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 ASIA-PACIFIC 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.
[ ] 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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[FAX LOGO]
Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
(800) 451-6788
February ___, 2003
Dear Stockholder:
The Annual Meeting of Stockholders is to be held at 3:30 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 III 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 A through I 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 ASIA-PACIFIC INCOME FUND, INC.
Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
______________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 20, 2003
______________________________________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Aberdeen
Asia-Pacific 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 3:30 p.m. (Eastern time), for the
following purposes, each more fully described in the Proxy Statement:
(1) To elect four Directors to serve as Class III 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 A through I 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
Newark, 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 ASIA-PACIFIC INCOME FUND, INC.
Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
______________________________________________________
Annual Meeting of Stockholders
March 20, 2003
______________________________________________________
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors of Aberdeen Asia-Pacific 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 3:30 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, Gateway Center 3, 100 Mulberry Street,
Newark, New Jersey 07102), 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 III 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 A through I Auction Market
Preferred Stock) will require the affirmative vote of a majority of the shares
of common and preferred stock voting together as a single class. 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
Solicitation of Vote of Preferred
Vote of Common Stockholders
Stockholders (Series A-I)
--------------- -----------------
Proposal 1:
Election of Class III 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 [number of
outstanding shares] shares of common stock, par value $0.01 per share; 3,000
shares of Auction Market Preferred Stock, Series A, par value $0.01 per share;
3,000 shares of Auction Market Preferred Stock, Series B, par value $0.01 per
share; 2,000 shares of Auction Market Preferred Stock, Series C, par value $0.01
per share; 4,000 shares of Auction Market Preferred Stock, Series D, par value
$0.01 per share; 2,000 shares of Auction Market Preferred Stock, Series E, par
value $0.01 per share; 2,000 shares of Auction Market Preferred Stock, Series F,
par value $0.01 per share; 3,000 shares of Auction Market Preferred Stock,
Series G, par value $0.01 per share; 2,500 shares of Auction Market Preferred
Stock, Series H, par value $0.01 per share; and 2,500 shares of Auction Market
Preferred Stock, Series I, 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.
2
PROPOSAL 1: ELECTION OF CLASS III DIRECTORS
The Fund's bylaws 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 David L. Elsum, Martin J.
Gilbert, Peter J. O'Connell, and William J. Potter to serve as Class III
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 qualified.
Messrs. Elsum, O'Connell and Potter were elected by stockholders to serve until
the 2003 Annual Meeting. Mr. Gilbert was appointed to the Board by the Board of
Directors, including the Independent Directors, upon the recommendation of the
Fund's Nominating Committee which is composed entirely of Independent Directors,
to fill a vacancy on the Board of Directors. The nominees have indicated an
intention 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 for
the election of the persons indicated above to serve as Class III 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 III 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
Fund
Complex*
Overseen
Term of by
Office Director
and or
Position(s) Length Nominee Other Directorships Held by
Held With of Time Principal Occupation(s) for Director or Nominee for
Name, Address and Age the Fund Served During Past Five Years Director Director
----------------------------------------------------------------------------------------------------------------------------
Class III
Current Directors and Nominees for a Term expiring at the Annual Meeting to be held in 2006
----------------------------------------------------------------------------------------------------------------------------
Interested Director
-------------------
Martin J. Gilbert** Chairman of Current Mr. Gilbert is the Chief 2 Aberdeen Global Income Fund,
One Albyn Place the Board; term Executive and an Executive Inc., Aberdeen Asia-Pacific
Aberdeen, AB10 1YG Class III expires Director of Aberdeen Asset Income Investment Company
United Kingdom Director 2003; Management PLC, which was Limited.
Director established in 1983 and is
since the parent company of the Mr. Gilbert is also a Director
Age: 47 2001 Fund's Investment Manager of foreign funds advised by
and Investment Adviser. He entities affiliated with the
is one of the founding Investment Manager and the
directors of Aberdeen Asset Investment Adviser.
Management PLC and has been
involved in
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3
----------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Fund
Complex*
Overseen
Term of by
Office Director
and or
Position(s) Length Nominee Other Directorships Held by
Held With of Time Principal Occupation(s) for Director or Nominee for
Name, Address and Age the Fund Served During Past Five Years Director Director
----------------------------------------------------------------------------------------------------------------------------
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 Global 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.
----------------------------------------------------------------------------------------------------------------------------
Independent Directors
---------------------
David L. Elsum, A.M.+ Class III Current Mr. Elsum has over 20 years 3 Aberdeen Australia Equity Fund,
9 May Grove Director term of experience in investment Inc.; Aberdeen Global Income
South Yarra, Victoria 3141 expires and insurance markets. He Fund, Inc.; Aberdeen
Australia 2003; was a member of the Asia-Pacific Income Investment
Director Corporations and Securities Company Limited; Melbourne
Age: 65 since Panel of the Australian Wholesale Fish Market Pty.
1986 Securities Commission until Ltd.; Queen Victoria Market
2000, a member of the Pty. Ltd. (municipal market);
Australian Federal Financial Planning Association
Government Administrative Limited (industry association);
Appeals 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).
----------------------------------------------------------------------------------------------------------------------------
4
----------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Fund
Complex*
Overseen
Term of by
Office Director
and or
Position(s) Length Nominee Other Directorships Held by
Held With of Time Principal Occupation(s) for Director or Nominee for
Name, Address and Age the Fund Served During Past Five Years Director Director
----------------------------------------------------------------------------------------------------------------------------
Peter J. O'Connell Class III Current Mr. O'Connell is involved in 2 Aberdeen Australia Equity Fund,
Level 37, Chifley Tower Director term modern technology Inc.
Two Chifley Square expires developments, has extensive
Sydney, NSW 2000 2003; business experience in the
Australia Director Asian region, and has served
since as an international mergers
Age: 49 1999 and acquisitions lawyer in
this region. Mr. O'Connell
is admitted as a solicitor
in Australia and he has been
Chief Executive Officer of
Smart Device Marketing
Company since 2001. Mr.
O'Connell has also served as
Chief Executive Officer of
Lang Holdings (Aust) Pty.
Ltd. (technology consulting)
since 2001; and Chief
Executive Officer of Ten
Ventures Pty. Ltd.
(establishment of
media-based internet
businesses) from 1999 until
2000. Mr. O'Connell was
Chief of Operations of
Consolidated Press Holdings
Pty. Limited (supervision of
private equity investments)
from 1997 to 1999; Chief
Executive Officer (from 1994
to 1996) and Director (from
1994 to 1999) of Hargrave
Consultants Pty. Ltd.,
(technology consulting).
----------------------------------------------------------------------------------------------------------------------------
William J. Potter+(degree) Class III Current Mr. Potter has extensive 3 Aberdeen Australia Equity Fund,
236 West 27th Street Director term experience in investment Inc.; Aberdeen Global Income
3rd Floor expires banking and fund management. Fund, Inc.; Aberdeen
New York, NY 10001 2003; Mr. Potter has held senior Asia-Pacific Income Investment
Director positions with Toronto Company Limited; National
Age: 54 since Dominion Bank, Barclays Bank Foreign Trade Counsel (trade
1986 PLC, and Prudential association); Alexandria
Securities, Inc., as well as Bancorp (banking group in
board of director positions Cayman Islands); E.C. Power,
with investment funds Inc. (energy company);
involving over $20 billion Alexandria Funds.
