File No. 811-08949
As filed with the Securities and Exchange Commission on November 13, 1998
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
|X| REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
BGT SUBSIDIARY INC.
(Exact Name of Registrant as Specified in Charter)
345 PARK AVENUE
NEW YORK, NEW YORK 10154
(Address of Principal Executive Offices) (Zip Code)
(212) 754-5560
(Registrant's Telephone Number, including Area Code)
RALPH L. SCHLOSSTEIN, PRESIDENT
BGT SUBSIDIARY INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
(Name and Address of Agent for Service)
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Copies to:
RICHARD T. PRINS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
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BGT SUBSIDIARY INC.
FORM N-2
CROSS REFERENCE SHEET
Part A
Item No. Caption Prospectus Caption
-------- ------- ------------------
1. Cover Page............................. Not Applicable
2. Inside Front and Outside Back
Cover Page............................. Not Applicable
3. Fee Table and Synopsis................. Fee Table and Synopsis;
Expense Information
4. Financial Highlights................... Not Applicable
5. Plan of Distribution................... Not Applicable
6. Selling Shareholders................... Not Applicable
7. Use of Proceeds........................ Not Applicable
8. General Description of the
Registrant............................. General Description
of the Registrant;
General; Investment
Objectives and Policies;
Risk Factors
9. Management............................. Management; General
Description of the
Registrant; General
10. Capital Stock, Long-Term Debt,
and Other Securities................... Capital Stock, Long-Term
Debt and Other
Securities; Capital
Stock; General
Description of the
Registrant; General;
Taxes; Outstanding
Securities;
11. Defaults and Arrears on Senior
Securities............................. Not Applicable
12. Legal Proceedings...................... Not Applicable
13. Table of Contents of Statement
of Additional Information.............. Not Applicable
Part B Statement of Additional
Item No. Information Caption
-------- -----------------------
14. Cover Page............................ Not Applicable
15. Table of Contents..................... Not Applicable
16. General Information and
History............................... General Description
of the Registrant;
General
17. Investment Objective and
Policies.............................. Not Applicable
18. Management............................ Management
19. Control Persons and Principal
Holders of Securities................. Control Persons
20. Investment Advisory and Other
Services.............................. Management
21. Brokerage Allocation and Other
Practices............................. Not Applicable
22. Tax Status............................ Tax Status; Taxation
of the Fund
23. Financial Statements.................. Not Applicable
Part C
Item No.
- --------
Information required to be included in Part C is set forth, under the
appropriate item so numbered, in Part C of this registration statement.
PART A
ITEM 1. COVER PAGE
Not Applicable.
ITEM 2. INSIDE FRONT AND OUTSIDE BACK COVER PAGE
Not Applicable.
ITEM 3. FEE TABLE AND SYNOPSIS
1. Expense Information
Annual Expenses
Management Fees........................................ .45%
Interest Payments on Borrowed Funds.................... 2.32%
Other Expenses......................................... .28%
Total Annual Expenses.................................. 3.05%
Example 1 year 3 years 5 years 10 years
- ----------------------------------------------------------------------------
You would pay the following
expenses on a $1,000 investment,
assuming a 5% annual return: $31.26 $106.05 $188.51 $433.57
The purpose of the preceding table is to assist the investor in
understanding the various costs and expenses that an investor in BGT
Subsidiary Inc. (the "Fund") will bear directly or indirectly.
"Other Expenses" are based on estimated amounts for the current fiscal
year. The example above should not be considered a representation of future
expenses, which may be higher or lower.
2. Not Applicable.
3. Not Applicable.
ITEM 4. FINANCIAL HIGHLIGHTS
Not Applicable.
ITEM 5. PLAN OF DISTRIBUTION
Not Applicable.
ITEM 6. SELLING SHAREHOLDERS
Not Applicable.
ITEM 7. USE OF PROCEEDS
Not Applicable.
ITEM 8. GENERAL DESCRIPTION OF THE REGISTRANT
8.1. General. The Fund was incorporated under the laws of the State of
Maryland on August 10, 1998, and is a diversified closed-end management
investment company. The Fund was incorporated solely for the purpose of
receiving all or a substantial portion of the assets of The BlackRock
Strategic Term Trust Inc., incorporated under the laws of the State of
Maryland on October 11, 1990 (the "BGT Trust").
8.2. Investment Objective and Policies. The Fund's investment objective is
to manage a portfolio of investment grade fixed income securities while
providing high monthly income to the BGT Trust. No assurance can be given
that the Fund's investment objective will be achieved.
The Fund will seek to achieve high monthly income by investing primarily in
Mortgage-Backed Securities and actively managing its assets in relation to
market conditions, interest rate changes and the remaining term of the
Fund. The Fund will preserve capital through active management of its
portfolio of high quality securities and through its investments in
Municipal Securities including Municipal Zero Coupon Securities. The Fund
may also invest in various instruments designed to hedge interest rate risk
and its effects on the market value of the Fund's securities investments.
All of the Fund's assets will be invested in securities that are (i) issued
or guaranteed by the United States government or one of its agencies or
instrumentalities, (ii) at least rated BBB- by Standard & Poor's
Corporation ("S&P") or Baa3 by Moody's Investors Service, Inc. ("Moody's")
at the time of investment or (iii) with respect to no more than 20% of the
Fund's assets, determined by the Adviser to be of comparable credit quality
at the time of investment to such rated securities. Such ratings reflect an
assessment of credit risk and do not take into account potential changes in
market value. Securities issued by the U.S. government or its agencies or
instrumentalities or guaranteed thereby are generally considered to be of
the same or higher credit quality as privately issued securities rated AAA
by S&P or Aaa by Moody's.
The Fund may also invest its assets in other types of debt securities
including those issued by non-U.S. issuers although the Fund currently
expects that none of these types of securities, except Municipal Securities
and Asset Backed Securities, will exceed 5% of its total assets at any time
during the term of the Fund.
In order to maintain its tax status as a regulated investment company for
U.S. federal income tax purposes, the Fund will be required to, and intends
to, distribute to its shareholders substantially all of its net investment
income each year. In addition, the Fund intends to distribute to its
shareholders all or a portion of net capital gain (i.e., the excess of net
long-term capital gain over net short-term capital loss), if any, at least
once annually.
The Adviser believes that it will be able to manage the Fund's assets
without realizing capital losses which are not offset, for federal income
tax purposes, by capital gains over the life of the Fund on the disposition
of its other assets.
The Fund expects to use various investment techniques, including engaging
in hedging transactions and short sales, selling covered call options to
enhance income or reduce fluctuations in net asset value, investing in
restricted or illiquid securities, making forward commitments, entering
into repurchase agreements, reverse repurchase agreements, and mortgage
dollar rolls, investing in Eurodollar instruments and lending its portfolio
securities.
Under current market conditions, the Fund intends to borrow an amount equal
to approximately 30% of its total assets although its investment
restrictions permit such borrowings in amounts up to 33 1/3% of its total
assets (including the amount borrowed). The Fund will only borrow when the
Adviser believes that such borrowings will benefit the Fund. Borrowing by
the Fund creates an opportunity for increased income, but, at the same
time, creates special risks.
For purposes of both the foregoing and Item 8.3:
(a) "Mortgage-Backed Securities" are securities that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage
loans on real property, including pass-through securities, such as Ginnie
Mae, Fannie Mae and Freddie Mac Certificates and collateralized mortgage
obligations ("CMOs"). The yield and credit characteristics of Mortgage-Backed
Securities differ in a number of respects from Corporate Debt Securities and
other traditional debt securities.
(b) "CMO Residuals" are securities issued in connection with CMOs that
generally represent the excess cash flow from the Mortgage Assets
underlying such CMO after payment of principal and interest on the other
CMO securities and related administrative expenses. CMO residuals may be
issued as either (i) debt obligations of the CMO issuer or (ii) equity
interests in such issuer or the Mortgage Assets underlying the related CMO.
The yield to maturity on these securities is highly sensitive to
prepayments on the related underlying Mortgage Assets. In certain
circumstances, the Fund may fail to recoup fully its initial investment in
a CMO Residual. Under current market conditions, the Fund expects that it
will invest approximately 20% of its assets in these securities and in no
event will the Fund invest more than 40% of its assets in such securities.
(c) "Zero Coupon Securities" are debt obligations which do not entitle the
holder to periodic payments prior to maturity and are issued and traded at
a discount from their face amounts. The discount varies depending on the
time remaining until maturity, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. There are
currently two basic types of Zero Coupon Securities, those created by
separating the interest and principal components of a previously issued
interest-paying security and those originally issued in the form of a face
amount only security paying no interest. Zero Coupon Securities of the
United States government and certain of its agencies and instrumentalities,
private corporate issuers and tax exempt issuers, including state and local
governments and certain of their agencies and instrumentalities, are
currently available. Some types of Zero Coupon Securities may be considered
to be illiquid.
(d) "Other Municipal Securities" are debt securities other than Zero Coupon
Securities issued by Municipal Issuers the income from which is generally
exempt from federal taxation.
