption payment contemplated by
this paragraph 5.
(e) Whenever shares of AMPS are to be redeemed, the Corporation shall, not
less than five nor more than 30 days prior to the applicable redemption date,
file with the Commission as required under the Investment Company Act, a written
notice of redemption (a "Notice of Redemption"). The Notice of Redemption shall
be (i) mailed by first-class mail, postage prepaid or sent by facsimile
transmission, to each Holder of shares of AMPS to be redeemed, and (ii)
published by the Corporation in an Authorized Newspaper, not fewer than 15 nor
more than 20 days prior to such redemption date. Not fewer than five nor more
than 10 days before such mailing date, the Corporation shall mail the
42
Notice of Redemption to the Paying Agent. Each Notice of Redemption shall state
(A) the series of AMPS or other Preferred Stock to be redeemed, (B) the
redemption date, (C) the redemption price, (D) the place or places where such
AMPS are to be surrendered for payment of the redemption price, (E) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date, (F) the provision of these Articles Supplementary under which
the redemption is being made, (G) if less than all the Outstanding shares of
AMPS are to be redeemed, the number of shares to be redeemed and the basis upon
which the shares to be redeemed are to be selected, and (H) the CUSIP number or
numbers of the shares to be redeemed. No defect in the Notice of Redemption or
in the mailing or publication thereof shall affect the validity of the
redemption proceedings, except as required by applicable law.
(f) If the Corporation shall give a Notice of Redemption, then by 12:00
noon, New York City time, on the Business Day next preceding the date fixed for
redemption the Corporation shall deposit with the Paying Agent Deposit
Securities constituting immediately available funds in an amount sufficient to
redeem the shares of AMPS to be redeemed. In such event the Corporation shall
give the Paying Agent irrevocable instructions and authority to pay the
redemption price to the Holders of the shares of AMPS called for redemption upon
the redemption date. The Corporation may direct the Paying Agent with respect to
the investment of any Deposit Securities so deposited provided that the proceeds
of any such investment will be available at the opening of business on such
redemption date. The Deposit Securities deposited with the Paying Agent pursuant
to the immediately preceding sentence and the shares of AMPS to be redeemed and
funds deposited with a paying agent with irrevocable instructions to pay the
redemption price with respect to any other shares of Preferred Stock for which a
notice of redemption has been duly given shall be excluded from the calculation
of the AMPS Basic Maintenance Amount, the 1940 Act AMPS Asset Coverage Ratio,
and the 1940 Act AMPS Asset Coverage Requirement. Upon the date of such deposit,
or if no such deposit is made, then upon such date fixed for redemption (unless
the Corporation shall default in making payment of the redemption price), all
rights of the Holders of the shares of AMPS so called for redemption shall cease
and terminate except the right of the Holders thereof to receive the redemption
price thereof inclusive of accumulated but unpaid dividends, but without any
interest, and such shares shall no longer be deemed Outstanding for any purpose.
The Corporation shall be entitled to receive, promptly after the date fixed for
redemption, any cash in excess of the aggregate redemption price of the shares
of AMPS called for redemption on such date and any remaining Deposit Securities.
Any assets so deposited which are unclaimed at the end of one year from such
redemption date shall, to the extent permitted by law, be repaid to the
Corporation, after which the Holders of the shares of AMPS so called for
redemption shall look only to the Corporation for payment thereof. The
Corporation shall be entitled to receive, from time to time after the date fixed
for redemption, any interest on the Deposit Securities so deposited.
(g) Shares of AMPS that have been redeemed, purchased or otherwise
acquired by the Corporation may not be reissued, shall not be deemed
Outstanding, and shall be retired and cancelled.
(h) In addition to redemption rights expressly established under these
Articles Supplementary, the Corporation may repurchase shares of AMPS to the
extent now or hereafter permitted by the laws of the State of Maryland and by
the Investment Company Act.
(i) If the Corporation shall not have funds legally available for the
redemption of all the shares of the AMPS to be redeemed on any redemption date
(or is otherwise legally unable to effect such redemption), the Corporation
shall redeem on such redemption date the number of shares of AMPS as it shall be
legally able to redeem, ratably from each Existing Holder whose shares are to be
43
redeemed and the remainder of the shares of the AMPS required to be redeemed
shall be redeemed, as provided in paragraph 5(b) above.
6. Voting Rights.
(a) General. Each holder of AMPS shall be entitled to one vote for each
share held on each matter on which the holders of the AMPS are entitled to vote
and, except as otherwise provided in the Articles of Incorporation, the By-Laws,
these Articles Supplementary or by law, the holders of the AMPS and the Common
Stock shall vote together as one class on all matters submitted to the
shareholders; provided, however, that at any meeting of shareholders of the
Corporation at which directors are to be elected, the holders of Preferred Stock
of all series, voting separately as a single class, shall be entitled to elect
two members of the Board of Directors, and the holders of Common Stock, voting
separately as a single class, shall be entitled to elect the balance of the
members of the Board of Directors.
(b) Right to Elect Majority of Board of Directors.
(i) During any period in which (A) dividends on any Outstanding
Preferred Stock of any series shall be due and unpaid in an amount equal to
two full years' dividends; or (B) the Corporation fails to redeem any
shares of Preferred Stock that are required to be redeemed pursuant to
paragraph 5(b) above or that would have been so redeemed but for the
requirement that redemption be made out of legally available funds, or (C)
holders of any other shares of Preferred Stock are entitled to elect a
majority of the directors of the Corporation (the "Voting Period"), the
number of directors constituting the Board of Directors shall automatically
be increased by the smallest number that, when added to the two directors
elected by the holders of Preferred Stock pursuant to paragraph 6(a) above,
will constitute a majority of the total number of directors so increased;
and at a special meeting of shareholders, which shall be called and held as
soon as practicable, and at all subsequent meetings at which directors are
to be elected, the holders of Preferred Stock of all series voting
separately as a single class shall be entitled to elect the smallest number
of additional directors of the Corporation who, together with the two
directors elected by the holders of Preferred Stock pursuant to paragraph
6(a) above, will constitute a majority of the total number of directors of
the Corporation so increased. The terms of office of the persons who are
directors at the time of that election shall continue.
(ii) If the Corporation thereafter shall pay, or declare and set
apart for payment, in full all dividends payable on all Outstanding shares
of Preferred Stock of all series for all past dividend periods and if the
Corporation has remedied any failure to redeem shares of Preferred Stock
that are required to be redeemed pursuant to paragraph 5(b) above, and
holders of no other series of Preferred Stock are entitled to elect a
majority of the directors of the Corporation, the Voting Period and the
voting rights stated in this paragraph 6(b) shall cease, and the terms of
office of all additional directors elected by the holders of Preferred
Stock (but not of the directors elected by the holders of Common Stock or
the two directors regularly elected by the holders of Preferred Stock as
provided in paragraph 6(a)) shall terminate automatically, subject always,
however, to the revesting of such voting rights in the holders of shares of
Preferred Stock upon the further occurrence of any of the events described
in clauses (A), (B) or (C) of paragraph 6(b)(i).
(c) Voting Procedures.