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.
----------------------------------------------------------------------------------------------------------------------------
5
----------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Fund
Complex*
Term of Overseen
Office by
and Director
Length or
Position(s) of Nominee Other Directorships Held by
Held With Time Principal Occupation(s) for Director or Nominee for
Name, Address and Age the Fund Served During Past Five Years Director Director
----------------------------------------------------------------------------------------------------------------------------
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.
----------------------------------------------------------------------------------------------------------------------------
Class I Directors
Term expiring at the Annual Meeting to be held in 2004
----------------------------------------------------------------------------------------------------------------------------
Interested Director
-------------------
Beverley Hendry** Class I Term as Mr. Hendry served as 1 Aberdeen Investment Services
300 Las Olas Place Director; Director Executive Director of S.A. (since 1998); Aberdeen
300 S.E. 2nd Street, Assistant expires Aberdeen Asset Management Fund Managers Ireland Limited
Suite 820 Treasurer 2004; PLC (parent company of the (since 2000); Phoenix Aberdeen
Fort Lauderdale, FL 33301 Director Fund's Investment Manager International Advisors LLC
since and Investment Adviser) from (since 1996); Aberdeen Asset
Age: 49 2001 1991 to 2002. He has also Managers Ireland Limited (since
served as Chief Executive 1999); The America Monthly
Officer of Aberdeen Fund Income Trust (since 2000).
Managers, Inc. (affiliate of
the Fund's Investment
Manager and Investment
Adviser) since 1995. Mr.
Hendry has been a Director
of Aberdeen Asset Managers
(C.I.) Limited (the Fund's
Investment Manager) since
2001.
----------------------------------------------------------------------------------------------------------------------------
Independent Directors
---------------------
Anthony E. Aaronson++ Class I Term Mr. Aaronson is owner of 2 Aberdeen Australia Equity Fund,
110 E. 9th Street Director expires Tony Aaronson Textiles. He Inc.
Suite 721B 2004; was a Director of the
Los Angeles, CA 90079 Director Textile Association of Los
since Angeles from 1997 to 2000.
Age: 66 1986 Mr. Aaronson has extensive
experience in the management
of private investments. He
served as Chairman of the
Audit Committee of the Fund
from the inception of the
Fund until 2000.
----------------------------------------------------------------------------------------------------------------------------
6
----------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Fund
Complex*
Term of Overseen
Office by
and Director
Length or
Position(s) of Nominee Other Directorships Held by
Held With Time Principal Occupation(s) for Director or Nominee for
Name, Address and Age the Fund Served During Past Five Years Director Director
----------------------------------------------------------------------------------------------------------------------------
Neville J. Miles+(degree) Class I Term Mr. Miles has over 20 years 3 Aberdeen Australia Equity Fund,
2 Paddington Street Director expires of international investment Inc.; Aberdeen Global Income
Paddington, NSW 2021 2004; banking experience. He was Fund, Inc.; Aberdeen
Australia Director formerly head of Corporate Asia-Pacific Income Investment
since Treasury at Westpac Banking Company Limited; Aberdeen
Age: 56 1996 Corporation and Managing Leaders Limited (investment
Director of Ord Minnett company).
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.
----------------------------------------------------------------------------------------------------------------------------
Class II Directors
Term Expiring at the Annual Meeting to be held in 2005
----------------------------------------------------------------------------------------------------------------------------
Interested Director
-------------------
Brian M. Sherman** Class II Term Mr. Sherman has 36 years 1 Aberdeen Asia-Pacific Income
2 Paddington Street Director expires experience in international Investment Company Limited;
Paddington, NSW 2021 2005; funds management, EquitiLink Holdings Pty.
Australia Director stockbroking, and in Limited (holding company);
since particular, 24 years in the Aberdeen Leaders Limited
Age: 59 1986 funds management industry in (investment company); Ten
Australia, managing money in Network Holdings Limited
equities and bonds. He was (television network); Kirman
Chairman of the Fund from Pty. Limited; Kirman Holdings
2000 to 2001 and President Pty. Limited; Hestian Pty.
of the Fund to 2001. Until Limited; EIML Australia Pty.
December 2000, he was Limited.
Chairman and Joint Managing
Director of the Fund's
Investment Adviser, and a
Director of the Fund's
Investment Manager.
Mr. Sherman was also Vice
President and a Director from
----------------------------------------------------------------------------------------------------------------------------
7
----------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Fund
Complex*
Term of Overseen
Office by
and Director
Length or
Position(s) of Nominee Other Directorships Held by
Held With Time Principal Occupation(s) for Director or Nominee for
Name, Address and Age the Fund Served During Past Five Years Director Director
----------------------------------------------------------------------------------------------------------------------------
1992 to 2000, and Chairman
from 1995 to 2000, of Aberdeen
Global Income Fund, Inc.;
President from 1985 to 2001
and Director from 1985 to 2000
of Aberdeen Australia Equity
Fund, Inc.; Joint Managing
Director from 1986 to 2001 and
Chairman from 1995 to 2001 of
Aberdeen Asia-Pacific Income
Investment Company Limited;
Joint Managing Director from
1988 to 2000 of EquitiLink
Limited (holding company); and
a Director of Equitilink E
Link Ltd. from 1998 to 2002
(listed investment company).
Mr. Sherman was a Director of
the Sydney Olympic Games
Organizing Committee (SOGOC)
from 1996 until 2000. He is
currently Chairman of Sherman
Group Limited, an investment
company; Chairman of Sonic
Communications Pty. Limited;
and Chairman of Pulse
International Pty. Limited.
Mr. Sherman has also been
President of the Australian
Museum Trust (since 2000).
----------------------------------------------------------------------------------------------------------------------------
8
----------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Fund
Complex*
Term of Overseen
Office by Director
and or
Position(s) Length Nominee Other Directorships Held by
Held With of Time Principal Occupation(s) for Director or Nominee for
Name, Address and Age the Fund Served During Past Five Years Director Director
----------------------------------------------------------------------------------------------------------------------------
Independent Directors
---------------------
Howard A. Knight Class II Term Mr. Knight has over 30 years 2 Aberdeen Australia Equity Fund,
421 Glenbrook Road, #2 Director expires of experience in financial Inc.; Lions Gate Entertainment
Stamford, CT 06906 2005; markets and has been Corp. (film production and
Director actively involved in the distribution); Agaton Fitness
Age: 60 since Australian financial markets AG.
1993 for more than 25 years.
From 1991 to 1994, he served
as President of Investment
Banking, Equity Transactions
and Corporate Strategy at
Prudential Securities. From
1996 to 2001, Mr. Knight
served as Vice Chairman and
Chief Operating Officer of SBS
Broadcasting SA (European
television and radio
broadcasting), where he was
actively involved in
investment management and
capital markets. Mr. Knight is
currently an independent
director and management
adviser.
----------------------------------------------------------------------------------------------------------------------------
P. Gerald Malone Class II Term Mr. Malone has been chairman 1 Aberdeen Asia-Pacific Income
861 Coronation Road Director expires or a director of several Investment Company Limited.
Park Royal 2005; companies in the health care
London NW 107PT Director industry since 1998. He has
United Kingdom since been Chairman since 2000 and
2001 a Director since 1999 of
Age: 52 Regent GM Laboratories Ltd.