(e) "Asset-Backed Securities" have similar structural characteristics to
Mortgage-Backed Securities. However, the underlying assets are not mortgage
loans or interests in mortgage loans but include assets such as motor
vehicle installment sales or installment loan contracts, leases or various
types of real and personal property, and receivables from revolving credit
(credit card) agreements.
(f) "Corporate Debt Securities" are securities which are issued by
corporate entities and may or may not be secured by assets of such
entities. They typically have fixed or variable interest rates and a fixed
maturity, which may be subject to early redemption. Such securities provide
for payment of interest and principal and have maturities ranging from one
month to thirty years or more.
Investment Limitations. The Fund's investment objective and the following
investment restrictions are fundamental and cannot be changed without the
approval of the holders of a majority of the Fund's outstanding voting
securities (defined in the Investment Company Act of 1940 (the "1940 Act")
as the lesser of (a) more than 50% of the outstanding shares or (b) 67% or
more of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented). All other investment policies or
practices are considered by the Fund not to be fundamental and accordingly
may be changed without stockholder approval. If a percentage restriction on
investment or use of assets set forth below is adhered to at the time a
transaction is effected, later changes in percentage resulting from
changing market values will not be considered a deviation from policy. The
Fund may not:
(1) with respect to 75% of its total assets, invest more than
5% of the value of its total assets (taken at market value at time of
purchase) in the outstanding securities of any one issuer, or own
more than 10% of the outstanding voting securities of any one issuer,
in each case other than securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof;
(2) invest 25% or more of the value of its total assets in any
one industry;
(3) issue senior securities (including borrowing money,
including on margin if margin securities are owned and through
entering into reverse repurchase agreements) in excess of 33 1/3% of
its total assets (including the amount of senior securities issued
but excluding any liabilities and indebtedness not constituting
senior securities) except that the Fund may borrow up to an
additional 5% of its total assets for temporary purposes; or pledge
its assets other than to secure such issuances or in connection with
hedging transactions, short sales, when-issued and forward commitment
transactions and similar investment strategies. The Fund's
obligations under interest rate swaps are not treated as senior
securities;
(4) make loans of money or property to any person, except
through loans of portfolio securities, the purchase of fixed income
securities consistent with the Fund's investment objectives and
policies or the acquisition of securities subject to repurchase
agreements;
(5) underwrite the securities of other issuers, except to the
extent that in connection with the disposition of portfolio
securities or the sale of its own shares the Fund
may be deemed to be an underwriter;
(6) purchase real estate or interests therein other than
Mortgage-Backed Securities and similar instruments;
(7) purchase or sell commodities or commodity contracts except
for hedging purposes; or
(8) make any short sale of securities except in conformity with
applicable laws, rules and regulations and unless, giving effect to
such sale, the market value of all securities sold short does not
exceed 25% of the value of the Fund's total assets and the Fund's
aggregate short sales of a particular class of securities does not
exceed 25% of then outstanding securities of that class.
8.3 Risk Factors. Zero Coupon Securities. The market prices of Zero Coupon
Securities including Municipal Zero Coupon Securities are generally more
volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a
greater degree than do securities having similar maturities and credit
quality which do pay periodic interest.
Yield Considerations. The yield characteristics of Mortgage-Backed
Securities and Asset-Backed Securities differ from Corporate Debt
Securities and other traditional debt securities. The major differences
typically include more frequent interest and principal payments, usually
monthly, and the possibility that prepayments of principal may be made at
any time. Prepayment rates are influenced by changes in current interest
rates and a variety of other economic, geographic, social and other
factors. In general, changes in the rate of prepayments on a security will
change the yield to maturity of the security.
The Fund expects that it will invest a portion of its assets in securities
such as CMO Residuals and stripped Mortgage-Backed Securities that are
highly sensitive to changes in prepayment and interest rates. Under certain
interest rate or prepayment rate scenarios, the Fund may fail to fully
recoup its investment in such securities notwithstanding that such
securities may be rated AAA or Aaa. Under current market conditions, the
Fund expects to invest approximately 20% of its assets in CMO Residuals and
under no circumstances will the Fund invest more than 40% of its assets in
CMO Residuals. Under current market conditions, the Fund expects to invest
approximately 10% of its assets in stripped Mortgage-Backed Securities.
As the result of usual prepayment patterns, amounts available for
reinvestment by the Fund are likely to be greater during a period of
declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates.
Mortgage-Backed Securities and Asset-Backed Securities may decrease in
value as a result of increases in interest rates and may benefit less than
other fixed income securities from declining interest rates because of the
risk of prepayment. The Fund's income and dividends are expected to decline
over the term of the Fund due to the anticipated shortening of the
dollar-weighted average maturity of the Fund's assets over the term of the
Fund.
Disposition of Assets. The Fund must distribute to its shareholders each
year substantially all of its net investment income in order to continue to
qualify as a regulated investment company for U.S. federal income tax
purposes. The Fund intends to distribute to its shareholders all or a
portion of net capital gain (i.e., the excess of net long-term capital gain
over net short-term capital loss), if any, at least once annually.
Illiquid Securities. The Fund may invest in securities that lack an
established secondary trading market or are otherwise considered illiquid.
Liquidity of a security relates to the ability to easily dispose of
securities and the price to be obtained, and does not generally relate to
the credit risk or likelihood of receipt of cash at maturity. Illiquid
securities may trade at a discount from comparable, more liquid
investments. Illiquid securities in which the Fund may invest include,
under current guidelines of the staff of the Securities and Exchange
Commission (the "Commission"), stripped mortgage-backed, privately stripped
U.S. Government, agency and municipal securities, CMO Residuals, interest
rate swaps, certain hedging instruments and restricted securities of
corporate and other issuers, including certain Corporate Debt Securities.
The Fund expects that approximately 20% of its assets will be invested in
CMO Residuals and approximately 15% of its assets will be invested in the
remaining categories of illiquid securities, representing an anticipated
total of 35% of the Fund's assets. In no event will the Fund invest more
than 40% of its assets in CMO Residuals and the total of all such illiquid
investments will not exceed 60% of the Fund's assets. Although the staff of
the Commission currently categorizes these securities as illiquid, some of
them trade in established secondary markets.
Borrowings. The Fund is authorized to borrow funds (including through
reverse repurchase agreements) in amounts not exceeding 33 1/3% of its
total assets (including the amount borrowed) and under current market
conditions intends to borrow an amount equal to approximately 30% of its
total assets. Borrowing by the Fund creates an opportunity for increased
net income, but, at the same time, creates special risks. The Fund will
only borrow when the Adviser believes that such borrowings will benefit the
Fund. To the extent the income derived from securities purchased with
borrowed funds exceeds the interest the Fund will have to pay, the Fund's
net income will be greater than if borrowings had not been used.
Conversely, if the income from the securities purchased with borrowed funds
is not sufficient to cover the cost of borrowing, the net income of the
Fund will be less than if borrowing had not been used, and therefore the
amount available for distribution to stockholders as dividends will be
reduced. The Fund may also borrow up to an additional 5% of its total
assets for temporary purposes without regard to the foregoing limitation.
Non-U.S. Securities. The Fund may invest less than 10% of its total assets
in debt securities, including Corporate Debt Securities, of non-U.S.
issuers although under current market conditions the Fund does not expect
to purchase any non-U.S. securities. Investing in non-U.S. securities
involves certain special risks.
The rating of a corporate debt security may change over time, as S&P and
Moody's monitor and evaluate the ratings assigned to corporate debt
securities on an ongoing basis. As a result, corporate debt securities held
by the Fund could receive a higher rating (which would tend to increase
their value) or a lower rating (which would tend to decrease their value)
during the time that they are owned by the Fund. If a security owned by
such Fund is downgraded below either BBB- by S&P or Baa3 by Moody's, the
Adviser will monitor such security and determine whether to sell it based
on the factors it considers relevant such as remaining terms of such Fund,
size of the investment, whether a loss or gain will result, relative risk
to such Fund, depth of the trading market or any other relevant factors.
Other Investment Techniques. The Fund may use various other investment
techniques that also involve special considerations including engaging in
hedging transactions and short sales, selling covered call options, making
forward commitments, entering into repurchase agreements, reverse
repurchase agreements, and mortgage dollar rolls, investing in Eurodollar
instruments, and lending its portfolio securities.
Market Price of Shares. The shares of closed-end investment companies such
as the Fund frequently trade at a discount from their net asset values but
may trade at a premium. The Fund cannot predict whether its shares will
trade at, above or below net asset value. This market price risk may be
greater for investors who intend to sell their shares in a relatively short
period after completion of the public offering. The Fund is permitted to
engage in share repurchases or make tender offers for a portion of the
shares in an effort to reduce any market value discount that may exist.
There are special risks associated with such activities.
The market value of the Fund's assets will fluctuate with changes in
prevailing interest rates. To the extent the various hedging techniques and
active portfolio management employed by the Fund do not offset these
changes, the net asset value of the Fund's shares will also fluctuate in
relation to interest rate changes. It is anticipated that a substantial
portion of the Fund's portfolio will consist of debt securities, the value
of which varies inversely with changes in prevailing interest rates. The
various hedging techniques employed by the Fund, the term of the Fund and
the different characteristics of particular securities in which the Fund
may invest make it very difficult to predict the impact of interest rate
changes on either the net asset value or the market price of the shares.