44
(i) As soon as practicable after the accrual of any right of the
holders of shares of Preferred Stock to elect directors pursuant to
paragraph 6(b), the Corporation shall call a special meeting of, and mail a
notice to, such holders of shares of Preferred Stock. Such special meeting
shall be held not less than 10 nor more than 80 days after the date of
mailing of such notice. If the Corporation fails to send such notice, the
meeting may be called by any holder of shares of Preferred Stock on like
notice. The record date for determining the holders of shares of Preferred
Stock entitled to notice of and to vote at such special meeting shall be
the close of business on the fifth Business Day preceding the day on which
such notice is given. At any such special meeting and at each meeting at
which directors are elected held during a Voting Period, the holders of
shares of Preferred Stock, voting together as a class (to the exclusion of
the holders of shares of Common Stock), shall be entitled to elect the
number of directors prescribed in paragraph 6(b) above on a
one-vote-per-share basis. At any such meeting or adjournment thereof in the
absence of a quorum, a majority of the holders of shares of Preferred
Stock, present in person or by proxy or any officer of the Corporation
present entitled to preside or act as Secretary of such meeting shall have
the power to adjourn the meeting without further notice to a date not more
than 120 days after the original record date for such meeting.
(ii) For purposes of determining any rights of the holders of
shares of Preferred Stock to vote on any matter, whether such right is
created by the Articles of Incorporation, these Articles Supplementary, by
statute or otherwise, only Holders of shares of Outstanding Preferred Stock
shall be entitled to vote.
(iii) The directors elected by the holders of shares of Preferred
Stock pursuant to paragraph 6(b) shall (subject to the provisions of any
applicable law) be subject to removal only by the vote of the holders of
two-thirds of the shares of Preferred Stock Outstanding. Any vacancy on the
Board of Directors occurring by reason of such removal or otherwise (in the
case of directors subject to election by the holders of shares of Preferred
Stock) may be filled only by a majority of the remaining directors (or the
remaining director) who were elected by the holders of shares of Preferred
Stock. If no such directors remain after such removal, such vacancy may be
filled only by the vote of the holders of at least two-thirds of the shares
of Preferred Stock Outstanding. Any other vacancy on the Board of Directors
during a Voting Period shall be filled as provided in the Corporation's
Articles of Incorporation or By-Laws.
(iv) At any time when the holders of shares of Preferred Stock
become entitled to elect additional directors pursuant to paragraph 6(b),
the maximum number of directors fixed by the By-Laws of the Corporation or
otherwise shall automatically be increased by the number of such additional
directors if required; and at such time as the holders of shares of
Preferred Stock shall no longer be entitled to elect directors pursuant to
paragraph 6(b), such exact number shall automatically be decreased by the
number by which they were increased by reason of this provision.
(d) Corporate Acts. So long as any shares of AMPS are Outstanding, the
Corporation shall not, without the affirmative vote of the holders of a majority
of the shares of Preferred Stock Outstanding at the time, voting separately as
one class: (i) authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock ranking prior to or on a parity with any
series of Preferred Stock with respect to payment of dividends or the
distribution of assets on liquidation, other than the authorization, creation or
issuance of other series of AMPS or increase the authorized amount of AMPS or
any other Preferred Stock, (ii) amend, alter or repeal the provisions of
45
the Articles of Incorporation so as to materially and adversely affect any of
the contract rights expressly set forth in the Articles of Incorporation of
holders of shares of AMPS or any other Preferred Stock, or (iii) create,
authorize, issue, incur or suffer to exist any indebtedness for borrowed money
or any direct or indirect guarantee of any such indebtedness, provided, however,
that the Corporation may authorize the issuance of indebtedness for borrowed
money, for temporary or emergency purposes or for the clearance of transactions,
in an aggregate amount not to exceed the lesser of $10,000,000 or 10% of the
aggregate liquidation preference of the shares of AMPS Outstanding at any one
time without any such consent or approval, provided that, with or without the
consent or approval of the holders, such action would not result in the lowering
of the then-current rating of the shares of AMPS by the Rating Agencies (as
evidenced in writing by the Rating Agencies); provided that any increase in the
amount of the authorized AMPS or the creation and issuance of other series of
Preferred Stock, or any increase in the amount of authorized shares of such
series or of any other series of Preferred Stock, in each case ranking on a
parity with or junior to the AMPS will not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers unless such
issuance would cause the Corporation not to satisfy the 1940 Act AMPS Asset
Coverage Requirement or the AMPS Basic Maintenance Amount. To the extent
permitted under the Investment Company Act, in the event shares of more than one
series of AMPS are outstanding, the Corporation shall not approve any of the
actions set forth in clause (i) or (ii) which materially and adversely affects
the contract rights expressly set forth in the Articles of Incorporation of a
Holder of shares of a series of AMPS differently than those of a Holder of
shares of any other series of AMPS without the affirmative vote of the holders
of at least a majority of the shares of AMPS of each series adversely affected
and outstanding at such time (each such adversely affected series voting
separately as a class). Unless a higher percentage is provided for under the
Articles of Incorporation, the affirmative vote of the holders of a majority of
the Outstanding shares of Preferred Stock, including AMPS, voting together as a
single class, will be required to approve any plan of reorganization (including
bankruptcy proceedings) adversely affecting such shares or any action requiring
a vote of security holders under Section 13(a) of the Investment Company Act.
The class vote of holders of shares of Preferred Stock, including AMPS,
described above will, in each case, be in addition to a separate vote of the
requisite percentage of shares of Common Stock and shares of Preferred Stock,
including AMPS, voting together as a single class necessary to authorize the
action in question.
The foregoing voting provisions shall not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all Outstanding shares of AMPS shall have been redeemed or called
for redemption and sufficient funds shall have been deposited in trust to effect
such redemption.
(e) Exclusive Remedy. Unless otherwise required by law, the Holders shall
not have any relative rights or preferences or other special rights other than
those specifically set forth herein. In the event that the Corporation fails to
pay any dividends on the shares of AMPS or the Corporation fails to redeem any
shares of AMPS which it is required to redeem, or any other event occurs which
requires the mandatory redemption of AMPS and the required Notice of Redemption
has not been given, the exclusive remedy of the Holders shall be the right to
vote for directors pursuant to the provisions of this paragraph 6. In no event
shall the Holders have any right to sue for, or bring a proceeding with respect
to, such dividends or redemptions or damages for the failure to receive the
same.
(f) Notification to Rating Agencies. In the event a vote of Holders of
AMPS is required pursuant to the provisions of Section 13(a) of the Investment
Company Act, the Corporation shall, not later than ten Business Days prior to
the date on which such vote is to
46
be taken, notify the Rating Agencies that such vote is to be taken and the
nature of the action with respect to which such vote is to be taken and, not
later than ten Business Days after the vote is taken, notify S&P and Moody's of
the result of such vote.
7. Asset Coverage.
(a) 1940 Act AMPS Asset Coverage Requirement.