(generic pharmaceutical
manufacturer); Director of
Chiltern Invadex plc
(manufacturers of patient
handling and showering
equipment) since 1999; a
Director of Ultrasis plc
(developers of health care
software) since 2000, a
Director of European Growth
and Income Trust plc
(investment trust) since
2000, a Director of Quinta
dos Pinhieros Limited (real
estate) since 2001; and a
Director of Sense-Sonic
Limited. Mr. Malone was
Minister of Health between
1994 and 1997, and a Member
of Parliament from
Winchester between 1992 and
1997. Mr. Malone was the
----------------------------------------------------------------------------------------------------------------------------
9
----------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Fund
Complex*
Term of Overseen
Office by Director
and or
Position(s) Length Nominee Other Directorships Held by
Held With of Time Principal Occupation(s) for Director or Nominee for
Name, Address and Age the Fund Served During Past Five Years Director Director
----------------------------------------------------------------------------------------------------------------------------
Executive Editor of The
European in 1998.
----------------------------------------------------------------------------------------------------------------------------
Peter D. Sacks++ Class II Term Mr. Sacks is currently 3 Aberdeen Australia Equity Fund,
445 King Street West, Director expires Managing Partner of Toron Inc.; Aberdeen Global Income
4th Floor 2005; Capital Markets, Inc., a Fund, Inc.; Aberdeen
Toronto, Ontario M5V 1K4 Director company he established in Asia-Pacific Income Investment
Canada since 1988 to design and manage Company Limited; Aberdeen G7
1993 customized equity, fixed Trust; First Horizon Holdings
Age: 57 income and currency LTD; First Horizon Capital
portfolios for individual Corp.; Cirrus Financial
and corporate clients. Mr. Concepts Inc.
Sacks serves on the Boards
of Directors of Toron
Capital Markets, Inc.
(portfolio management),
Toron Capital Management,
Ltd. and Toron Asset
Management, Inc.
----------------------------------------------------------------------------------------------------------------------------
-----------------------------
* Aberdeen Australia Equity Fund, Inc. and Aberdeen Global Income 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. Sherman 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.
Messrs. Gilbert and Hendry are deemed to be interested persons because
of their affiliation with the Fund's Investment Manager and Investment
Adviser.
+ Messrs. Elsum, Miles and Potter are members of the Contract Review
Committee.
++ Messrs. Aaronson and Sacks 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 four nominees as Class III Directors to the Fund's Board
of Directors.
PROPOSAL 2: ELECTION OF PREFERRED DIRECTORS
The Fund has outstanding 3,000 shares of Auction Market Preferred Stock, Series
A, par value $0.01 per share; 3,000 shares of Auction Market Preferred Stock,
Series B, par value $0.01 per share; 2,000 shares of Auction Market Preferred
Stock, Series C, par value $0.01 per share; 4,000 shares of Auction Market
Preferred Stock, Series D, par value $0.01 per share; 2,000 shares of Auction
Market Preferred Stock, Series E, par value $0.01 per share; 2,000 shares of
Auction Market Preferred Stock, Series F, par value $0.01 per share; 3,000
shares of Auction Market Preferred Stock, Series G, par value $0.01 per share;
2,500 shares of Auction Market Preferred Stock, Series H, par value $0.01 per
share; and 2,500 shares of Auction Market Preferred Stock, Series I, par value
$0.01 per share.
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
10
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
Fund
Complex*
Term of Overseen
Office by
and Director
Length or
Position(s) of Nominee Other Directorships Held by
Held With Time Principal Occupation(s) for Director or Nominee for
Name, Address and Age the Fund Served During Past Five Years Director Director
----------------------------------------------------------------------------------------------------------------------------
Dr. Anton E. Schrafl Preferred Current Dr. Schrafl was Deputy 2 Aberdeen Global Income Fund,
Wiesenstrasse 7 Stock term Chairman of Holcim Limited, a Inc.; Aberdeen Asia-Pacific
8008 Zurich Director expires global manufacturer and Income Investment Company
Switzerland 2003; distributor of cement and Limited.
Director allied products until May
Age: 70 since 1998 2002. He currently serves as
Chairman of the Board of
Directors of 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.
----------------------------------------------------------------------------------------------------------------------------
11
----------------------------------------------------------------------------------------------------------------------------
Number of
Funds in
Fund
Complex*
Term of Overseen
Office by
and Director
Length or
Position(s) of Nominee Other Directorships Held by
Held With Time Principal Occupation(s) for Director or Nominee for
Name, Address and Age the Fund Served During Past Five Years Director Director
----------------------------------------------------------------------------------------------------------------------------
John T. Sheehy++(degree) Preferred Current Mr. Sheehy has over 30 years' 3 Aberdeen Australia Equity Fund,
560 Sylvan Avenue Stock term experience in investment Inc.; Aberdeen Global Income
Englewood Cliffs, NJ Director expires banking with companies such as Fund, Inc.; Aberdeen
07632 2003; J.P. Morgan & Company and Asia-Pacific Income Investment
Director Bear, Stearns & Co. Inc. His Company Limited.
Age: 60 since 1986 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 Australia Equity Fund, Inc. and Aberdeen Global Income 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 Audit and Valuation 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 nine series of Auction Market Preferred Stock, designated
Series A through Series I ("AMPS"). Each of these Series was created by Articles
Supplementary, which form part of the Fund's charter. Consistent with their
terms, the Articles Supplementary creating each series of the AMPS 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 A through I AMPS, as amended from time to time ("Articles
Supplementary"), be further amended and then restated by means of filing
Articles of Amendment and 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.
12
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 permit the Fund to have a "Special Dividend Period" consisting of a
number of days or years (up to five years), rather than its current
regular dividend period of seven or 28 days, depending on the series
of AMPS in question;
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 lower the vote necessary for the Fund to take certain specified
corporate actions from two-thirds of the shares of Preferred Stock
outstanding to a majority of the shares of Preferred Stock
outstanding;
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 Board, or a committee thereof, to approve modifications
of the definitions contained in the Articles Supplementary without
further stockholder approval and to file amended and restated Articles
Supplementary after such modifications are made; and
o to integrate the separate Articles Supplementary for each of the nine
series of AMPS, Series A through Series I, into a single Amended and
Restated 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 each series of 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
13
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):
Applicable
Credit Ratings Percentage of
--------------------------------------------- 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 June of 1989 and through January 15, 2003,
the average rate at which the AMPS have been bid is 4.837% which is the
equivalent of 99% 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 15, 2003, the AMPS were bid at a
rate of 1.49% which was the equivalent of 118% 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 Australia and U.S. rates
and a depreciating Australian dollar 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. The Australian dollar and most Asian currencies strengthened
against the U.S. dollar over the period, with the Australian dollar rising
___%.] Further, 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.
14
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 to 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 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:
Method Used to
Max. Rate Using the Max. Rate Using the Determine Maximum
Reference Rate Applicable Percentage Applicable Spread Applicable Rate
-------------- --------------------- ------------------- -----------------
1% 2% 3% Spread
2% 4% 4% Either
3% 6% 5% Percentage
Special Dividend Period
Cumulative cash dividends may be paid on shares of AMPS when, as and if declared
by the Board. Such dividends on shares of AMPS are paid in preference to and in
priority over any dividends declared and payable on the Fund's common stock. The
Fund has established a Regular Dividend Period for each of the nine series of
AMPS. The Regular Dividend Period with respect to the Series A, Series B, Series
C and Series D AMPS consists of 28 days. The Regular Dividend Period with
respect to the Series E, Series F, Series G, Series H and Series I AMPS consists
of seven days.