Shares Unsecured. Although certain portfolio securities purchased by the
Fund are collateralized by, or represent ownership interests in, specific
assets, the shares themselves are not so secured.
Antitakeover Provisions. Certain antitakeover provisions will make a change
in the Fund's business or management more difficult without the approval of
the Fund's board of directors and may have the effect of depriving
stockholders of an opportunity to sell their shares at a premium above the
prevailing market price.
ITEM 9. MANAGEMENT
1. General.
(a) Board of Directors. The Directors set broad policies for the Fund
and choose its officers. The Adviser manages the day-to-day operations of
the Fund and supplies officers to the Fund for this purpose. The number of
directors of the Fund shall initially be nine (9). The Directors shall
consist at all times of no less than two (2) Directors, unless the Fund has
three (3) or more stockholders during which time the number of Directors
shall never be less than three (3). No more than 60% of the Directors are
"interested persons" of the Fund, as defined in the 1940 Act.
(b) Investment Adviser. The Adviser, BlackRock Financial Management,
Inc., is located at 345 Park Avenue, New York, New York 10154. The Adviser
currently serves as the investment advisor to institutional and individual
fixed income investors in the U.S. and overseas through a number of funds
and separately managed accounts with combined total assets in excess of
$120 billion.
Pursuant to an Investment Advisory Agreement (the "Advisory Agreement"),
the Fund has retained the Adviser to manage the investment of its assets,
to provide such investment research, advice and supervision, in conformity
with its investment objective and policies, as may be necessary for the
operations of the Fund. The Advisory Agreement was approved by the
Directors on August 13, 1998 and by the Fund's sole shareholder on November
11, 1998.
As compensation for its services rendered to the Fund, the Adviser will
receive a Management Fee directly from the BGT Trust.
(c) Portfolio Management. The Fund's portfolio manager will be
BlackRock Financial Management, Inc.
(d) Administration Agreement. Under the Administration Agreement with
the Fund, Morgan Stanley Dean Witter Advisers Inc., Two World Trade Center,
New York, New York, 10048, administers the Fund's corporate affairs subject
to the supervision of the Directors and furnishes the Fund with office
facilities and ordinary clerical and bookkeeping services.
(e) Custodian. State Street Bank & Trust Company, 225 Franklin
Street, Boston, Massachusetts, 02110 will serve as custodian for the Fund's
portfolio securities and cash, and in such capacity, maintains certain
financial and accounting books and records pursuant to agreements with the
Fund. The Fund may also periodically enter into arrangements with other
qualified custodians with respect to certain types of securities or other
transactions.
(f) Expenses. The Advisory Agreement provides, among other things,
that the Adviser will bear all expenses of its employees and overhead
incurred in connection with its duties under the Advisory Agreement, and
the expense of services rendered by any employee of the Adviser in such
employee's capacity as a Director or officer of the Fund.
ITEM 10. CAPITAL STOCK, LONG-TERM DEBT, AND OTHER SECURITIES
1. Capital Stock. The Fund is authorized to issue up to 200 million
shares of capital stock of all classes, all of which have a par value of
one cent ($.01) per share. The shares have no preemptive, conversion,
exchange or redemption rights. Each share has equal voting, dividend,
distribution and liquidation rights. Shareholders of the Fund have
cumulative voting rights on the election of Directors and are entitled to
one vote per share on all other matters subject to shareholder approval.
When issued against payment therefor, the shares will be fully paid and
non-assessable. No person has any liability for liabilities of the Fund by
reason of owning shares.
2. Long Term Debt. None.
3. General. None.
4. Taxes. The Fund intends to elect to be, and to qualify to be
treated as, a regulated investment company ("RIC") under the Internal
Revenue Code of 1986, as amended (the "Code"). For each taxable year that
the Fund so qualifies, the Fund (but not its shareholders) will be relieved
of federal income tax on that part of its investment company taxable income
(consisting generally of net investment income and net short-term capital
gain) and net capital gain that it distributes to its shareholders.
Distributions of the Fund's investment company taxable income generally are
taxable to shareholders as ordinary income. Distributions of the Fund's net
capital gain, when designated as such, are taxable to shareholders as
long-term capital gain, regardless of how long such shareholders have held
their shares in the Fund. Distributions by the Fund to its shareholders in
any year that exceed the Fund's earnings and profits generally may be
applied by each shareholder against his or her basis for the shares of the
Fund and will be taxable at capital gains rates (assuming the shares are
held as capital assets) to any shareholder only to the extent the
distributions to the shareholder exceed the shareholder's basis for his or
her shares in the Fund. The Fund may retain for investment its net capital
gain. However, if the Fund does so, it will be subject to a tax of 35% on
the amount retained. In that event, the Fund expects to designate the
retained amount as undistributed capital gain in a notice to shareholders,
who (i) will be required to include in income for tax purposes, as
long-term capital gain, their proportionate shares of such undistributed
amount, (ii) will be entitled to credit their proportionate shares of the
35% tax paid by the Fund against their federal income tax liabilities, if
any, and to claim refunds to the extent the credit exceeds those
liabilities, and (iii) will increase the tax basis of their shares in the
Fund by an amount equal to the difference between the amount of
undistributed capital gain included in their gross income and the tax
deemed paid by such shareholders.
The Fund will notify shareholders following the end of each calendar year
of the amounts of ordinary income and capital gain distributions paid (or
deemed paid) that year and undistributed capital gain designated for that
year.
Any distributions declared by the Fund in October, November or December of
any year and payable to shareholders of record on a specified date in such
a month will be deemed to have been paid by the Fund and received by the
shareholders on December 31st if the distributions are paid by the Fund
during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31st falls.
An investor should be aware that, if shares are purchased shortly before
the record date for any distribution, the investor will pay full price for
the shares and will receive some portion of the purchase price back as a
taxable distribution.
Upon the sale or exchange of shares of the Fund, a shareholder generally
will recognize a taxable gain or loss equal to the difference between his
or her adjusted basis for the shares and the amount received. Any such gain
or loss will be treated as a capital gain or loss if the shares constitute
capital assets in the shareholder's hands and will be long-term capital
gain or loss if the shares have been held for more than one year. Any loss
recognized on a sale or exchange of shares that were held for six months or
less will be treated as long-term, rather than short-term, capital loss to
the extent of any capital gain distributions previously received (or deemed
to be received) thereon. A loss realized on a sale or exchange of shares
will be disallowed to the extent those shares are replaced by other shares
within a period of 61 days beginning 30 days before and ending 30 days
after the date of disposition of the shares. In that event, the basis of
the replacement shares will be adjusted to reflect the disallowed loss.
The maximum tax rates applicable to net capital gains recognized by
individuals and other non-corporate taxpayers are generally (i) the same as
ordinary income tax rates for capital assets held for one year or less and
(ii) 20% for capital assets held for more than one year. The maximum net
capital gain tax rate for corporations is 35%. These tax rates will apply
to distributions of net capital gain by the Fund (including undistributed
net capital gain designated as such by the Fund) as well as to sales and
exchanges of shares in the Fund.
The foregoing is only a brief summary of some of the material U.S. federal
income tax considerations generally relating to an investment in the Fund.
It is based upon the Code, applicable Treasury regulations and
administrative rulings and pronouncements of the Internal Revenue Service,
all as in effect on the date hereof and which are subject to change,
possibly with retroactive effect. This summary is directed to investors who
are U.S. persons (as determined for U.S. federal income tax purposes) and
does not purport to discuss all of the income tax consequences applicable
to the Fund or to all categories of investors, some of whom may be subject
to special rules (including dealers in securities, insurance companies,
non-U.S. persons and tax-exempt entities). Investors are urged to consult
their tax advisers regarding the specific U.S. federal income tax
consequences of an investment in the Fund, as well as the effects of state,
local and foreign tax laws and any proposed tax law changes.
5. Outstanding Securities.
Amount Outstanding
Amount Held by Exclusive of Amount
Amount Registrant or for Shown Under
Title of Class Authorized its Account Previous Column
- -------------- ---------- ----------------- -------------------
Voting Shares 200 million shares None 57,510,639 shares
6. Securities Ratings.
None.
ITEM 11. DEFAULTS AND ARREARS ON SENIOR SECURITIES
1. None.
2. None.
ITEM 12. LEGAL PROCEEDINGS
None.
ITEM 13. TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
Not Applicable.
PART B
ITEM 14. COVER PAGE
Not Applicable.
ITEM 15. TABLE OF CONTENTS
Not Applicable.
ITEM 16. GENERAL INFORMATION AND HISTORY
The Fund has no history. See Item 8 - General Description of the
Registrant, for general information.
ITEM 17. INVESTMENT OBJECTIVES AND POLICIES
Additional detail on the BGT Trust's investment objectives and policies is
provided in its Registration Statement filed with the SEC on October 12,
1990.