The Corporation shall maintain, as of the last Valuation Date of each month
in which any share of AMPS is Outstanding, the 1940 Act AMPS Asset Coverage
Requirement. The calculation of the 1940 Act AMPS Asset Coverage Ratio shall be
included in each AMPS Basic Maintenance Report.
(b) AMPS Basic Maintenance Amount.
(i) For so long as any shares of AMPS are Outstanding, the
Corporation will maintain, on each Valuation Date, as evidenced by the
completion of an AMPS Basic Maintenance Report, Eligible Portfolio Property
having an aggregate Discounted Value at least equal to the AMPS Basic
Maintenance Amount, each as of such Valuation Date. Upon any failure to
maintain the AMPS Basic Maintenance Amount, the Corporation will use its
best efforts to alter the composition of its portfolio so as to satisfy
such test on or prior to the AMPS Basic Maintenance Cure Date.
(ii) On or before 10:00 A.M., New York City time, on the fourth
Business Day after (A) the Date of Original Issuance, (B) each Quarterly
Surprise Valuation Date thereafter, (C) any Valuation Date on which the
Corporation shall fail to meet the AMPS Basic Maintenance Amount, (D) any
Valuation Date on which it cures its failure to satisfy the AMPS Basic
Maintenance Amount, (E) any Valuation Date on which it fails to meet the
AMPS Basic Maintenance Amount by 25% or more, or (F) any Valuation Date as
may be specified by S&P, the Corporation shall complete and deliver to
Moody's and S&P and the Auction Agent, in the case of clauses (A) and (B)
and to the relevant Rating Agency, in the case of clauses (C) - (F), an
AMPS Basic Maintenance Report as of the relevant Valuation Date. All such
AMPS Basic Maintenance Reports shall be deemed to have been delivered to
Moody's, S&P or the Auction Agent upon receipt of a copy or telecopy or
other electronic transcription thereof if on the same day the Corporation
mails the AMPS Basic Maintenance Report for delivery on the next possible
Business Day. A failure by the Corporation to deliver an AMPS Basic
Maintenance Report as contemplated by this paragraph 7(b)(ii) shall be
deemed to be delivery of an AMPS Basic Maintenance Report indicating a
failure to satisfy the AMPS Basic Maintenance Amount.
(iii) Within seven Business Days after the required date of
delivery of the initial AMPS Basic Maintenance Report or any AMPS Basic
Maintenance Report delivered with respect to a Quarterly Surprise Valuation
Date in accordance with paragraph 7(b)(ii) above, the Corporation shall
deliver to the Auction Agent and the Rating Agencies a report or reports
(the "Accountant's Confirmation") reviewing the portfolio calculations,
prepared by the Corporation's Independent Accountants, relating to such
AMPS Basic Maintenance Report substantially to the effect that (A) the
Independent Accountants have read such AMPS Basic Maintenance Reports
(each, a "Report"); (B) with respect to the 1940 Act AMPS Asset Coverage
Ratio and the AMPS Basic Maintenance Amount, the result of the calculations
set forth in each Report have been recalculated and are numerically
correct; (C) with respect to the excess or deficiency of the aggregate
Discounted Value of the Eligible Portfolio Property
47
amount when compared to the AMPS Basic Maintenance Amount, the results of
the calculation set forth in each Report have been recalculated and are
numerically correct; (D) with respect to (x) any trade price, bid or mean
price (or such alternative permissible factor used in calculating the
Market Value) provided to the Corporation for purposes of valuing
securities in the Corporation's portfolio, the Independent Accountant has
compared the price used in such Report to the trade price, the bid or mean
price listed in such Report as provided to the Corporation and verified
that such information agrees; (y) with respect to the lower of two bid
prices provided to the Corporation for purposes of valuing securities in
the portfolio, the Independent Accountants have compared the price used in
each Report with the lower of the two bid prices listed in the Report and
verified that such information agrees (in the event such information does
not agree, the Independent Accountants will provide a listing in their
report of such differences); and (E) that the assets listed in each Report
conform with the definition of Eligible Portfolio Property. If any letter
reviewing the portfolio calculations delivered pursuant to this paragraph
shows that an error was made in an AMPS Basic Maintenance Report for a
particular Valuation Date for which such Accountant's Confirmation was
required to be delivered or shows that a lower aggregate Discounted Value
for the aggregate of all Eligible Portfolio Property was determined by the
Independent Accountants, the calculation or determination made by such
Independent Accountants shall be final and conclusive and shall be binding
on the Corporation, and the Corporation shall promptly amend the AMPS Basic
Maintenance Report and deliver the amended AMPS Basic Maintenance Report to
the Auction Agent, S&P and Moody's.
(iv) For so long as shares of AMPS are rated by Moody's, in
managing the Corporation's portfolio, the Investment Manager will not alter
the composition of the Corporation's portfolio if, in the reasonable belief
of the Investment Manager, the effect of any such alteration would be to
cause the Corporation to have Eligible Portfolio Property with an aggregate
Discounted Value, as of the immediately preceding Valuation Date, less than
the AMPS Basic Maintenance Amount as of such Valuation Date; provided,
however, that in the event that, as of the immediately preceding Valuation
Date, the aggregate Discounted Value of Eligible Portfolio Property
exceeded the AMPS Basic Maintenance Amount by 25% or less, the Investment
Manager will not alter the composition of the Corporation's portfolio in a
manner reasonably expected to reduce the aggregate Discounted Value of
Eligible Portfolio Property unless the Corporation shall have confirmed
that, after giving effect to such alteration, the aggregate Discounted
Value of Eligible Portfolio Property would exceed the AMPS Basic
Maintenance Amount.
(c) Calculation of AMPS Basic Maintenance Amount; Accounting Treatment.
(i) Eligible Portfolio Property of the Corporation shall be
determined on an accrual basis in accordance with customary practice under
which Eligible Portfolio Property purchased and not yet received are so
reflected as Eligible Portfolio Property.
(ii) Dividends on the Common Stock which are payable in Common
Stock shall, after the effective date of any election by a holder of Common
Stock to receive such dividend, be excluded from current liabilities.
(iii) Withholding taxes with respect to interest earned on any
asset of the Corporation if such interest is not included in Eligible
Portfolio Property, shall be excluded from current liabilities.
48
(iv) With respect to Eligible Portfolio Property sold by the
Corporation as of or prior to the Valuation Date, the Market Value of such
property will be reflected in Eligible Portfolio Property and will be
discounted at the appropriate Discount Factor, provided, however, that if
the determination is being made by Moody's, the sales price of such
property will be reflected as Cash or Australian Currency, Canadian
Currency or United Kingdom Currency, as appropriate, to the extent that
such receivable is due and payable within five Business Days (determined as
for a Valuation Date) and trades generating the receivable are (A) settled
through clearing house firms with respect to which the issuer has received
prior authorization from Moody's or (B) with counterparties having a long
term rating by Moody's of at least Baa3 and if the determination is being
made for S&P, the sales price of such property will be reflected in Cash or
Australian Currency, Canadian Currency or United Kingdom Currency, as
appropriate, to the extent that such receivable is due and payable within
five Business Days (determined as for a Valuation Date).
(d) Other Permitted Assets.