Under certain market conditions, it may be advantageous for the Fund to be able
to reset the number of days that are in a given Dividend Period. For example,
depending on then-current interest rates, the Fund may be able to lock in a
relatively low interest rate on the AMPS through the use of an interest rate
swap and may be able to maximize the benefit of that swap by setting a Dividend
Period that corresponds to the cash flows from that swap.
If adopted as proposed, the Amendment and Restatement will provide for a Special
Dividend Period, as follows:
15
o A "Special Dividend Period" would include (i) a Dividend Period
consisting of a specified number of days (other than the number
included in the applicable Regular Dividend Period) evenly divisible
by seven, and not fewer than seven nor more than 364 (a "Short Term
Dividend Period"); or (ii) a Dividend Period consisting of a specified
number of whole years not greater than five years (a "Long Term
Dividend Period").
o The Fund may, at its sole option and to the extent permitted by law,
by telephonic and written notice to the Fund's Auction Agent and to
each Broker-Dealer with which the Auction Agent has entered into a
Broker-Dealer Agreement, request a Special Dividend Period, provided
that the Fund may not give a Request for a Special Dividend Period
unless the Fund has received written confirmation from the Rating
Agencies that such action would not impair the ratings then assigned
to the AMPS 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.
o A Special Dividend Period will not be effective for the AMPS unless
Sufficient Clearing Bids exist at an Auction with respect to such
Special Dividend Period. If Sufficient Clearing Bids do not exist at
such Auction, a Regular Dividend Period will commence on the Business
Day succeeding such Auction, and the holders of the outstanding AMPS
prior to such Auction will required to continue to hold such shares
for the Regular Dividend Period.
o The Fund may not give a Notice of Special Dividend Period or, if the
Fund has given a Notice of Special Dividend Period for the AMPS, the
Fund will be required to give a Notice of Revocation in respect
thereof, if (i) either the 1940 Act AMPS Asset Coverage Requirement is
not satisfied or the Fund fails to satisfy the AMPS Basic Maintenance
Amount, in each case on each of the two Valuation Dates immediately
preceding the Business Day prior to the related Auction Date for the
AMPS; (ii) sufficient funds for the payment of dividends payable on
the immediately succeeding Dividend 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 (iii)
the Broker-Dealers have given the Fund notice that it is not advisable
to hold an Auction with respect to a Special Dividend Period. In such
event, the next succeeding Dividend Period will be a Regular 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 May 1998, 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. In
June 2001, the Fund's stockholders voted to expand the categories of permissible
derivatives. However, the Fund's use of derivatives continues to be limited by
certain provisions of its
16
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 hedge or enter into future contracts or option
contracts with respect to the Eligible Portfolio Property.
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.
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.
Voting on Corporate Actions
Currently, at least two thirds of the votes of the outstanding AMPS must be cast
in favor of certain corporate actions (e.g., authorize, create or issue, or
increase the authorized issued amount of any class or series of stock; amend,
alter or repeal provisions of the Articles of Incorporation so as to materially
and adversely affect any contract rights expressly set forth therein; or create,
authorize, issue, incur or suffer to exist any indebtedness for borrowed money
or any direct or indirect guarantee of such indebtedness; approve a plan of
reorganization) in order for such proposed action to be approved. If approved,
the proposed Amendment and Restatement would require that in order for the Fund
to take corporate action, a majority of the shares of the then-outstanding AMPS,
voting separately as a single class, be cast in favor of any proposed corporate
action to be approved. The rights of AMPS Holders will still be protected by the
majority vote requirement, but obtaining the appropriate consent of such Holders
will be less costly and less time consuming for the Fund. The proposed Amendment
and Restatement also sets forth that the contractual rights of a Holder of
shares of a series of AMPS cannot be affected or altered unless a majority of
the shares of the AMPS that will be affected are cast in favor of such change.
This provision preserves a Holder's rights, while prohibiting a Holder from
affecting the contractual rights of another Holder in a negative manner.
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,
17
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.
Modifications and Further Restatements
Currently, the Articles Supplementary authorize the Board to adjust, modify,
alter or change from time to time the assets (and/or the characteristics
thereof) included in certain definitions (e.g., Corporate Bonds, Discount
Factors, Eligible Portfolio Property) if each Rating Agency advises the Fund in
writing that such change or specification will not adversely affect its
then-current rating of the AMPS.
The proposed amendment would authorize the Board to adjust, modify, alter or
change from time to time the definitions included in the Amendment and
Restatement and the restrictions and guidelines set forth thereunder and to add
additional definitions or delete definitions if, where relevant to the rating
accorded by the Rating Agencies, such Rating Agency advises the Fund in writing
that such adjustment, modification, alteration, change, addition or deletion
will not adversely affect its then current rating on the AMPS. Additionally, the
Board, in its sole discretion and without a further stockholder vote, would be
able 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.
Integration of Each of the Articles Supplementary of Each of the Nine Series of
AMPS
The terms set forth in the nine Articles Supplementary creating Series A through
Series I AMPS, have been changed from time to time over the past 14 years. In
particular, a number of terms and definitions have been added, altered or
deleted from the Articles Supplementary either by stockholder action or by Board
action, as applicable. In an effort to conform and update such terms and
definitions, 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 will integrate all nine series of AMPS, and the
terms and definitions used to create such series of AMPS, into a single
document.
The Board of Directors recommends that stockholders vote FOR each of 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:
-------------------------------------------------------------------------------------------------------------------------
Term of Office**
Name, Address Position(s) Held and Length of Time
and Age With 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
#01-01 Capital Square Two and Investment Adviser) (from 1991 to 2002);
Singapore 049480 Managing Director of Aberdeen Asset Management
Asia Limited (affiliate of the Fund's Investment
Age: 44 Manager and Investment Adviser) (since 1992);
Managing Director of Aberdeen International Fund
Managers Limited (affiliate of the Fund's
Investment Manager and Investment
-------------------------------------------------------------------------------------------------------------------------
18
-------------------------------------------------------------------------------------------------------------------------
Term of Office**
Name, Address Position(s) Held and Length of Time
and Age With the Fund* Served Principal Occupation(s) During Past Five Years
------------------------------------------------------------------------------------------------------------------------
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.
-------------------------------------------------------------------------------------------------------------------------
Christian Pittard Treasurer and Since 2001 Managing Director of the Fund's Investment Manager
P.O. Box 641 Assistant (since 2001); Managing Director of Aberdeen
One Seaton Place Secretary Private Wealth Management (affiliate of the Fund's
St. Helier, Jersey JE4 8YJ Investment Manager and Investment Adviser);
Channel Islands Chartered Accountant, KPMG (from 1994 to 1998) and
Quorum Trust Group (1998).
Age: 29
-------------------------------------------------------------------------------------------------------------------------
Michael Karagianis Vice President Since 2002 Vice President (since 2002) and Assistant Vice
One Bow Churchyard 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
Age: 39 Management (from 1995 to 1999).