ITEM 18. MANAGEMENT
The following individuals are the officers and Directors of the Fund. A
brief statement of their present positions and principal occupations during
the past five years is also provided.
Position(s) Held Principal Occupation(s)
Name and Business Address with Registrant During Past Five Years
- ------------------------- ---------------- -----------------------
Andrew F. Brimmer Director President of Brimmer &
4400 MacArthur Blvd., Company, Inc. a
N.W. Suite 302 Washington, D.C.-based
Washington, D.C. 20007 economic and financial
Age: 71 consulting firm. Formerly
member of the Board of
Governors of the Federal
Reserve System. Director
of Airborne Express, Borg
Warner Automotive, Carr
America Realty
Corporation, E.I. du Pont
de Nemours & Company and
Navistar International
Corporation (truck
manufacturing).
Richard E. Cavanagh Director President and Chief
845 Third Avenue Executive Officer of The
New York, NY 10022 Conference Board, Inc.,
Age: 51 a leading global business
membership organization.
Former Executive Dean of
the John F. Kennedy
School of Government at
Harvard University from
1988-1995. Acting
Director, Harvard Center
for Business and
Government (1991-1993).
Formerly Partner
(principal) of McKinsey &
Company, Inc. (1980-1988).
Former Executive Director
of Federal Cash
Management, White House
Office of Management and
Budget (1977-1979).
Co-author, The Winning
Performance (best selling
management book published
in 13 national editions.)
Trustee, Wesleyan
University and Drucker
Foundation. Director of
Olin Corp. (chemicals and
metals), Fremont Group
(investments) and LCI
International
(telecommunication).
Kent Dixon Director Consultant/Investor.
9495 Blind Pass Road Former President and
Unit #602 Chief Executive Officer
St. Petersburg, FL 33706 of Empire Federal Savings
Age: 60 Bank of America and Banc
PLUS Savings Association.
Former Chairman of the
Board, President and
Chief Executive Officer
of Northeast Savings.
Former Director of ISFA
(the owner of INVEST, a
national securities
brokerage service
designed for banks and
thrift institutions).
Frank J. Fabozzi Director Consultant. Editor of The
858 Tower View Circle Journal of Portfolio
New Hope, PA 18938 Management and Adjunct
Age: 49 Professor of Finance at
the School of Management
at Yale University.
Director, Guardian Mutual
Funds Group. Author and
editor of several books
on fixed income portfolio
management. Visiting
Professor of Finance and
Accounting at the Sloan
School of Management,
Massachusetts Institute
of Technology from 1986
to August 1992.
Laurence D. Fink* ** Director and Chairman and Chief
Age: 45 Chairman of the Executive Officer of the
Board Adviser. Formerly a
Managing Director of The
First Boston Corporation,
member of its Management
Committee, co-head of its
Taxable Fixed Income
Division, and head of its
Mortgage and Real Estate
Products Group. Chairman
of the Board of each of
the BlackRock Trusts.
Trustee of New York
University Medical
Center, Dwight-Englewood
School and National
Outdoor Leadership School
and Phoenix House. A
Director of VIMRx
Pharmaceuticals, Inc. and
Innovir Laboratories,
Inc.
James Grosfeld Director Consultant/Investor.
20500 Civic Center Drive Director of BlackRock Fund
Suite 3000 Investors I, BlackRock
Southfield, MI 48076 Fund Investors II,
Age: 60 BlackRock Fund Investors
III and BlackRock Asset
Investors. Formerly
Chairman of the Board and
Chief Executive Officer
of Pulte Corporation
(homebuilding and
mortgage banking and
finance) (May 1974-April
1990).
James Clayburn LaForce, Director Dean Emeritus of The John
Jr. E. Anderson Graduate
P.O. Box 1595 School of Management,
Pauma Valley, CA 92061 University of California
Age: 69 since July 1, 1993.
Director of Eli Lilly
and Company
(pharmaceuticals),
Imperial Credit
Industries (mortgage
banking), Jacobs
Engineering Group, Inc.,
Rockwell International
Corporation, Payden &
Rygel Investment Trust
(mutual fund), Provident
Investment Counsel Funds
(investment companies),
Timken Company (roller
bearing and steel), Motor
Cargo Industries
(transportation). Acting
Dean of the School of
Business, Hong Kong
University of Science and
Technology 1990-1993.
From 1978 to September
1993, Dean of The John E.
Anderson Graduate School
of Management, University
of California.
Walter F. Mondale Partner, Dorsey & Whitney,
220 South Sixth Street a law firm (December 1996-,
Minneapolis, MN 55402 September 1987-August
Age: 70 1993). Formerly, U.S.
Ambassador to Japan (1993
-1996). Formerly Vice
President of the United
States, U.S. Senator and
Attorney General of the
State of Minnesota. 1984
Democratic Nominee for
President of the United
States.
Ralph L. Schlosstein* ** Director and President of the Adviser.
Age: 47 President Formerly a Managing
Director of Lehman
Brothers, Inc. and
co-head of its Mortgage
and Savings Institutional
Group. President of each
of the BlackRock Trusts.
Trustee of Denison
University and New
Visions for Public
Education in New York
City. A Director of the
Pulte Corporation and a
member of the Visiting
Board of Overseers of the
John F. Kennedy School of
Government at Harvard
University.
Keith T. Anderson Vice President Managing Director of the
Age: 38 Adviser. From February
1987 to April 1988, Vice
President at The First
Boston Corporation in the
Fixed Income Research
Department. Previously
Vice President and Senior
Portfolio Manager at
Criterion Investment
Management Company (now
Nicholas-Applegate).
Henry Gabbay Treasurer Managing Director and
Age: 50 Chief Operating Officer
of the Adviser. From
September 1984 to
February 1989, Vice
President at The First
Boston Corporation.
Robert S. Kapito Vice President Managing Director and
Age: 41 Vice Chairman of the
Adviser. Formerly Vice
President at The First
Boston Corporation in the
Mortgage Products Group.
James Kong Assistant Treasurer Managing Director of the
Age: 37 Adviser. From April 1987
to April 1989, Assistant
Vice President at The
First Boston Corporation
in the CMO/ABO
Administration
Department. Previously
affiliated with Deloitte,
Haskins & Sells (now
Deloitte & Touche LLP).
Karen H. Sabath Secretary Managing Director of the
Age: 32 Adviser. From June 1986
to July 1988, Associate
at The First Boston
Corporation in the
Mortgage Finance
Department. From August
1988 to December 1992
Associate, Vice President
of the Adviser.
Dennis Schaney Vice President Managing Director of the
Age: 41 Adviser and Head of High
Yield Team. From June
1989 to February 1998,
Managing Director at
Merrill Lynch in the
Global Fixed Income
Research and Economics
Department.
Richard Shea, Esq. Vice President/Tax Director of the Adviser.
Age: 38 From December 1988 to
February 1993, Associate
Vice President and Tax
Counsel at Prudential
Securities, Inc. From
August 1984 to December
1988 Senior Tax
Specialist at Laventhol &
Horwath.
* Directors who are directors, officers or employees of the Adviser.
** Directors who may be deemed to be "interested persons" of the Fund.
Each Director (other than any Director who is a partner, director, officer
or employee of the Adviser or any affiliate thereof or successor thereto)
will receive no compensation for serving as Director of the Fund. Inasmuch
as each Director is also a Director of BLK Subsidiary Inc., BAT Subsidiary
Inc., the BGT Trust and the other investment companies in the BlackRock
Fund complex, it is anticipated that the aggregate annual compensation to
each Director for service to investment companies in the BlackRock fund
complex will be approximately $160,000. Each Director is entitled to one
vote on each matter requiring the Directors to take any action or consent
to the taking of any action. In all cases in which a Director vote is
required, only the vote of the Directors present (whether in person or by
telephone) and eligible to vote with respect to such matter will be taken
into consideration in determining whether consent has been given or
withheld. On each matter on which Directors vote, each Director may give or
withhold his or her vote as he or she deems appropriate in his or her sole
discretion.
Messrs. Fink, Gabbay and Grosfeld also serve in the same capacity as a
director and/or officer, as the case may be, of each of the other closed
end investment companies in the BlackRock fund complex except that Mr.
Schlosstein is also a director of each of such other investment companies.
In addition, the Adviser serves as investment sub-advisor to The BlackRock
Government Income Trust, the Dean Witter Premier Income Trust and the Smith
Barney Shearson Adjustable Rate Government Income Fund, each of which are
open-end management investment companies. The Adviser also acts as an
advisor to BlackRock Institutional Trust, an open end investment company
consisting of sixteen investment portfolios. Mr. Grosfeld additionally
serves as a director and officer of such Trust.
ITEM 19. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
1. The BGT Trust, which has offices at 345 Park Avenue, New York,
New York 10154, owns 100% of the voting shares of the Registrant.
The BGT Trust was incorporated under the laws of the State of
Maryland on October 11, 1990.
2. See Item 19.1.
3. None.
ITEM 20. INVESTMENT ADVISORY AND OTHER SERVICES
1-6. See Item 9 - Management.