(i) In addition to Eligible Portfolio Property, the Corporation
may own Other Permitted Assets and may also own other securities, if the
inclusion of any such type of other securities is deemed by the Board of
Directors to be in the best interest of the Corporation.
(ii) Other Permitted Assets and such other securities may be
included in Eligible Portfolio Property if the Rating Agencies have advised
the Corporation in writing that the inclusion of such Other Permitted
Assets or other securities in Eligible Portfolio Property would not
adversely affect their respective then-current ratings of the shares of
AMPS.
(iii) The Fund may engage in transactions in Derivatives, subject
to any limitations imposed by the Rating Agencies. Derivatives may be
included in a Rating Agency's Eligible Portfolio Property if such Rating
Agency has advised the Corporation in writing that the inclusion of such
assets or securities in Eligible Portfolio Property would not adversely
affect its respective then-current ratings of the shares of AMPS. With
respect to options, the Fund may purchase and sell (write) options, subject
to any limitations imposed by the Rating Agencies.
8. Auction Procedures.
(a) Certain Definitions.
As used in this paragraph 8, the following terms shall have the following
meanings, unless the context otherwise requires:
(i) "AMPS" shall mean the shares of AMPS being auctioned
pursuant to this paragraph 8.
(ii) "Auction Date" shall mean the first Business Day preceding
the first day of a Dividend Period.
(iii) "Available AMPS" shall have the meaning specified in
paragraph 8(d)(i) below.
(iv) "Bid" shall have the meaning specified in paragraph 8(b)(i)
below.
49
(v) "Bidder" shall have the meaning specified in paragraph
8(b)(i) below.
(vi) "Hold Order" shall have the meaning specified in paragraph
8(b)(i) below.
(vii) "Maximum Applicable Rate" for any Dividend Period will be
the greater of (A) the Applicable Percentage of the Reference Rate on the
date of such Auction or (B) the Applicable Spread plus the Reference Rate
on the date of such Auction. The Applicable Percentage and the Applicable
Spread will be determined as set forth below based on the lower of the
credit rating or ratings assigned on such date to the AMPS by Moody's and
S&P (or if Moody's or S&P or both shall not make such rating available, the
equivalent of either or both of such ratings by a Substitute Rating Agency
or two Substitute Rating Agencies or, in the event that only one such
rating shall be available, the percentage will be based on such rating).
Credit Ratings
-------------------------------------------------- Applicable Percentage of Applicable Spread Plus
Moody's S&P Reference Rate Reference Rate
-------------------------------------------------------------------------------------------------------
"aa3" or higher AA- or higher 200% 200 bps
"a3" to "a1" A- to A+ 210% 210 bps
"baa3" to "baa1" BBB- to BBB+ 300% 300 bps
Below "baa3" Below BBB- 325% 325 bps
The Corporation shall take all reasonable action necessary to enable S&P
and Moody's to provide a rating for the AMPS. If either S&P or Moody's
shall not make such a rating available, or if neither S&P nor Moody's shall
make such a rating available, Merrill Lynch, Pierce, Fenner & Smith
Incorporated or its affiliates and successors, after consultation with the
Corporation, shall select a nationally recognized statistical rating
organization or two nationally recognized statistical rating organizations
to act as a Substitute Rating Agency or Substitute Rating Agencies, as the
case may be.
(viii) "Order" shall have the meaning specified in paragraph
8(b)(i) below.
(ix) "Sell Order" shall have the meaning specified in paragraph
8(b)(i) below.
(x) "Submission Deadline" shall mean 1:00 P.M., New York City
time, on any Auction Date or such other time on any Auction Date as may be
specified by the Auction Agent from time to time as the time by which each
Broker-Dealer must submit to the Auction Agent in writing all Orders
obtained by it for the Auction to be conducted on such Auction Date.
(xi) "Submitted Bid" shall have the meaning specified in
paragraph 8(d)(i) below.
(xii) "Submitted Hold Order" shall have the meaning specified in
paragraph 8(d)(i) below.
(xiii) "Submitted Order" shall have the meaning specified in
paragraph 8(d)(i) below.
(xiv) "Submitted Sell Order" shall have the meaning specified in
paragraph 8(d)(i) below.
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(xv) "Sufficient Clearing Bids" shall have the meaning specified
in paragraph 8(d)(i) below.
(xvi) "Winning Bid Rate" shall have the meaning specified in
paragraph 8(d)(i) below.
(b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders.
(i) Unless otherwise permitted by the Corporation, Beneficial
Owners and Potential Beneficial Owners may only participate in Auctions
through their Broker-Dealers. Broker-Dealers will submit the Orders of
their respective customers who are Beneficial Owners and Potential
Beneficial Owners to the Auction Agent, designating themselves as Existing
Holders in respect of shares subject to Orders submitted or deemed
submitted to them by Beneficial Owners and as Potential Holders in respect
of shares subject to Orders submitted to them by Potential Beneficial
Owners. A Broker-Dealer may also hold shares of AMPS in its own account as
a Beneficial Owner. A Broker-Dealer may thus submit Orders to the Auction
Agent as a Beneficial Owner or a Potential Beneficial Owner and therefore
participate in an Auction as an Existing Holder or Potential Holder on
behalf of both itself and its customers. On or prior to the Submission
Deadline on each Auction Date:
(A) each Beneficial Owner may submit to its Broker-Dealer
information as to:
(1) the number of Outstanding shares, if any, of AMPS
held by such Beneficial Owner which such Beneficial Owner
desires to continue to hold without regard to the Applicable
Rate for the next succeeding Dividend Period;
(2) the number of Outstanding shares, if any, of AMPS
held by such Beneficial Owner which such Beneficial Owner
desires to continue to hold, provided that the Applicable
Rate for the next succeeding Dividend Period shall not be
less than the rate per annum specified by such Beneficial
Owner; and/or
(3) the number of Outstanding shares, if any, of AMPS
held by such Beneficial Owner which such Beneficial Owner
offers to sell without regard to the Applicable Rate for the
next succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential
Beneficial Owners that shall be maintained in good faith for the
purpose of conducting a competitive Auction, shall contact Potential
Beneficial Owners, including Persons that are not Beneficial Owners,
on such list to determine the number of Outstanding shares, if any, of
AMPS which each such Potential Beneficial Owner offers to purchase,
provided that the Applicable Rate for the next succeeding Dividend
Period shall not be less than the rate per annum specified by such
Potential Beneficial Owner.
For the purposes hereof, the communications by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by
a Broker-Dealer acting for its own account to the Auction Agent, or
the communications by a Broker-Dealer on behalf of a Beneficial Owner
or Potential Beneficial Owner to the Auction Agent, of information
referred to in clause (A) or (B) of this paragraph 8(b)(i) is
hereinafter
51
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in
such capacity for its own account and each Broker-Dealer placing an
Order on behalf of a Beneficial Owner or Potential Beneficial Owner,
is hereinafter referred to as a "Bidder"; an Order containing the
information referred to in clause (A)(1) of this paragraph 8(b)(i) or
clause (C) of paragraph 8(b)(ii) is hereinafter referred to as a "Hold
Order"; an Order containing the information referred to in clause
(A)(2) or (B) of this paragraph 8(b)(i) is hereinafter referred to as
a "Bid;" and an Order containing the information referred to in clause
(A)(3) of this paragraph 8(b)(i) is hereinafter referred to as a "Sell
Order." Inasmuch as a Broker-Dealer participates in an Auction as an
Existing Holder or a Potential Holder only to represent the interests
of a Beneficial Owner or Potential Beneficial Owner, whether it be its
customers or itself, all discussion herein relating to the
consequences of an Auction for Existing Holders and Potential Holders
also applies to the underlying beneficial ownership interests
represented.