-------------------------------------------------------------------------------------------------------------------------
Roy M. Randall Secretary Since 1986 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 Australia
Equity Fund, Inc. and Aberdeen Global Income 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
Dollar Range of Equity Companies Overseen by Director in
Name of Director Securities in the Fund Family of Investment Companies *
-------------------------------------------------------------------------------------------------------------------------
Martin J. Gilbert $1 to $10,000 $10,001 to $50,000
-------------------------------------------------------------------------------------------------------------------------
Beverley Hendry $1 to $10,000 $1 to $10,000
-------------------------------------------------------------------------------------------------------------------------
Brian M. Sherman $10,001 to $50,000 $10,001 to $50,000
-------------------------------------------------------------------------------------------------------------------------
19
Independent Directors
---------------------
--------------------- ------------------------ ----------------------------------------
Aggregate Dollar Range of Equity
Securities in All Registered Investment
Dollar Range of Equity Companies Overseen by Director in
Name of Director Securities in the Fund Family of Investment Companies *
--------------------- ------------------------ ----------------------------------------
Anthony E. Aaronson $1 to $10,000 $10,001 to $50,000
--------------------- ------------------------ ----------------------------------------
David L. Elsum $1 to $10,000 $10,001 to $50,000
--------------------- ------------------------ ----------------------------------------
Howard A. Knight $1 to $10,000 $10,001 to $50,000
--------------------- ------------------------ ----------------------------------------
P. Gerald Malone $1 to $10,000 $1 to $10,000
--------------------- ------------------------ ----------------------------------------
Neville J. Miles $1 to $10,000 $10,001 to $50,000
--------------------- ------------------------ ----------------------------------------
Peter J. O'Connell $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
--------------------- ------------------------ ----------------------------------------
John T. Sheehy $1 to $10,000 $10,001 to $50,000
--------------------- ------------------------ ----------------------------------------
-----------------------------
* Aggregate Dollar Range shown includes equity securities of the Fund, and of
Aberdeen Global 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 American Stock Exchange ("AMEX") 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.
Anthony E. Aaronson, Peter D. Sacks and John T. Sheehy.
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, Neville J. Miles and William J. Potter.
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
20
security holders. The members of the Fund's Nominating Committee are Messrs.
Neville J. Miles, William J. Potter and John T. Sheehy.
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 $21,000 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
Aggregate Benefits Accrued Annual From Fund and
Compensation As Part of Benefits Upon Fund Complex
Name of Director From Fund Fund Expenses Retirement Paid to Directors
------------ ----------------- ------------- -----------------
Anthony E. Aaronson.................. $21,000 N/A N/A $ 37,000(2)
David L. Elsum....................... $20,500 N/A N/A $ 52,000(3)
Martin J. Gilbert.................... $ 0 N/A N/A $ 0(2)
Beverley Hendry...................... $ 0 N/A N/A $ 0(1)
Howard A. Knight..................... $20,000 N/A N/A $ 35,000(2)
P Gerald Malone...................... $20,000 N/A N/A $ 20,000(1)
Neville J. Miles..................... $22,000 N/A N/A $ 66,500(3)
Peter O'Connell...................... $20,000 N/A N/A $ 39,000(2)
William J. Potter.................... $21,000 N/A N/A $ 61,500(3)
Peter D. Sacks....................... $21,000 N/A N/A $ 55,000(3)
Brian M. Sherman++................... $ 0 N/A N/A $ 0(3)
Preferred Directors:
Dr. Anton E. Schrafl................. $22,000 N/A N/A $ 22,000(2)
John T. Sheehy....................... $22,500 N/A N/A $ 63,000(3)
----------------------
++ Mr. Sherman 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. Sherman is a director. For the fiscal year ended
October 31, 2002, the amount of the consulting fees paid to Mr. Sherman was
$21,000.
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,
21
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 changes in such ownership with the SEC and the AMEX.
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, and except as provided in the following
sentence, the Fund believes that during the fiscal year ended October 31, 2002,
its Reporting Persons complied with all applicable filing requirements. Mr.
Brian Sherman filed a Form 4 Statement of Changes in Beneficial Ownership
subsequent to the period specified in the Form.
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. Beverley Hendry, a Director of the Fund,
also serves as an Executive Director of Aberdeen Asset Management PLC, and 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 $10,000, 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.
22
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 Design
Audit Fees and Implementation Fees All Other Fees*
--------------------------------------------------------------------------------
$128,385 None $70,700
--------------------------------------------------------------------------------
* 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 Prudential Investments LLC, Gateway
Center 3, 100 Mulberry Street, Newark, NJ 07102.
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
23
procedures are reasonably designed to 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 of stockholders, but does
not wish to give a proxy by telephone by 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 owner 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 Karpus Investment 1,365,607 %
$0.01 per share Management
183 Sullys Trail
Pittsford, New York 14534
---------------------------------------------------------------------------------------------------------
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, Gateway Center 3, 100 Mulberry Street, Newark,
New Jersey 07102, 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, Gateway Center 3, 100 Mulberry
Street, Newark, New Jersey 07102, and such notice must be received by the
Secretary no sooner than November 20, 2003 and no later than December 20, 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
Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
February ___, 2003
24
EXHIBIT A
Aberdeen Asia-Pacific Income Fund, Inc.
Audit and Valuation Committee
-----------------------------
AUDIT CHARTER
Mission
-------
The mission of the Audit and Valuation Committee (the "Committee") of Aberdeen
Asia-Pacific 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. Employment by the Fund or any of its affiliates for the current year
or any of the past three years;
B. Acceptance of any compensation from the Fund or any of its affiliates
in excess of $60,000 during the previous fiscal year, other than
compensation for board service, benefits under a tax-qualified
retirement plan, or non-discretionary compensation;
C. Member of the immediate family of an individual who is, or has been in
any of the past three years, employed by the Fund or any of its
affiliates as an executive officer. Immediate family includes a
person's spouse, parents, children, siblings, mothers and
fathers-in-law, brothers and sisters-in-law, sons and
daughters-in-law, and anyone who resides in such person's home;
D. Partnership in, or being a controlling shareholder or an executive
officer of, any for-profit business organization to which the Fund
made, or from which the Fund received, payments (other than those
arising solely from investments in the Fund's securities) that exceed
5% of the Fund's gross income for that year, or $200,000, whichever is
more, in any of the past three years; or
E. Employment as an executive of another entity where any of the Fund's
executives serve on that entity's compensation committee.
A-1
2. One member of the Committee may be a non-independent director, under
exceptional and limited circumstances, if the Board determines that
membership on the Committee by that non-independent director is required in
the best interests of the Fund and its shareholders. To be eligible for
this consideration, the non-independent director may not be a current
employee or immediate family member of an employee of the Fund. If such a
determination is made, the Board must disclose, in the Fund's next annual
proxy statement subsequent to making the determination, the nature of the
relationship and the reasons for that determination.
3. Each member of the Committee must be able to read and understand basic
financial statements, including the Fund's balance sheet, income statement
and statement of cash flows, or must become able to do so within a
reasonable period of time after his or her appointment to the Committee. At
least one member of the Committee must have past employment experience in
finance or accounting, requisite professional certification in accounting,
or any other comparable experience or background which result in that
individual's having financial sophistication, including, but not limited
to, being or having been a chief executive officer, chief financial officer
or other senior officer with financial oversight responsibilities.