7. Deloitte & Touche LLP, 2 World Financial Center, New York, New
York 10281-1431. They will serve as independent auditors of the
Fund and express an opinion on the financial statement based on
the audit.
8. None.
ITEM 21. BROKERAGE ALLOCATION AND OTHER PRACTICES
1. Not Applicable.
2. None.
3. Not Applicable.
4. None.
5. None.
ITEM 22. TAX STATUS
The following discussion is based on the advice of Skadden, Arps, Slate,
Meagher & Flom LLP and is based upon provisions of the Code, applicable
Treasury regulations and administrative rulings and pronouncements of the
Internal Revenue Service, all as in effect on the date hereof and which are
subject to change, possibly with retroactive effect. In addition, the
following discussion is a general summary of certain of the material U.S.
federal income tax considerations relating to the Fund and an investment in
the shares of the Fund. This summary is directed to investors who are U.S.
persons (as determined for U.S. federal income tax purposes) and does not
purport to deal with all of the U.S. federal income tax consequences or any
of the state or other tax considerations applicable to the Fund, or to all
categories of investors, some of which may be subject to special rules
(including dealers in securities, insurance companies, non-U.S. persons and
tax-exempt entities). Investors should consult their own tax advisors
regarding the U.S. federal, state, local, foreign and other tax
consequences to them of investments in the Fund, including the effects of
any changes, including proposed changes, in the tax laws.
Taxation of the Fund. The Fund and the Adviser intend to qualify the Fund
as a Regulated Investment Company (a "RIC") under Subchapter M of the Code.
For each taxable year the Fund so qualifies, the Fund (but not its
shareholders) will be relieved of federal income tax on its investment
company taxable income (consisting generally of net investment income and
net short-term capital gain) and net capital gain, if any, realized during
any taxable year to the extent that the Fund distributes such income and
capital gains to shareholders.
In order to qualify as a RIC, the Fund must, among other things, (a) derive
at least 90% of its gross income from dividends, interest, payments with
respect to loans of securities and gains from the sale or other disposition
of securities or certain other related income; (b) diversify its holdings
so that at the end of each quarter of the Fund's taxable year (i) at least
50% of the value of the Fund's total assets is represented by cash and cash
items, U.S. government securities, securities of other RICs, and other
securities which, with respect to any one issuer, do not represent more
than 5% of the value of the Fund's assets nor more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of the Fund's total assets is invested in securities (other than
U.S. government securities or the securities of other RICs) of any one
issuer or of two or more issuer`s which the Fund controls and which are
engaged in the same or related trades or businesses; and (c) distribute to
its shareholders at least 90% of its investment company taxable income. So
long as the Fund qualifies as a RIC, the Fund will not be subject to U.S.
federal tax on the income it distributes to its shareholders. However, the
Fund would be subject to U.S. federal income tax (currently at a maximum
federal tax rate of 35%) on any undistributed income other than tax-exempt
income from municipal securities. If for any reason the Fund does not
qualify as a RIC, the Fund will be taxable as an ordinary corporation which
would have a material adverse effect on the Fund.
The Fund will be subject to a non-deductible 4% excise tax to the extent
that it fails to distribute by the end of any calendar year substantially
all of its ordinary income for that year and capital gain net income for
the one-year period ending on October 31st of that year, plus certain other
amounts. For these purposes, any such income retained by the Fund, and on
which the Fund pays U.S. federal income tax, will be treated as having been
distributed.
Nature of the Fund's Investments. Some of the investment practices that may
be employed by the Fund will be subject to special provisions that, among
other things, may defer the use of certain losses of the Fund and affect
the holding period of the securities held by the Fund and the character of
the gains or losses realized. These provisions may also require the Fund to
mark-to-market some of the positions in its portfolio (i.e., treat as sold
for their fair market value) or to accrue original issue discount, both of
which may cause the Fund to recognize income without receiving cash with
which to make distributions in amounts necessary to satisfy the
distribution requirement and avoid imposition of the excise tax, described
above. In order to satisfy the distribution requirement and avoid the
excise tax, the Fund may be required to liquidate securities or borrow
funds. The Fund intends to monitor its transactions and may make certain
elections in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a RIC.
The Fund may invest in debt-securities of non-U.S. issuers. Any income
received by the Fund from such investments may be subject to income,
withholding or other taxes imposed by foreign countries. Such taxes will
not be deductible or creditable by shareholders of the Fund (but may be
deductible by the Fund), and may be withheld at a higher rate than that
which would be applicable if the underlying securities had been held
directly by a shareholder. Tax conventions between certain countries and
the United States may reduce or eliminate those taxes.
ITEM 23. FINANCIAL STATEMENTS
Not Applicable.
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Not Applicable.
(2) (a) Articles of Incorporation.
(b) By-Laws.
(c) None.
(d) None.
(e) None.
(f) None.
(g) Form of Investment Advisory Agreement.
(h) None.
(i) None.
(j) Form of Custodian Agreement.
(k) Form of Administration Agreement;
(l) Not Applicable.
(m) None.
(n) Not Applicable.
(o) Not Applicable.
(p) None.
(q) None.
(r) None.
(p) None.
(q) None.
(r) None.
ITEM 25. MARKETING ARRANGEMENTS
None.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Not Applicable.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Fund does not control any person.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES OF THE FUND
Title of Class Number of Record Holders
-------------- ------------------------
Voting Shares 1
ITEM 29. INDEMNIFICATION
Under the Fund's By-laws, each officer and director of the Fund shall be
indemnified by the Fund to the full extent permitted under the General Laws
of the State of Maryland, including the advancing of expenses, except that
such indemnity shall not protect any such person against any liability to
the Fund or any stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Absent a court determination that an officer or director seeking
indemnification was not liable on the merits or guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, the decision by the Fund to
indemnify such person must be based upon the reasonable determination of
independent counsel or nonparty independent directors, after review of the
facts, that such officer or director is not guilty of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
Further, pursuant to the Advisory Agreement, the Fund agrees to indemnify
the Adviser and each of the Adviser's directors, officers, employees,
agents, associates and controlling persons and the members, partners,
directors, officers, employees and agents thereof (including any individual
who serves at the Adviser's request as director, officer, partner, trustee
or the like of another corporation) (each such person being an
"indemnitee") against any liabilities and expenses, including amounts paid
in satisfaction of judgments, in compromise or as fines and penalties, and
counsel fees (all as provided in accordance with applicable corporate law)
reasonably incurred by such indemnitee in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which
he may be or may have been involved as a party or otherwise or with which
he may be or may have been threatened, while acting in any capacity set
forth above or thereafter by reason of his having acted in any such
capacity, except with respect to any matter as to which he shall have been
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interest of the Fund and furthermore, in the
case of any criminal proceeding, so long as he had no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no
indemnitee shall be indemnified hereunder against any liability to the Fund
or its shareholders or any expense of such indemnitee arising by reason of
(i) willful misfeasance, (ii) bad faith, (iii) gross negligence or (iv)
reckless disregard of the duties involved in the conduct of his position
(the conduct referred to in such clauses (i) through (iv) being sometimes
referred to herein as "disabling conduct"), (2) as to any matter disposed
of by settlement or a compromise payment by such indemnitee, pursuant to a
consent decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless there has been a
determination that such settlement or compromise is in the best interests
of the Fund and that such indemnitee appears to have acted in good faith in
the reasonable belief that his action was in the best interests of the Fund
and did not involve disabling conduct by such indemnitee and (3) with
respect to any action, suit or other proceeding voluntarily prosecuted by
any indemnitee as plaintiff, indemnification shall be mandatory only if the
prosecution of such action, suit or other proceeding by such indemnitee was
authorized by a majority of the full Board of the Fund.
Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "1933 Act") may be permitted to the Directors and
officers, the Fund has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in such Act and is
therefore unenforceable. If a claim for indemnification against such
liabilities under the 1933 Act (other than for expenses incurred in a
successful defense) is asserted against the Fund by the Directors or
officers in connection with the shares, the Fund will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and directors of the Adviser,
reference is made to the Adviser's current Form ADV filed under the
Investment Advisors Act of 1940, as amended, incorporated herein by
reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Fund are maintained in part at the office
of the Adviser at 345 Park Avenue, New York, New York 10154, in part at the
offices of the Custodian and the Administrator, State Street Bank & Trust
Company, with offices at 225 Franklin Street, Boston, Massachusetts, 02110
and Prudential Investments Fund Management LLC, with offices at One Seaport
Plaza, New York, New York 10292, respectively.
ITEM 32. MANAGEMENT SERVICES
Except as described above in Item 9 - Management, the Fund is not a party
to any management service related contract.
ITEM 33. UNDERTAKINGS
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on the 11th day of November, 1998.
BGT Subsidiary Inc.
(Registrant)
By /s/ Ralph Schlosstein
----------------------
Title: President
SCHEDULE OF EXHIBITS TO FORM N-2
Exhibit Page
Number Exhibit Number
------- ------- ------
Exhibit A Articles of Incorporation......................
Exhibit B By-Laws........................................
Exhibit C None...........................................
Exhibit D None...........................................
Exhibit E None...........................................