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding shares of AMPS specified
in such Bid if the Applicable Rate determined on such
Auction Date shall be less than the rate per annum specified
in such Bid; or
(2) such number or a lesser number of Outstanding
shares of AMPS to be determined as set forth in paragraph
8(e)(i)(D) if the Applicable Rate determined on such Auction
Date shall be equal to the rate per annum specified therein;
or
(3) a lesser number of Outstanding shares of AMPS to
be determined as set forth in paragraph 8(e)(ii)(C) if such
specified rate per annum shall be higher than the Maximum
Applicable Rate and Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding shares of AMPS specified
in such Sell Order; or
(2) such number or a lesser number of Outstanding
shares of AMPS to be determined as set forth in paragraph
8(e)(ii)(C) if Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Outstanding shares of AMPS specified
in such Bid if the Applicable Rate determined on such
Auction Date shall be higher than the rate per annum
specified in such Bid; or
(2) such number or a lesser number of Outstanding
shares of AMPS to be determined as set forth in paragraph
8(e)(i)(E) if the Applicable Rate
52
determined on such Auction Date shall be equal to the rate
per annum specified therein.
(c) Submissions of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or through the
Auction Agent's Auction Processing System to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the
Corporation) as an Existing Holder in respect of shares subject to Orders
submitted or deemed submitted to it by Beneficial Owners and as a Potential
Holder in respect of shares subject to Orders submitted to it by Potential
Beneficial Owners, and specifying with respect to each Order:
(A) the name of the Bidder placing such Order (which shall
be the Broker-Dealer unless otherwise permitted by the Corporation);
(B) the aggregate number of Outstanding shares of AMPS that
are the subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding shares, if any, of AMPS
subject to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares, if any, of AMPS
subject to any Bid placed by such Existing Holder and the
rate per annum specified in such Bid; and
(3) the number of Outstanding shares, if any, of AMPS
subject to any Sell Order placed by such Existing Holder;
and
(D) to the extent such Bidder is a Potential Holder, the
rate per annum specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid contains more
than three figures to the right of the decimal point, the Auction Agent
shall round such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering all of the Outstanding shares
of AMPS held by an Existing Holder are not submitted to the Auction Agent
prior to the Submission Deadline, the Auction Agent shall deem a Hold Order
(in the case of an Auction relating to a Dividend Period which is not a
Special Dividend Period) and a Sell Order (in the case of an Auction
relating to a Special Dividend Period) to have been submitted on behalf of
such Existing Holder covering the number of Outstanding shares of AMPS held
by such Existing Holder and not subject to Orders submitted to the Auction
Agent.
(iv) If one or more Orders on behalf of an Existing Holder
covering in the aggregate more than the number of Outstanding shares of
AMPS held by such Existing Holder are submitted to the Auction Agent, such
Orders shall be considered valid as follows and in the following order of
priority:
53
(A) any Hold Order submitted on behalf of such Existing
Holder shall be considered valid up to and including the number of
Outstanding shares of AMPS held by such Existing Holder; provided that
if more than one Hold Order is submitted on behalf of such Existing
Holder and the number of shares of AMPS subject to such Hold Orders
exceeds the number of Outstanding shares of AMPS held by such Existing
Holder, the number of shares of AMPS subject to each of such Hold
Orders shall be reduced pro rata so that such Hold Orders, in the
aggregate, will cover exactly the number of Outstanding shares of AMPS
held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder
shall be considered valid, in the ascending order of their respective
rates per annum if more than one Bid is submitted on behalf of such
Existing Holder, up to and including the excess of the number of
Outstanding shares of AMPS held by such Existing Holder over the
number of shares of AMPS subject to any Hold Order referred to in
paragraph 8(c)(iv)(A) above (and if more than one Bid submitted on
behalf of such Existing Holder specifies the same rate per annum and
together they cover more than the remaining number of shares that can
be the subject of valid Bids after application of paragraph
8(c)(iv)(A) above and of the foregoing portion of this paragraph
8(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per
annum, the number of shares subject to each of such Bids shall be
reduced pro rata so that such Bids, in the aggregate, cover exactly
such remaining number of shares); and the number of shares, if any,
subject to Bids not valid under this paragraph 8(c)(iv)(B) shall be
treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and
including the excess of the number of Outstanding shares of AMPS held
by such Existing Holder over the number of shares of AMPS subject to
Hold Orders referred to in paragraph 8(c)(iv)(A) and Bids referred to
in paragraph 8(c)(iv)(B); provided that if more than one Sell Order is
submitted on behalf of any Existing Holder and the number of shares of
AMPS subject to such Sell Orders is greater than such excess, the
number of shares of AMPS subject to each of such Sell Orders shall be
reduced pro rata so that such Sell Orders, in the aggregate, cover
exactly the number of shares of AMPS equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate per annum
and number of shares of AMPS therein specified.
(vi) Any Order submitted by a Beneficial Owner or a Potential
Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction
Agent, prior to the Submission Deadline on any Auction Date shall be
irrevocable.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction
Date, the Auction Agent shall assemble all Orders submitted or deemed
submitted to it by the Broker-Dealers (each such Order as submitted or
deemed submitted by a Broker-Dealer being hereinafter referred to
individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted
Sell Order," as the case may be, or as a "Submitted Order") and shall
determine:
54
(A) the excess of the total number of Outstanding shares of
AMPS over the number of Outstanding shares of AMPS that are the
subject of Submitted Hold Orders (such excess being hereinafter
referred to as the "Available AMPS");
(B) from the Submitted Orders whether the number of
Outstanding shares of AMPS that are the subject of Submitted Bids by
Potential Holders specifying one or more rates per annum equal to or
lower than the Maximum Applicable Rate exceeds or is equal to the sum
of:
(1) the number of Outstanding shares of AMPS that are
the subject of Submitted Bids by Existing Holders specifying
one or more rates per annum higher than the Maximum
Applicable Rate; and
(2) the number of Outstanding shares of AMPS that are
subject to Submitted Sell Orders.