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:
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
----------------------
/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.
A-2
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;
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.
------------------------
/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.
/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-3
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;
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-4
EXHIBIT B
ABERDEEN ASIA-PACIFIC INCOME FUND, INC.
FORM OF ARTICLES OF AMENDMENT AND RESTATEMENT
Aberdeen Asia-Pacific 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 each series of its Auction Market Preferred Stock, each
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 each series of the
Corporation's Auction Market Preferred Stock were filed with the Maryland State
Department of Assessments and Taxation on the dates shown below and each set of
Articles Supplementary has been amended from time to time in accordance with its
terms and the requirements of the Maryland General Corporation Law, as
applicable:
SERIES DATE FILED
----------------- -----------------
Series A, B and C January 17, 1989
Series D July 26, 1989
Series E December 21, 1992
Series F December 16, 1993
Series G July 25, 1995
Series H and I September 9, 1996
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 each series of the Corporation's
Auction Market Preferred Stock which have been integrated into a single
document; and
FOURTH: The Article Supplementary creating the Corporation's Series A
through I Auction Market Preferred Stock are hereby restated to read in their
collective entirety as follows:
* * * *
ABERDEEN ASIA-PACIFIC INCOME FUND, INC.
AMENDED AND RESTATED
ARTICLES SUPPLEMENTARY CREATING NINE SERIES OF
AUCTION MARKET PREFERRED STOCK*
Aberdeen Asia-Pacific 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:
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* Registered Trademark of Merrill Lynch & Co., Inc.
FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article Fifth of its charter, the Board of Directors has
previously authorized the issuance of nine series of (i) up to 3,000 shares each
of its authorized preferred stock, par value $.01 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 respectively:
Auction Market Preferred Stock, Series A, Auction Market Preferred Stock, Series
B, Auction Market Preferred Stock, Series C and Auction Market Preferred Stock,
Series G; (ii) up to 2,000 shares of its authorized preferred stock, par value
$.01 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 F; and (iii) up to 4,000
shares each of its authorized preferred stock, par value $.01 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
respectively: Auction Market Preferred Stock, Series D, Auction Market Preferred
Stock, Series E, Auction Market Preferred Stock, Series H and Auction Market
Preferred Stock, Series I.
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 Article FIRST
of these Articles Supplementary, the terms of the shares of Auction Market
Preferred Stock, Series A through I.
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 A: A series of up to 3,000 shares of preferred stock, par value
$.01 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 A." Each share of
Auction Market Preferred Stock, Series A shall be issued on the Date of Original
Issue (as herein defined); have an Initial Dividend Payment Date (as herein
defined) of February 14, 1989; 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 A shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series A shall be identical except as provided in paragraph 3 of these
Articles Supplementary.
SERIES B: A series of up to 3,000 shares of preferred stock, par value
$.01 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 B." Each share of
Auction Market Preferred Stock, Series B shall be issued on the Date of Original
Issue (as herein defined); have an Initial Dividend Payment Date (as herein
defined) of February 22, 1989; 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 B shall constitute a separate series of
preferred stock of the
2
Corporation, and each share of Auction Market Preferred Stock, Series B shall be
identical except as provided in paragraph 3 of these Articles Supplementary.
SERIES C: A series of up to 3,000 shares of preferred stock, par value
$.01 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 C." Each share of
Auction Market Preferred Stock, Series C shall be issued on the Date of Original
Issue (as herein defined); have an Initial Dividend Payment Date (as herein
defined) of February 28, 1989; 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 C shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series C shall be identical except as provided in paragraph 3 of these
Articles Supplementary.
SERIES D: A series of up to 4,000 shares of preferred stock, par value
$.01 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 D." Each share of
Auction Market Preferred Stock, Series D shall be issued on the Date of Original
Issue (as herein defined); have an Initial Dividend Payment Date (as herein
defined) of August 22, 1989; 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 D shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series D shall be identical except as provided in paragraph 3 of these
Articles Supplementary.
SERIES E: A series of up to 4,000 shares of preferred stock, par value
$.01 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 E." Each share of
Auction Market Preferred Stock, Series E shall be issued on the Date of Original
Issue (as herein defined); have an Initial Dividend Payment Date (as herein
defined) of January 5, 1993; 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 E shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series E shall be identical except as provided in paragraph 3 of these
Articles Supplementary.
SERIES F: A series of up to 2,000 shares of preferred stock, par value
$.01 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 F." Each share of
Auction Market Preferred Stock, Series F shall be issued on the Date of Original
Issue (as herein defined); have an Initial Dividend Payment Date (as herein
defined) of January 10, 1994; 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 F shall constitute a separate series of
preferred stock of the
3
Corporation, and each share of Auction Market Preferred Stock, Series F shall be
identical except as provided in paragraph 3 of these Articles Supplementary.
SERIES G: A series of up to 3,000 shares of preferred stock, par value
$.01 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 G." Each share of
Auction Market Preferred Stock, Series G shall be issued on the Date of Original
Issue (as herein defined); have an Initial Dividend Payment Date (as herein
defined) of August 9, 1995; 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 G shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series G shall be identical except as provided in paragraph 3 of these
Articles Supplementary.
SERIES H: A series of up to 4,000 shares of preferred stock, par value
$.01 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 H." Each share of
Auction Market Preferred Stock, Series H shall be issued on the Date of Original
Issue (as herein defined); have an Initial Dividend Payment Date (as herein
defined) of September 19, 1996; 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 H shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series H shall be identical except as provided in paragraph 3 of these
Articles Supplementary.
SERIES I: A series of up to 4,000 shares of preferred stock, par value
$.01 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 I." Each share of
Auction Market Preferred Stock, Series I shall be issued on the Date of Original
Issue (as herein defined); have an Initial Dividend Payment Date (as herein
defined) of September 20, 1996; 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 I shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Market Preferred
Stock, Series I 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
4
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 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 Prudential Investments, LLC 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 (i) the Auction Market Preferred Stock, Series A, (ii) the
Auction Market Preferred Stock, Series B, (iii) the Auction Market Preferred
Stock, Series C, (iv) the Auction Market Preferred Stock, Series D, (v) the
Auction Market Preferred Stock, Series E, (vi) the Auction Market Preferred
Stock, Series F, (vii) the Auction Market Preferred Stock, Series G, (viii) the
Auction Market Preferred Stock, Series H, or (ix) the Auction Market Preferred
Stock, Series I, and 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 Projected
Dividend Amount; (iv) the aggregate principal amount of any then-outstanding
indebtedness of the Corporation for money borrowed; (v) the amount of
anticipated expenses of the
5
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.
"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):
6
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% 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.
"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:
7
(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) 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
8
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.
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.
9
(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%
----------------------------------------------------------------------
"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.
10
(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).
(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.
11
(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.
"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.
"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.
12
"Common Stock" means shares of the common stock, par value $.01 per
share, of the Corporation.