Exhibit F None...........................................
Exhibit G Form of Investment Advisory Agreement..........
Exhibit H None...........................................
Exhibit I None...........................................
Exhibit J Form of Custodian Agreement....................
Exhibit K Form of Administration Agreement...............
Exhibit L Not Applicable.................................
Exhibit M None...........................................
Exhibit N Not Applicable.................................
Exhibit O Not Applicable.................................
Exhibit P None...........................................
Exhibit Q None...........................................
Exhibit R None...........................................
EXHIBIT A
ARTICLES OF INCORPORATION
OF
BGT SUBSIDIARY INC.
* * * * *
ARTICLE I
THE UNDERSIGNED, Asher Rubin, whose post office address is 10
Light Street, Baltimore, Maryland 21202, being at least eighteen (18) years
of age, hereby forms a corporation under and by virtue of the Maryland
General Corporation Law.
ARTICLE II
NAME
The name of the Corporation is BGT Subsidiary Inc. (the
"Corporation").
ARTICLE III
PURPOSES AND POWERS
The purposes for which the Corporation is formed are to act as an
investment company under the federal Investment Company Act of 1940, as
amended (the "1940 Act"), and to exercise and enjoy all of the general
powers, rights and privileges granted to, or conferred upon, corporations
by the Maryland General Corporation Law now or hereafter in force.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202. The name of the
resident agent of the Corporation in the State of Maryland is The
Corporation Trust Incorporated, a corporation of the State of Maryland, and
the post office address of the resident agent is 32 South Street,
Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is Two Hundred Million
(200,000,000) shares, all of which shall have a par value of one cent
($.01) per share and of the aggregate par value of Two Million Dollars
($2,000,000).
(2) (a) The Board of Directors of the Corporation is authorized
to classify or to reclassify, from time to time, any unissued shares of
stock of the Corporation, whether now or hereafter authorized, by setting,
changing or eliminating the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms
and conditions of or rights to require redemption of the stock.
(b) Without limiting the generality of the foregoing, the
dividends and distributions or other payments with respect to the stock of
the Corporation, and with respect to each class that hereafter may be
created, shall be in such amount as may be declared from time to time by
the Board of Directors, and such dividends and distributions may vary from
class to class to such extent and for such purposes as the Board of
Directors may deem appropriate, including, but not limited to, the purpose
of complying with requirements of regulatory or legislative authorities.
(c) Until such time as the Board of Directors shall provide
otherwise pursuant to the authority granted in this section (2) all the
authorized shares of the Corporation are designated as Common Stock. Shares
of the Common Stock and the holders thereof, and shares of any class and
the holders thereof, shall be subject to the following provisions,
provided, however, that if no shares of any class other than Common Stock
are outstanding, the shares of the Common Stock and the holders thereof
shall nevertheless be subject to the following provisions except to the
extent that such provisions are by their terms applicable only when shares
of two or more classes are outstanding.
(i) The net asset value of each share of the
Corporation's capital stock issued, sold or purchased at net asset value
shall be the current net asset value per share as determined in accordance
with procedures adopted from time to time by the Board of Directors which
comply with the 1940 Act.
(ii) Shares of each class of stock shall be entitled
to such dividends or distributions, in stock or in cash or both, as may be
declared from time to time by the Board of Directors, acting in its sole
discretion, with respect to such class.
(iii) In the event of the liquidation or dissolution
of the Corporation, the holders of the Common Stock of the Corporation's
stock shall be entitled to receive all the assets of the Corporation not
attributable to other classes of stock through any preference. The assets
so distributable to the stockholders shall be distributed among such
stockholders in proportion to the number of shares of that class held by
them and recorded on the books of the Corporation.
(iv) Unless otherwise expressly provided in these
Articles of Incorporation, including any Articles Supplementary creating
any class of capital stock, on each matter submitted to a vote of
stockholders, each holder of a share of capital stock of the Corporation
shall be entitled to one vote for each share standing in such holder's name
on the books of the Corporation, irrespective of the class thereof, and all
shares of all classes of capital stock shall vote together as a single
class; provided, however, that as to any matter with respect to which a
separate vote of any class is required by the 1940 Act or any rules,
regulations or orders issued thereunder, or the Maryland General
Corporation Law, such requirement as to a separate vote by that class shall
apply in lieu of a vote of all classes voting together as a single class as
described above.
(v) The Corporation shall be entitled to purchase
shares of its capital stock, to the extent that the Corporation may
lawfully effect such purpose under the laws of the State of Maryland, upon
such terms and conditions and for such consideration as the Board of
Directors shall deem advisable.
(vi) All shares purchased by the corporation shall
constitute authorized but unissued shares and the number of the authorized
shares of stock of the Corporation shall not be reduced by the number of
any shares purchased by it. Unless and until their classification is
changed in accordance with section (2) of this Article V, all shares of
capital stock so purchased shall continue to belong to the same class to
which they belonged at the time of their purchase.
(vii) The Corporation may issue shares of stock in
fractional denominations to the same extent as its whole shares, and shares
in fractional denominations shall be shares of capital stock having
proportionately to the respective fractions represented thereby all the
rights of whole shares, including without limitation, the right to vote,
the right to receive dividends and distributions, and the right to
participate upon liquidation of the Corporation, but excluding the right to
receive a stock certificate representing fractional shares.
(viii) Any purchase or transfer or purported purchase
or transfer of capital stock to (i) the United States, any State or
political subdivision thereof, any foreign government, any international
organization, or any agency or instrumentality of any of the foregoing;
(ii) any organization (other than a farmer's cooperative described in
section 521 of the Internal Revenue Code of 1986, as amended (the "Code"
that is exempt from the tax imposed by 26 U.S.C. section 1-1399 and not
subject to the tax imposed by 26 U.S.C. section 511 or (iii) any rural
electric or telephone cooperative described in section 1381(1)(2)(C) of the
Code shall be void. Any capital stock purportedly transferred to or
retained by such an entity may, at the option of the Corporation, be
repurchased by the Corporation at the lesser of market value or net asset
value at the time of repurchase.
(ix) All persons who shall acquire capital stock or
other securities of the Corporation shall acquire the same subject to the
provisions of these Articles of Incorporation and the By-Laws of the
Corporation, as each may be amended from time to time.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE CORPORATION
AND OF THE DIRECTORS AND STOCKHOLDERS
(1) The number of directors of the Corporation shall initially
be nine, which number may be increased or decreased by or pursuant to the
By-Laws of the Corporation but shall never be less than two (2), unless the
Corporation has three (3) or more stockholders during which time the number
of directors shall never be less than three (3). In addition, and
notwithstanding the preceding sentence, the number of the Corporation's
directors shall be increased by or pursuant to the Corporation's By-Laws to
a number greater than or equal to three prior to or at the Corporation's
first annual meeting of stockholders (the "initial annual meeting"). The
names of the persons who shall act as directors until the initial annual
meeting and until their successors are duly elected and qualify are:
Dr. Andrew F. Brimmer
Richard E. Cavanagh
Kent Dixon
Frank J. Fabozzi
Laurence D. Fink
James Grosfeld
James Clayburn LaForce, Jr.
Walter F. Mondale
Ralph L. Schlosstein
Beginning with the initial annual meeting, the directors shall be
divided into three classes, designated Class I, Class II and Class III.
Each class shall consist, as nearly as may be possible, of one-third of the
total number of directors constituting the entire Board of Directors. At
the initial annual meeting of stockholders, Class I directors shall be
elected for a one-year term, Class II directors for a two-year term and
Class III directors for a three-year term. At each annual meeting of
stockholders beginning with the annual meeting of stockholders next
succeeding the initial annual meeting, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three-year
term. A director elected at an annual meeting shall hold office until the
annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office. If
the number of directors is changed, any increase or decrease shall be
apportioned among the classes, as of the annual meeting of stockholders
next succeeding any such change, so as to maintain a number of directors in
each class as nearly equal as possible. In no case shall a decrease in the
number of directors shorten the term of any incumbent director. Any vacancy
on the Board of Directors that results from an increase in the number of
directors may be filled by a majority of the entire Board of Directors,
provided that a quorum is present, and any other vacancy occurring in the
Board of Directors may be filled by a majority of the directors then in
office, whether or not sufficient to constitute a quorum, or by a sole
remaining director; provided, however, that if the stockholders of any
class of the Corporation's capital stock are entitled separately to elect
one or more directors, a majority of the remaining directors elected by
that class or the sole remaining director elected by that class may fill
any vacancy among the number of directors elected by that class. A director
elected by the Board of Directors to fill any vacancy in the Board of
Directors shall serve until the next annual meeting of stockholders and
until his successor shall be elected and shall qualify, subject, however,
to prior death, resignation, retirement, disqualification or removal from
office. At any annual meeting of stockholders, any director elected to fill
any vacancy in the Board of Directors that has arisen since the preceding
annual meeting of stockholders (whether or not any such vacancy has been
filled by election of a new director by the Board of Directors) shall hold
office for a term which coincides with the remaining term of the class to
which such directorship was previously assigned, if such vacancy arose
other than by an increase in the number of directors, and until his
successor shall be elected and shall qualify. In the event such vacancy
arose due to an increase in the number of directors, any director so
elected to fill such vacancy at an annual meeting shall hold office for a
term which coincides with that of the class to which such directorship has
been apportioned as heretofore provided, and until his successor shall be
elected and shall qualify. A director may be removed for cause only, and
not without cause, and only by action taken by the holders of at least
seventy-five percent (75%) of the shares of capital stock then entitled to
vote in an election of such director.