If such excess or such equality exists (other than because the number
of Outstanding shares of AMPS in clauses (1) and (2) above are each
zero because all of the Outstanding shares of AMPS are the subject of
Submitted Hold Orders), then "Sufficient Clearing Bids" exist; and
(C) if Sufficient Clearing Bids exist, the lowest rate per
annum specified in the Submitted Bids (the "Winning Bid Rate") that
if:
(1) each Submitted Bid from Existing Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Existing Holders specifying lower rates per annum were
rejected, thus entitling such Existing Holders to continue
to hold the shares of AMPS that are the subject of such
Submitted Bids, and
(2) each Submitted Bid from Potential Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Potential Holders specifying lower rates per annum were
accepted, thus entitling those Potential Holders to purchase
the shares of AMPS that are the subject of such Submitted
Bids, would result in the number of shares subject to all
Submitted Bids specifying the Winning Bid Rate or a lower
rate per annum being at least equal to the Available AMPS.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 8(d)(i), the Auction Agent shall advise the
Corporation of the Maximum Applicable Rate and, based on such
determinations, the Applicable Rate for the next succeeding Dividend Period
as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable
Rate for the next succeeding Dividend Period shall be equal to the
Winning Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than
because all of the Outstanding shares of AMPS are the subject of
Submitted Hold Orders), that the Applicable Rate for the next
succeeding Dividend Period shall be equal to the Maximum Applicable
Rate; or
55
(C) if all of the Outstanding shares of AMPS are the
subject of Submitted Hold Orders, that the Dividend Period next
succeeding the Auction shall automatically be the same length as the
immediately preceding Dividend Period and the Applicable Rate for the
next succeeding Dividend Period shall be equal to 90% of the Reference
Rate on the date of the Auction.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares.
Based on the determinations made pursuant to paragraph 8(d)(i), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 8(e)(iii) and paragraph 8(e)(iv), Submitted Bids
and Submitted Sell Orders shall be accepted or rejected in the following
order of priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be
accepted and the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is higher than the Winning Bid Rate
shall be accepted, thus requiring each such Existing Holder to sell
the Outstanding shares of AMPS that are the subject of such Submitted
Sell Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be accepted, thus entitling each such Existing Holder to
continue to hold the Outstanding shares of AMPS that are the subject
of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be accepted, thus requiring each such Potential Holder to
purchase the shares of AMPS that are the subject of such Submitted
Bids;
(D) the Submitted Bid of each of the Existing Holders
specifying a rate per annum that is equal to the Winning Bid Rate
shall be rejected, thus entitling each such Existing Holder to
continue to hold the Outstanding shares of AMPS that are the subject
of such Submitted Bid, unless the number of Outstanding shares of AMPS
subject to all such Submitted Bids shall be greater than the number of
Outstanding shares of AMPS ("Remaining Shares") equal to the excess of
Available AMPS over the number of Outstanding shares of AMPS subject
to Submitted Bids described in paragraph 8(e)(i)(B) and paragraph
8(e)(i)(C), in which event the Submitted Bids of each such Existing
Holder shall be accepted, and each such Existing Holder shall be
required to sell Outstanding shares of AMPS, but only in an amount
equal to the difference between (1) the number of Outstanding shares
of AMPS then held by such Existing Holder subject to such Submitted
Bid and (2) the number of shares of AMPS obtained by multiplying (x)
the number of Remaining Shares by (y) a fraction, the numerator of
which shall be the number of Outstanding shares of AMPS held by such
Existing Holder subject to such Submitted Bid and the denominator of
which shall be the sum of
56
the numbers of Outstanding shares of AMPS subject to such Submitted
Bids made by all such Existing Holders that specified a rate per annum
equal to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders
specifying a rate per annum that is equal to the Winning Bid Rate
shall be accepted, thus requiring each such Potential Holder to
purchase the shares of AMPS that are the subject of such Submitted
Bids, but only in an amount equal to the number of Outstanding shares
of AMPS obtained by multiplying (x) the difference between the
Available AMPS and the number of Outstanding shares of AMPS subject to
Submitted Bids described in paragraph 8(e)(i)(B), paragraph 8(e)(i)(C)
and paragraph 8(e)(i)(D) by (y) a fraction the numerator of which
shall be the number of Outstanding shares of AMPS subject to such
Submitted Bids and the denominator of which shall be the sum of the
number of Outstanding shares of AMPS subject to such Submitted Bids
made by all such Potential Holders that specified rates per annum
equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding shares of AMPS are subject to Submitted Hold
Orders), subject to the provisions of paragraph 8(e)(iii), Submitted Orders
shall be accepted or rejected as follows in the following order of priority
and all other Submitted Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying
any rate per annum that is equal to or lower than the Maximum
Applicable Rate shall be rejected, thus entitling such Existing Holder
to continue to hold the Outstanding shares of AMPS that are the
subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying
any rate per annum that is equal to or lower than the Maximum
Applicable Rate shall be accepted, thus requiring such Potential
Holder to purchase the Outstanding shares of AMPS that are the subject
of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying
any rate per annum that is higher than the Maximum Applicable Rate
shall be accepted and the Submitted Sell Orders of each Existing
Holder shall be accepted, thus requiring each such Existing Holder to
sell shares of AMPS that are the subject of such Submitted Bid or
Submitted Sell Order, in both cases only in an amount equal to the
difference between (1) the number of Outstanding shares of AMPS then
held by such Existing Holder subject to such Submitted Bid or
Submitted Sell Order and (2) the number of shares of AMPS obtained by
multiplying (x) the difference between the Available AMPS and the
aggregate number of Outstanding shares of AMPS subject to Submitted
Bids described in paragraph 8(e)(ii)(A) and paragraph 8(e)(ii)(B) by
(y) a fraction the numerator of which shall be the number of
Outstanding shares of AMPS held by such Existing Holder subject to
such Submitted Bid or Submitted Sell Order and the denominator of
which shall be the number of Outstanding shares of AMPS subject to all
such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph
8(e)(i) or paragraph 8(e)(ii), any Existing Holder would be entitled or
required to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a share of AMPS on any Auction Date,
57
the Auction Agent shall, in such manner as in its sole discretion it shall
determine, round up or down the number of shares of AMPS to be purchased or
sold by an Existing Holder or Potential Holder on such Auction Date so that
each Outstanding share of AMPS purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be a whole share of AMPS.
(iv) If, as a result of the procedures described in paragraph
8(e)(i), any Potential Holder would be entitled or required to purchase
less than a whole share of AMPS on any Auction Date, the Auction Agent, in
such manner as in its sole discretion it shall determine, shall allocate
shares of AMPS for purchase among Potential Holders so that only whole
shares of AMPS are purchased on such Auction Date by any Potential Holder,
even if such allocation results in one or more of such Potential Holders
not purchasing any shares of AMPS on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent
shall determine, with respect to each Broker-Dealer that submitted Bids or
Sell Orders on behalf of Existing Holders or Potential Holders, the
aggregate number of Outstanding shares of AMPS to be purchased and the
aggregate number of Outstanding shares of AMPS to be sold by such Potential
Holders and Existing Holders and, to the extent that such aggregate number
of Outstanding shares to be purchased and such aggregate number of
Outstanding shares to be sold differ, the Auction Agent shall determine to
which other Broker-Dealer or Broker-Dealers acting for one or more
purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, Outstanding shares of
AMPS.