"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:
% 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 Percent of Value of Maximum Percent of Value of
Corporation Assets, Corporation Assets,
Minimum Original Including Eligible Portfolio Including Eligible Portfolio
Issue Size of Each Issue Property, Invested in any Property, Invested in any
Rating (1) ($ in millions) One Issuer (2) One Industry 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.
13
"Corporation" means Aberdeen Asia-Pacific 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 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).:
S&P
MOODY'S DISCOUNT
ISSUE SIZE TERM TO MATURITY DISCOUNT 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
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
14
S&P
MOODY'S DISCOUNT
ISSUE SIZE TERM TO MATURITY DISCOUNT FACTOR FACTOR
-------------------------------------------------------------------------------------------------------------------------
** 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 1.730 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
-------------------------------------------------------------------------------------------------------------------------
**** 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 1.730 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
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
15
S&P
MOODY'S DISCOUNT
ISSUE SIZE TERM TO MATURITY DISCOUNT FACTOR FACTOR
-------------------------------------------------------------------------------------------------------------------------
** 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
-------------------------------------------------------------------------------------------------------------------------
**** 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
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
16
S&P
MOODY'S DISCOUNT
ISSUE SIZE TERM TO MATURITY DISCOUNT FACTOR FACTOR
-------------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------------------
GNMA CERTIFICATES WITH FIXED INTEREST RATES:
-------------------------------------------------------------------------------------------------------------------------
N/A N/A 1.500 1.300
-------------------------------------------------------------------------------------------------------------------------
GNMA CERTIFICATES WITH ADJUSTABLE INTEREST RATES:
-------------------------------------------------------------------------------------------------------------------------
N/A N/A 1.480 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 1.610 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: (10)(11)
-------------------------------------------------------------------------------------------------------------------------
N/A N/A 1.500 1.500
-------------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------------------
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
17
S&P
MOODY'S DISCOUNT
ISSUE SIZE TERM TO MATURITY DISCOUNT FACTOR FACTOR
-------------------------------------------------------------------------------------------------------------------------
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 (12)
-------------------------------------------------------------------------------------------------------------------------
ASIAN YANKEE BONDS: (MOODY'S ONLY)
-------------------------------------------------------------------------------------------------------------------------
Issued by Australia, China, Hong Kong, India, 2.400 N/A
Indonesia, Korea, Malaysia, New Zealand, Thailand
and The Philippines
-------------------------------------------------------------------------------------------------------------------------
ASIAN YANKEE BONDS: (S&P ONLY)
-------------------------------------------------------------------------------------------------------------------------
Issued by Australia, China, Hong Kong, India,
Indonesia, Korea, Malaysia, New Zealand, Thailand
and The Philippines 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 1.0526(14)
(13)
-------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND GOVERNMENT SECURITIES: (15)
-------------------------------------------------------------------------------------------------------------------------
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
* LESS THAN
** GREATER THAN
*** LESS THAN OR EQUAL TO
**** GREATER THAN OR EQUAL TO
18
S&P
MOODY'S DISCOUNT
ISSUE SIZE TERM TO MATURITY DISCOUNT FACTOR FACTOR
-------------------------------------------------------------------------------------------------------------------------
**** 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
----------
(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 each ratings
Rating level
-------------------------------------------------------------------
Aa3/AA- or better 100%
-------------------------------------------------------------------
Below Aa3/AA- 50%
-------------------------------------------------------------------
Below A3/A- 25%
-------------------------------------------------------------------
Below BBB3/BBB- 10%
19
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) 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.
(11) Unless the Rating Agencies shall agree in writing, GNMA Graduated
Payment Securities with a coupon rate lower than 5% shall not be include
in Eligible Portfolio Property.
(12) In the case of S&P, discount factors to be applied are listed in the
"Leveraged Funds Market Value Ratings" publication dated December, 1997.
(13) 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.
(14) 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.
(15) 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$10,000,000.
"Discounted Value," with respect to any asset held by the Corporation,
means the quotient of the Market Value of such asset divided by the applicable
Discount Factor; provided that in no event shall the Discounted Value of any
asset constituting Eligible Portfolio Property as of any date exceed the unpaid
principal balance or face amount of such asset as of that date; provided further
that
20
the Discounted Value of all Australian Securities and New Zealand Securities
shall be further discounted by the Discount Factor applicable to, respectively,
Australian Currency and New Zealand Currency.
"Dividend Payment Date," with respect to each series of AMPS, means each
date of payment of dividends as provided in paragraph 3(b)(i) hereof.
"Dividend Period" means the Initial Dividend Period, any Regular
Dividend Period, and any Special Dividend Period.
"Dollar" or "$" shall mean U.S. dollars. Amounts in Australian or New
Zealand dollars 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, Cash, New Zealand Government Securities, U.S. Government
Obligations, Repurchase Agreements, Brady Bonds, Asian 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
21
writing that the specification will not adversely affect their 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.
22
"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 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:
(1) Aerospace and Defense: Major Contractor,
Subsystems, Research, Aircraft Manufacturing, Arms, Ammunition;
23
(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;
(16) Grocery: Grocery Stores, Convenience Food
Stores;
24
(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
(32) Utilities: Electric, Water, Hydro Power, Gas,
Diversified.
25
"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 each series of 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 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 Australia, with respect to Australian 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
26
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 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 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.
27
"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 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."
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"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 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.
29
"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 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.
"Projected Dividend Amount" for the AMPS and other Preferred Stock, if
any, shall mean, if the Valuation Date is a Valuation Date, the amount of
dividends, based on the number of shares of AMPS and other Preferred Stock, if
any, Outstanding on such Valuation Date, projected to accumulate on such shares
from the next succeeding Dividend Payment Date or Dates until the 63rd day after
such Valuation Date, at the following dividend rates:
30
(a) if the Valuation Date is the Date of Original Issue or a
Dividend Payment Date, for the period beginning on (and including) the first
following Dividend Payment Dates and ending on (and including) the 63rd day
following such Valuation Date, the product of 2.40 and (x) the Maximum
Applicable Rate on the Date of Original Issue (in the case of the Date of
Original Issue) or (y) the Maximum Applicable Rate as of the last occurring
Auction Date (in the case of any Dividend Payment Date); and
(b) if such Valuation Date is not the Date of Original Issue or a
Dividend Payment Date, (i) for the period beginning on (and including) the first
following Dividend Payment Dates and ending on (but not including) the sooner of
the second following Dividend Payment Date for such shares or the 64th day
following such Valuation Date, the product of 2.40 and (x) the Maximum
Applicable Rate on the Date of Original Issue (in the case of a Valuation Date
occurring prior to the first Auction Date) or (y) the Maximum Applicable Rate on
the last occurring Auction Date (in the case of any other Valuation Date), (ii)
for the period, if any, beginning on (and including) the second following
Dividend Payment Date and ending on (but not including) the 64th day following
such Valuation Date, the product of 2.40 and the rate specified in clause (x) or
(y) above and (iii) for the period, if any, beginning on (and including) the
third following Dividend Payment Date and ending on (but not including) the 64th
day following such Valuation Date the product of 2.94 and the rate specified in
clause (x) or (y) above.
If the Valuation Date is not a Valuation Date, then the Projected
Dividend Amount on such Valuation Date shall equal the Projected Dividend Amount
therefor on the immediately Preceding Valuation Date, adjusted to reflect any
decrease in the number of shares of AMPS Outstanding. The calculation of the
Projected Dividend Amount may be made on bases other than those set forth above
if the Rating Agencies shall have advised the Corporation in writing that the
revised calculation of the Projected Dividend Amount would not adversely affect
their respective then-current ratings of the AMPS.