(2) The Board of Directors of the Corporation is hereby
empowered to authorize the issuance from time to time of shares of capital
stock, whether now or hereafter authorized, for such consideration as the
Board of Directors may deem advisable, subject to such limitations as may
be set forth in these Articles of Incorporation or in the By-Laws of the
Corporation or in the Maryland General Corporation Law or the 1940 Act.
(3) Each person who at any time is or was a director or officer
of the Corporation shall be indemnified by the Corporation to the fullest
extent permitted by the Maryland General Corporation Law as it may be
amended or interpreted from time to time, including the advancing of
expenses, subject to any limitations imposed by the 1940 Act and the Rules
and Regulations promulgated thereunder. Furthermore, to the fullest extent
permitted by Maryland law, as it may be amended or interpreted from time to
time, subject to the limitations imposed by the 1940 Act and the Rules and
Regulations promulgated thereunder, no director or officer of the
Corporation shall be personally liable to the Corporation or its
stockholders. No amendment of the Charter of the Corporation or repeal of
any of its provisions shall limit or eliminate any of the benefits provided
to any person who at any time is or was a director or officer of the
Corporation under this Section in respect of any act or omission that
occurred prior to such amendment or repeal.
(4) The Board of Directors of the Corporation shall have the
exclusive authority to make, alter or repeal from time to time any of the
By-Laws of the Corporation except any particular By-Law which is specified
as not subject to alteration or repeal by the Board of Directors, subject
to the requirements of the 1940 Act and the Rules and Regulations
promulgated thereunder.
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No stockholder of the Corporation shall by reason of his holding
shares of capital stock have any preemptive or preferential right to
purchase or subscribe to any shares of capital stock of the Corporation,
now or hereafter authorized, or any notes, debentures, bonds or other
securities convertible into shares of capital stock, now or hereafter to be
authorized, whether or not the issuance of any such shares of capital
stock, or notes, debentures, bonds or other securities would adversely
affect the dividend or voting rights of such stockholder; and the Board of
Directors may issue shares of any class of capital stock of the
Corporation, or any notes debentures, bonds, or other securities
convertible into shares of any class of capital stock of the Corporation,
either, whole or in part, to the existing stockholders.
ARTICLE VIII
CERTAIN VOTES OF STOCKHOLDERS
(1) Except as otherwise provided in these Articles of
Incorporation and notwithstanding any provision of the Maryland General
Corporation Law (other than Sections 3-601 through 3-603 of the Maryland
General Corporation Law or any successors thereto) requiring approval by
the stockholders (or any class of stockholders) of any action by the
affirmative vote of a greater proportion than a majority of the votes
entitled to be cast on the matter, any such action may be taken or
authorized upon the concurrence of a majority of the number of votes
entitled to be cast thereon (or a majority of the votes entitled to be cast
thereon as a separate class).
(2) Notwithstanding the terms of Section 3603(e)(1)(iv) of the
Maryland General Corporation Law (or any successor thereto) and the
provisions of Section (1) of this Article VIII, the Corporation hereby
expressly elects to be subject to the requirements of Section 3-60; of the
Maryland General Corporation Law. The amendment, alteration, modification,
or repeal of this Section (2) of Article VIII of these Articles of
Incorporation shall require the vote specified in Section 3-602 of the
Maryland General Corporation Law.
ARTICLE IX
DETERMINATION BINDING
Any determination made in good faith, so far as accounting
matters are involved, in accordance with accepted accounting practice by or
pursuant to the authority of the direction of the Board of Directors, as to
the amount of assets, obligations or liabilities of the Corporation, as to
the amount of net income of the Corporation from dividends and interest for
any period or amounts at any time legally available for the payment of
dividends, as to the amount of any reserves or charges set up and the
propriety thereof, as to the time of or purpose for creating reserves or as
to the use, alteration or cancellation of any reserves or charges (whether
or not any obligation or liability for which such reserves or charges shall
have been created, shall have been paid or discharged or shall be then or
thereafter required to be paid or discharged), as to the price of any
security owned by the Corporation or as to any other matters relating to
the issuance, sale, redemption or other acquisition or disposition of
securities or shares of capital stock of the Corporation, and any
reasonable determination made in good faith by the Board of Directors shall
be final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of the
capital stock of the Corporation are issued and sold on the condition and
understanding, evidenced by the purchase of shares of capital stock or
acceptance of share certificates, that any and all such determinations
shall be binding as aforesaid. No provision of these Articles of
Incorporation shall be effective to (a) require a waiver of compliance with
any provision of the Securities Act of 1933, as amended, or the 1940 Act,
or of any valid rule, regulation or order of the Securities and Exchange
Commission thereunder or (b) protect or purport to protect any director or
officer of the Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
ARTICLE X
PRIVATE PROPERTY OF STOCKHOLDERS
The private property of stockholders shall not be subject to the
payment of corporate debts to any extent whatsoever.
ARTICLE XI
LIMITED TERM OF EXISTENCE
The Corporation shall have a limited period of existence and
shall cease to exist at the close of business on December 31, 2002, except
that the Corporation shall continue to exist for the purpose of paying,
satisfying, and discharging any existing debts or obligations, collecting
and distributing its assets, and doing all other acts required to liquidate
and wind up its business and affairs. After the close of business on
December 31, 2002, if the Corporation has not liquidated and wound up its
business and affairs, the directors shall become trustees of the
Corporation's assets for purposes of liquidation with the full powers
granted to directors of a corporation which has voluntarily dissolved under
Subtitle 4 of Title 3 of the Maryland General Corporation Law or any
successor statute as are necessary to liquidate the Corporation and wind up
its affairs, but in no event with lesser powers than the powers granted by
such subtitle granted under the Maryland General Corporation Law as of the
date of incorporation of the Corporation.
The Board of Directors may, to the extent it deems it
appropriate, adopt a plan of termination at any time during the twelve
months immediately preceding December 31, 2002, which plan of termination
may set forth the terms and conditions for implementing the termination of
the Corporation's existence under this Article XI. Stockholders of the
Corporation shall not be entitled to vote on the adoption of any such plan
or the termination of the Corporation's existence under this Article XI.
ARTICLE XII
CONVERSION TO OPEN-END COMPANY
Notwithstanding any other provisions of these Articles of
Incorporation or the By-Laws of the Corporation, a favorable vote of a
majority of the total number of directors fixed in accordance with the
By-Laws of the Corporation and the favorable vote of the holders of at
least seventy-five percent (75%) of the shares of capital stock of the
Corporation entitled to be voted on the matter shall be required to
approve, adopt or authorize an amendment to these Articles of Incorporation
that makes the Common Stock or any other class of capital stock a
"redeemable security" as that term is defined in the 1940 Act.
The Corporation shall notify the holders of all shares of capital
stock of the approval, in accordance with the preceding paragraph of this
Article XII, of any amendment to these Articles of Incorporation that makes
the Common Stock a "redeemable security" (as that term is defined in the
1940 Act) no later than thirty (30) days prior to the date of filing of
such amendment with the Department of Assessments and Taxation (or any
successor agency) of the State of Maryland; such amendment may not be so
filed, however, until the later of (a) ninety (90) days following the date
of approval of such amendment by the holders of shares of capital stock in
accordance with the preceding paragraph of this Article XII and (b) the
next January l or July l, whichever is sooner, following the date of such
approval by holders of shares of capital stock.
ARTICLE XIII
AMENDMENT
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
Notwithstanding any other provisions of these Articles of Incorporation or
the By-Laws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law), the amendment or repeal of Section
(1), Section (3), or Section (4) of Article VI, Section (l) of Article
VIII, Article X, Article XI, Article XII or this Article XIII of these
Articles of Incorporation shall require the affirmative vote of the holders
of at least seventy-five percent (75%) of the shares then entitled to be
voted on the matter.
IN WITNESS WHEREOF, the undersigned incorporator of BGT Subsidiary
Inc. hereby executes the foregoing Articles of Incorporation and
acknowledges the same to be his act and further acknowledges that, to the
best of his knowledge, the matters and facts set forth therein are true in
all material respects under the penalties of perjury.
Dated the 10th day of August, 1998.
/s/ Asher Rubin
______________________
Asher Rubin
EXHIBIT B
BY-LAWS
OF
BGT SUBSIDIARY INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the
Corporation shall be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive
offices of the Corporation shall be at 345 Park Avenue, New York, New York
10019.
Section 3. Other Offices. The Corporation may have such other
offices in such places as the Board of Directors may from time to time
determine.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meeting. An annual meeting of the
stockholders of the Corporation for the election of directors and for the
transaction of such other business as may properly be brought before the
meeting shall be held in May of each year.