(f) Force Majeure. Notwithstanding any other provision of these Articles
Supplementary, in the event that an Auction does not occur on an Auction Date
because of any act of God, strike, riot, act of war, act of terrorism, equipment
failure, power failure or damage or other causes reasonably beyond the control
of the Corporation or the Auction Agent, each Existing Holder as of such Auction
Date will continue to hold the shares of AMPS held by such Existing Holder until
the next Auction Date. The Applicable Rate for any Dividend Period during which
Existing Holders continue to hold such shares of AMPS by operation of this
paragraph 8(f) shall be the same Applicable Rate as applied during the last
Dividend Period following an Auction at which there were Sufficient Clearing
Bids prior to the applicability of this paragraph 8(f).
9. Miscellaneous.
(a) To the extent permitted by applicable law, the Board of Directors may
interpret or adjust the provisions of these Articles Supplementary to resolve
any inconsistency or ambiguity, remedy any formal defect or make any other
change or modification which does not materially and adversely affect the rights
of Beneficial Owners of shares of AMPS and if such inconsistency or ambiguity
reflects an incorrect provision hereof then the Board of Directors may authorize
the filing of a Certificate of Amendment or a Certificate of Correction, as the
case may be.
(b) A Beneficial Owner or an Existing Holder (A) may sell, transfer or
otherwise dispose of shares of AMPS only pursuant to a Bid or Sell Order in
accordance with the procedures described in paragraph 8 or to or through a
Broker-Dealer, provided that in the case of all transfers other than pursuant to
Auctions such Existing Holder or Broker-Dealer (acting on its own behalf or on
behalf of a Beneficial Owner), if applicable, or its Agent Member advises the
Auction Agent of such transfer and
58
(B) except as otherwise required by law, shall have the ownership of the shares
of AMPS held by it maintained in book entry form by the Securities Depository in
the account of its Agent Member, which in turn will maintain records of such
Beneficial Owner's beneficial ownership. Neither the Corporation nor any
Affiliate shall submit an Order in any Auction. Any Beneficial Owner that is an
Affiliate shall not sell, transfer or otherwise dispose of shares of AMPS to any
Person other than the Corporation. All of the Outstanding shares of AMPS shall
be represented by a single certificate registered in the name of the nominee of
the Securities Depository unless otherwise required by law or unless there is no
Securities Depository. If there is no Securities Depository, at the
Corporation's option and upon its receipt of such documents as it deems
appropriate, any shares of AMPS may be registered in the Stock Register in the
name of the Beneficial Owner thereof and such Beneficial Owner thereupon will be
entitled to receive certificates therefor and required to deliver certificates
therefor upon transfer or exchange thereof.
(c) The Corporation will exercise its best efforts to maintain an Auction
Agent pursuant to an agreement containing terms not materially less favorable to
the Corporation than the terms of the Auction Agent Agreement first entered into
by the Corporation on July 30, 1992.
(d) The Corporation will use its best efforts to maintain a rating of the
AMPS from each of the Rating Agencies.
(e) All notices or communications, unless otherwise specified in the
By-laws of the Corporation or the Articles Supplementary, will be sufficiently
given if in writing and delivered in person or mailed by first-class mail,
postage prepaid. Notice will be deemed given on the earlier of the date received
or the date seven days after which such notice is mailed.
10. Notice and Amendments
In addition to the authority given the Board of Directors to from time to
time, adjust, modify, alter, change, add to or delete certain definitions and
related terms set forth in paragraph 1(a) as contemplated by paragraph 1(b)
hereof and the authority given the Corporation to interpret the provisions of
paragraph 8 as contemplated by paragraph 9(a), the Board of Directors of the
Corporation shall have the authority to amend, adjust, modify, alter or change
the terms of the Articles Supplementary establishing the Series W-7 AMPS also
without shareholder approval to reflect changes required in connection with the
creation of one or more additional series of Auction Market Preferred Stock of
the same class as the Series W-7 AMPS; provided, however, that no such
additional series shall have any rights or preferences upon liquidation as to
payments of dividends or conditions of redemption or voting power which are
superior to the rights and conditions applicable to the Series W-7 AMPS, it
being intended that every series of Auction Market Preferred Stock issued by the
Corporation is to constitute a series of the same class for purposes of the
Investment Company Act.
* * * *
FIFTH: The foregoing Articles of Amendment and Restatement have been
approved by a majority of the Corporation's ten (10) Directors, and the names of
the Corporation's current ten (10) Directors are as follows: David L. Elsum,
Laurence S. Freedman, Martin J. Gilbert, Neville J. Miles, William J. Potter,
Peter D. Sacks, Anton E. Schrafl, E. Duff Scott, John T. Sheehy and Warren C.
Smith; and
SIXTH: The foregoing Articles of Amendment and Restatement have been
advised by the Board of Directors of the Corporation and approved by the
stockholders; and
59
SEVENTH: The name and address of the Corporation's resident agent in the
State of Maryland is The Corporation Trust Incorporated, whose current principal
address is 300 East Lombard St., Baltimore, Maryland 21202; and
EIGHTH: The Corporation's current business address is 800 Scudders Mill
Road, Plainsboro, New Jersey 08536; and
NINTH: These Articles of Amendment and Restatement do not increase the
total number of shares of stock of all classes which the Corporation has the
authority to issue, the number of shares of each class or the par value of the
shares of any class; and
TENTH: The preferences, the conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption are amended and restated to reflect the current
practices of the Corporation and may be found in paragraphs Designation, 3, 6,
3, 3, Designation and 5, respectively of the Articles of Amendment and
Restatement; and
ELEVENTH: These Articles of Amendment and Restatement shall become
effective when accepted for filing by the Maryland State Department of
Assessments and Taxation.
IN WITNESS WHEREOF, Aberdeen Global Income Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President, Hugh
Young, and its Assistant Secretary, Sander M. Bieber, on ______ 2003.
ABERDEEN GLOBAL INCOME FUND, INC.
By: Attest:
---------------------------- -----------------------
Hugh Young Sander M. Bieber
President Assistant Secretary
THE UNDERSIGNED, President of Aberdeen Global Income Fund, Inc., who
executed on behalf of said Corporation the foregoing Amendment and Restatement,
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said Corporation, the foregoing Amendment and Restatement to be the
corporate act of said Corporation and further certifies that, to the best of her
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
By: ----------------------
Hugh Young
President
60
PROXY
ABERDEEN GLOBAL INCOME FUND, INC.
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders -- March 20, 2003
The undersigned stockholder of Aberdeen Global Income Fund, Inc., a Maryland
corporation (the "Fund"), hereby appoints Beverley Hendry, William J. Potter,
and Timothy Sullivan, or any of them, with full power of substitution in each
of them, to attend the Annual Meeting of Stockholders of the Fund to be held at
Dryden Hall, 7th Floor, Plaza Building, 751 Broad Street, Newark, New Jersey on
Thursday March 20, 2003, at 4:30 p.m. (Eastern time), and any adjournment or
postponement thereof, to cast on behalf of the undersigned all votes that the
undersigned is entitled to cast at such meeting and otherwise to represent the
undersigned at the meeting with all powers possessed by the undersigned if
personally present at the meeting. The undersigned hereby acknowledges receipt
of the Notice of the Annual Meeting of Stockholders and of the accompanying
Proxy Statement and revokes any proxy heretofore given with respect to such
meeting.