"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.
31
"Regular Dividend Period" means, with respect to the Series E, Series F,
Series G, Series H and Series I AMPS, a Dividend Period consisting of seven days
and, with respect to the Series A, Series B, Series C and Series D 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.
"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 A-2 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 A-2 by Moody's; provided,
however, that in the case of Moody's such commercial paper must have a maturity
of 270 days or less.
32
"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 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.
"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
33
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 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):
34
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 S&P on each series of the AMPS
on the Date of Original Issue of each such series 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 (A) February
35
14, 1989 (the 27th day after the Date of Original Issue), with respect to the
Auction Market Preferred Stock, Series A; (B) February 22, 1989 (the 35th day
after the Date of Original Issue), with respect to the Auction Market Preferred
Stock, Series B; (C) February 28, 1989 (the 41st day after the Date of Original
Issue), with respect to the Auction Market Preferred Stock, Series C; (D) August
22, 1989 (the 21st day after the Date of Original Issue), with respect to the
Auction Market Preferred Stock, Series D; (E) January 5, 1993 (the 13th day
after the Date of Original Issue), with respect to the Auction Market Preferred
Stock, Series E; (F) January 10, 1994 (the 21st day after the Date of Original
Issue), with respect to the Auction Market Preferred Stock, Series F; (G) August
9, 1995 (the 13th day after the Date of Original Issue), with respect to the
Auction Market Preferred Stock, Series G; (H) September 19, 1996 (the 9th day
after the Date of Original Issue), with respect to the Auction Market Preferred
Stock, Series H; and (I) on September 20, 1996 (the 10th day after the Date of
Original Issue), with respect to the Auction Market Preferred Stock, Series I
(hereinafter, with respect to a series of AMPS, such date is referred to as the
"Initial Dividend Payment Date"). Following the Initial Dividend Payment Date,
the dividends on each series of 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 Periods, 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."(i)
(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 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 (A) for the Auction Market Preferred Stock, Series A
shall be 9.4% per annum for the Initial Dividend Period; (B) for the Auction
Market Preferred Stock, Series B shall be 9.4% per annum for the Initial
Dividend Period; (C) for the Auction Market Preferred Stock, Series C shall be
9.4% per annum for the Initial Dividend Period; (D) for the Auction Market
Preferred Stock, Series D shall be 9.125% per annum for the Initial Dividend
Period; (E) for the Auction Market Preferred Stock, Series E shall be 4.125% per
annum for the Initial Dividend Period; (F) for the Auction Market Preferred
Stock, Series F shall be 3.5% per annum for the Initial Dividend Period; (G) for
the Auction Market Preferred Stock, Series G shall be 5.875% per annum for the
Initial Dividend Period; (H) for the Auction Market Preferred Stock, Series H
shall be 5.35% per annum for the Initial Dividend Period; and (I) for the
Auction Market Preferred Stock, Series I shall be 5.35% 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
36
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
360. 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
360, 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 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
37
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
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
38
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.(i)
(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 material 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 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:
39
(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 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:
40
(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 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 (45 days in the case of Series A,
Series B, Series C and Series D) 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 (45th days in the case of
Series A, Series B, Series C and Series D) 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.
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(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
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
42
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
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
43
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.
(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
44
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 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
45
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 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.
46
(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 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
47
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.
(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, 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, as appropriate, to the extent that
48
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.
(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
49
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 12:30 P.M. for Series
A, Series B, Series C Series D and Series E, and 1:00 P.M. for Series F,
Series G, Series H and Series I, 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.
(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.
50
(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 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
51
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
determined on such Auction Date shall be equal to the
rate per annum specified therein.
52
(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:
(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
53
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
56
sum of 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). Any
Dividend Period during which Existing Holders continue to hold such shares of
AMPS by operation of this paragraph 8(f) shall consist of the same number of
days as 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
58
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 (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 pursuant to the resolutions adopted by the Board
of Directors on December 13, 1988.
(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 A through I 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 A through I 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 A through I 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 thirteen (13) Directors, and the
names of the Corporation's current
59
thirteen (13) Directors are as follows: Anthony E. Aaronson, David L. Elsum,
Martin J. Gilbert, Beverley Hendry, Howard Knight, P. Gerald Malone, Neville J.
Miles, Peter J. O'Connell, William J. Potter, Peter D. Sacks, Anton E. Schrafl,
John T. Sheehy and Brian M. Sherman; 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
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 Gateway Center 3,
100 Mulberry Street, Newark, New Jersey 07102.
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 Asia-Pacific 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 ASIA-PACIFIC INCOME FUND, INC.
By: Attest:
------------------------ -----------------------
Hugh Young Sander M. Bieber
President Assistant Secretary
THE UNDERSIGNED, President of Aberdeen Asia-Pacific 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 ASIA-PACIFIC 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 Asia-Pacific 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 3:30 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 Asia-Pacific 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.
---------
.. On a touch-tone telephone, call TOLL FREE 1-877-260-0388, 24 hours a day, 7
days a week
.. You will be asked to enter ONLY the Control Number shown below
.. Have your proxy card ready, then follow the prerecorded instructions
.. Your voting instructions will be confirmed and cast as you directed
---
FAX
---
.. 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.
--------
.. Visit the Internet voting Website at http://proxy.georgeson.com
.. Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the
instructions on your screen
.. You will incur only your usual Internet charges
----
MAIL
----
.. Simply sign and date your proxy card and return it in the postage-paid
envelope
COMPANY NUMBER CONTROL NUMBER
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
(X) PLEASE MARK VOTES
AS IN THIS EXAMPLE
--------------------------------------------------------------------------------
ABERDEEN ASIA-PACIFIC 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 For Withhold
nominees to serve as Class III
Directors for three-year terms and [ ] [ ]
until their successors are duly
elected and qualify:
David L. Elsum, Martin J. Gilbert,
Peter J. O'Connell, and William J. Potter
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 A through I 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 ASIA-PACIFIC 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 Asia-Pacific 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 3:30 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.
-----------------------------------------------------------------------
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 Voting Your Proxy
Aberdeen Asia-Pacific 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.
---------
.. On a touch-tone telephone, call TOLL FREE 1-877-260-0388, 24 hours a day, 7
days a week
.. You will be asked to enter ONLY the Control Number shown below
.. Have your proxy card ready, then follow the prerecorded instructions
.. Your voting instructions will be confirmed and cast as you directed
---
FAX
---
.. 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.
--------
.. Visit the Internet voting Website at http://proxy.georgeson.com
.. Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the
instructions on your screen
.. You will incur only your usual Internet charges
----
MAIL
----
.. Simply sign and date your proxy card and return it in the postage-paid
envelope
COMPANY NUMBER CONTROL NUMBER
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
(X) PLEASE MARK VOTES
AS IN THIS EXAMPLE
--------------------------------------------------------------------------------
ABERDEEN ASIA-PACIFIC INCOME FUND, INC.
--------------------------------------------------------------------------------
AUCTION MARKET PREFERRED STOCK SERIES A-I
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 For Withhold
represent the 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 A through I 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