The votes entitled to be cast by the undersigned will be cast as instructed on
the reverse side hereof. If this Proxy is executed but no instructions are
given, the votes entitled to be cast by the undersigned will be cast "FOR" each
of the nominees for director (Proposal 1), "FOR" Proposal 3, and in the
discretion of the Proxy holder on any other matter that may properly come before
the meeting or any adjournment or postponement thereof.
--------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
--------------------------- ------------------------------------------------
--------------------------- ------------------------------------------------
--------------------------- ------------------------------------------------
Instructions for Authorizing Your Proxy
Aberdeen Global Income Fund, Inc. offers shareholders of record four alternative
ways of authorizing proxies:
-----------
TELEPHONE Available only until 5:00 p.m. Eastern Daylight Time March 19, 2003.
-----------
o On a touch-tone telephone, call TOLL FREE 1-877-260-0388, 24 hours a day,
7 days a week
o You will be asked to enter ONLY the Control Number shown below
o Have your proxy card ready, then follow the prerecorded instructions
o Your voting instructions will be confirmed and cast as you directed
-----------
FAX
-----------
o Simply fax your completed and signed proxy card (both front and back sides)
to 1-212-440-9009
-----------
INTERNET Available only until 5:00 p.m. Eastern Daylight Time March 19, 2003.
-----------
o Visit the Internet voting Website at http://proxy.georgeson.com
o Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the
instructions on your screen
o You will incur only your usual Internet charges
-----------
MAIL
-----------
o Simply sign and date your proxy card and return it in the postage-paid
envelope
-------------- --------------
CONTROL NUMBER COMPANY NUMBER
-------------- --------------
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
(X) PLEASE MARK VOTES
AS IN THIS EXAMPLE
--------------------------------------------------------------------------------
ABERDEEN GLOBAL INCOME FUND, INC.
--------------------------------------------------------------------------------
COMMON STOCK
THE BOARD OF DIRECTORS RECOMMENDS THAT THE FUND'S COMMON STOCKHOLDERS VOTE "FOR"
PROPOSALS 1 AND 3, EACH AS MORE FULLY DESCRIBED IN THE PROXY STATEMENT.
(1) Election of the following four nominees to For Withhold
serve as Class II Directors for three-year / / / /
terms and until their successors are duly
elected and qualify:
William J. Potter and Peter D. Sacks
You may withhold authority to vote for any individual nominee or
nominees by marking the FOR box and striking out the name of any such
nominee. Your shares will be voted for the remaining nominee(s).
(3) Proposal to approve the amendment and For Against Abstain
restatement of the Articles Supplementary / / / / / /
creating the Fund's Series W-7 Auction Market
Preferred Stock
The undersigned authorizes the Proxy holder to vote and otherwise represent the
undersigned on any other matter that may properly come before the meeting or any
adjournment or postponement thereof in the discretion of the Proxy holder.
NOTE: Please sign as name appears herein. Joint
owners should each sign. When signing as
attorney, executor, administrator, trustee,
officer of corporation or other entity or in
another representative capacity, please give
the full title under the signature.
-----------------------------------------------
Signature
-----------------------------------------------
Signature (if held jointly)
-----------------------------------------------
Date
PROXY
ABERDEEN GLOBAL INCOME FUND, INC.
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders -- March 20, 2003
The undersigned stockholder of Aberdeen Global Income Fund, Inc., a Maryland
corporation (the "Fund"), hereby appoints Beverley Hendry, William J. Potter,
and Timothy Sullivan, or any of them, with full power of substitution in each
of them, to attend the Annual Meeting of Stockholders of the Fund to be held at
Dryden Hall, 7th Floor, Plaza Building, 751 Broad Street, Newark, New Jersey on
Thursday March 20, 2003, at 4:30 p.m. (Eastern time), and any adjournment or
postponement thereof, to cast on behalf of the undersigned all votes that the
undersigned is entitled to cast at such meeting and otherwise to represent the
undersigned at the meeting with all powers possessed by the undersigned if
personally present at the meeting. The undersigned hereby acknowledges receipt
of the Notice of the Annual Meeting of Stockholders and of the accompanying
Proxy Statement and revokes any proxy heretofore given with respect to such
meeting.
The votes entitled to be cast by the undersigned will be cast as instructed on
the reverse side hereof. If this Proxy is executed but no instructions are
given, the votes entitled to be cast by the undersigned will be cast "FOR" each
of the nominees for director to represent the interests of holders of preferred
stock for the ensuing year (Proposal 2), "FOR" Proposal 3, and in the discretion
of the Proxy holder on any other matter that may properly come before the
meeting or any adjournment or postponement thereof.
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PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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Instructions for Authorizing Your Proxy
Aberdeen Global Income Fund, Inc. offers shareholders of record four
alternative ways of authorizing proxies:
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TELEPHONE Available only until 5:00 p.m. Eastern Daylight Time
------------------ March 19, 2003.
o On a touch-tone telephone, call TOLL FREE 1-877-260-0388, 24 hours a day, 7
days a week
o You will be asked to enter ONLY the Control Number shown below
o Have your proxy card ready, then follow the prerecorded instructions
o Your voting instructions will be confirmed and cast as you directed
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FAX
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o Simply fax your completed and signed proxy card (both front and back sides)
to 1-212-440-9009
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INTERNET Available only until 5:00 p.m. Eastern Daylight
------------------ Time March 19, 2003.
o Visit the Internet voting Website at http://proxy.georgeson.com
o Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the
instructions on your screen
o You will incur only your usual Internet charges
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MAIL
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o Simply sign and date your proxy card and return it in the postage-paid
envelope
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CONTROL NUMBER CONTROL NUMBER
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TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
(X) PLEASE MARK VOTES
AS IN THIS EXAMPLE
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ABERDEEN GLOBAL INCOME FUND, INC.
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AUCTION MARKET PREFERRED STOCK, SERIES W-7
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE FUND'S PREFERRED
STOCK VOTE "FOR" PROPOSALS 2 AND 3, EACH AS MORE FULLY DESCRIBED IN THE PROXY
STATEMENT.
(2) The election of two Directors to represent the For Withhold
interests of holders of preferred stock for the / / / /
ensuing year:
Dr. Anton E. Schrafl and John T. Sheehy
You may withhold authority to vote for any individual nominee or
nominees by marking the FOR box and striking out the name of any such
nominee. Your shares will be voted for the remaining nominee(s).
(3) Proposal to approve the amendment and For Against Abstain
restatement of the Articles Supplementary / / / / / /
creating the Fund's Series W-7 Auction Market
Preferred Stock
The undersigned authorizes the Proxy holder to vote and otherwise represent the
undersigned on any other matter that may properly come before the meeting or any
adjournment or postponement thereof in the discretion of the Proxy holder.
NOTE: Please sign as name appears herein. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee, officer of
corporation or other entity or in another
representative capacity, please give the full
title under the signature.
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Signature
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Signature (if held jointly)
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Date