Section 2. Special Meetings. Special meetings of the
stockholders, unless otherwise provided by law or by the Articles of
Incorporation, may be called for any purpose or purposes by a majority of
the Board of Directors, the President, or on the written request of the
holders of at least 25% of the outstanding capital stock of the Corporation
entitled to vote at such meeting.
Section 3. Place of Meetings. Annual and special meetings of
the stockholders shall be held at such place within the United States as
the Board of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the
place, date and time of the holding of each annual and special meeting of
the stockholders and the purpose or purposes of each special meeting shall
be given personally or by mail, not less than ten nor more than ninety days
before the date of such meeting, to each stockholder entitled to vote at
such meeting and to each other stockholder entitled to notice of the
meeting. Notice by mail shall be deemed to be duly given when deposited in
the United States mail addressed to the stockholder at his address as it
appears on the records of the Corporation, with postage thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by
any stockholder who shall attend such meeting in person or by proxy, or who
shall, either before or after the meeting, submit a signed waiver of notice
which is filed with the records of the meeting. When a meeting is
adjourned to another time and place, unless the Board of Directors, after
the adjournment, shall fix a new record date for an adjourned meeting, or
the adjournment is for more than one hundred and twenty days after the
original record date, notice of such adjourned meeting need not be given if
the time and place to which the meeting shall be adjourned were announced
at the meeting at which the adjournment is taken.
Section 5. Quorum. At all meetings of the stockholders, the
holders of a majority of the shares of stock of the Corporation entitled to
vote at the meeting, present in person or by proxy, shall constitute a
quorum for the transaction of any business, except as otherwise provided by
statute or by the Articles of Incorporation. In the absence of a quorum no
business may be transacted, except that the holders of a majority of the
shares of stock present in person or by proxy and entitled to vote may
adjourn the meeting from time to time, without notice other than
announcement thereat except as otherwise required by these By-Laws, until
the holders of the requisite amount of shares of stock shall be so present.
At any such adjourned meeting at which a quorum may be present any business
may be transacted which might have been transacted at the meeting as
originally called. The absence from any meeting, in person or by proxy, of
holders of the number of shares of stock of the Corporation in excess of a
majority thereof which may be required by the laws of the State of
Maryland, the Investment Company Act of 1940, as amended, or other
applicable statute, the Articles of Incorporation, or these By-Laws, for
action upon any given matter shall not prevent action at such meeting upon
any other matter or matters which may properly come before the meeting, if
there shall be present thereat, in person or by proxy, holders of the
number of shares of stock of the Corporation required for action in respect
of such other matter or matters.
Section 6. Organization. At each meeting of the stockholders,
the Chairman of the Board (if one has been designated by the Board), or in
the Chairman of the Board's absence or inability to act, the President, or
in the absence or inability of the Chairman of the Board and the President,
a Vice President, shall act as chairman of the meeting. The Secretary, or
in the Secretary's absence or inability to act, any person appointed by the
chairman of the meeting, shall act as secretary of the meeting and keep the
minutes thereof.
Section 7. Order of Business. The order of business at all
meetings of the stockholders shall be as determined by the chairman of the
meeting.
Section 8. Voting. Except as otherwise provided by statute or
the Articles of Incorporation, each holder of record of shares of stock of
the Corporation having voting power shall be entitled at each meeting of
the stockholders to one vote for every share of such stock standing in such
stockholder's name on the record of stockholders of the Corporation as of
the record date determined pursuant to Section 9 of this Article or if such
record date shall not have been so fixed, then at the later of (i) the
close of business on the day on which notice of the meeting is mailed or
(ii) the thirtieth day before the meeting.
Each stockholder entitled to vote at any meeting of stockholders
may authorize another person or persons to act for him by a proxy signed by
such stockholder or his attorney-in-fact. No proxy shall be valid after
the expiration of eleven months from the date thereof, unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of
the stockholder executing it, except in those cases where such proxy states
that it is irrevocable and where an irrevocable proxy is permitted by law.
Except as otherwise provided by statute, the Articles of Incorporation or
these By-Laws, any corporate action to be taken by vote of the stockholders
shall be authorized by a majority of the total votes cast at a meeting of
stockholders by the holders of shares present in person or represented by
proxy and entitled to vote on such action.
If a vote shall be taken on any question other than the election
of directors, which shall be by written ballot, then unless required by
statute or these By-Laws, or determined by the chairman of the meeting to
be advisable, any such vote need not be by ballot. On a vote by ballot,
each ballot shall be signed by the stockholder voting, or by his proxy, if
there be such proxy, and shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may
set a record date for the purpose of determining stockholders entitled to
vote at any meeting of the stockholders. The record date, which may not be
prior to the close of business on the day the record date is fixed, shall
be not more than ninety nor less than ten days before the date of the
meeting of the stockholders. All persons who were holders of record of
shares at such time, and not others, shall be entitled to vote at such
meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If the inspector shall not be so
appointed or if any of them shall fail to appear or act, the chairman of
the meeting may, and on the request of any stockholder entitled to vote
thereat shall, appoint inspectors. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath to execute
faithfully the duties of inspector at such meeting with strict impartiality
and according to the best of his ability. The inspectors shall determine
the number of shares outstanding and the voting powers of each, the number
of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct
the election or vote with fairness to all stockholders. On request of the
chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or
matter determined by them and shall execute a certificate of any fact found
by them. No director or candidate for the office of director shall act as
inspector of an election of directors. Inspectors need not be
stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting. Except
as otherwise provided by statute or the Articles of Incorporation, any
action required to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the records of
stockholders meetings: (i) a unanimous written consent which sets forth
the action and is signed by each stockholder entitled to vote on the matter
and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote
thereat.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the
Articles of Incorporation, the business and affairs of the Corporation
shall be managed under the direction of the Board of Directors. All powers
of the Corporation may be exercised by or under authority of the Board of
Directors except as conferred on or reserved to the stockholders by law or
by the Articles of Incorporation or these By-Laws.
Section 2. Number of Directors. The number of directors shall
be fixed from time to time by resolution of the Board of Directors adopted
by a majority of the Directors then in office; provided, however, that the
number of directors shall in no event be less than two nor more than
fifteen. Any vacancy created by an increase in Directors may be filled in
accordance with Section 6 of this Article III. No reduction in the number
of directors shall have the effect of removing any director from office
prior to the expiration of his term. Directors need not be stockholders.
Section 3. Election and Term of Directors. Each class of
Directors as to which vacancies exist shall be elected by written ballot at
the annual meeting of stockholders, or a special meeting held for that
purpose unless otherwise provided by statute or the Articles of
Incorporation. The term of office of each director shall be from the time
of his election and qualification until the expiration of the term of his
class or until the annual election of directors next succeeding his
election and until his successor shall have been elected and shall have
qualified, or until his death, or until he shall have resigned, or have
been removed as hereinafter provided in these By-Laws, or as otherwise
provided by statute or the Articles of Incorporation.
Section 4. Resignation. A director of the Corporation may
resign at any time by giving written notice of his resignation to the Board
or the Chairman of the Board or the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately
upon its receipt; and, unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
Section 5. Removal of Directors. Any director of the
Corporation may be removed for cause (but not without cause) by the
stockholders by a vote of seventy-five percent (75%) of the votes entitled
to be cast for the election of directors.
Section 6. Vacancies. Subject to the provisions of the
Investment Company Act of 1940, as amended, any vacancies in the Board,
whether arising from death, resignation, removal, an increase in the number
of directors or any other cause, shall be filled by a vote of the Board of
Directors in accordance with the Articles of Incorporation.
Section 7. Place of Meetings. Meetings of the Board may be held
at such place as the Board may from time to time determine or as shall be
specified in the notice of such meeting.
Section 8. Regular Meeting. Regular meetings of the Board may be
held without notice at such time and place as may be determined by the
Board of Directors.
Section 9. Special Meetings. Special meetings of the Board may
be called by two or more directors of the Corporation or by the Chairman of
the Board or the President.
Section 10. Annual Meeting. The annual meeting of each newly
elected Board of Directors (including a Board of Directors to which only
one class of Directors has been newly elected) shall be held as soon as
practicable after the meeting of stockholders at which directors were
elected. No notice of such annual meeting shall be necessary if held
immediately after the adjournment, and at the site, of the meeting of
stockholders. If not so held, notice shall be given as hereinafter
provided for special meetings of the Board of Directors.
Section 11. Notice of Special Meetings. Notice of each special
meeting of the Board shall be given by the Secretary as hereinafter
provided, in which notice shall be stated the time and place of the
meeting. Notice of each such meeting shall be delivered to each director,
either personally or by telephone or any standard form of
telecommunication, at least twenty-four hours before the time at which such
meeting is to be held, or mailed by first-class mail, postage prepaid,
addressed to him at his residence or usual place of business, at least
three days before the day on which such meeting is to be held.
Section 12. Waiver of Notice of Meetings. Notice of any special
meeting need not be given to any director who shall, either before or after
the meeting, sign a written waiver of notice which is filed with the
records of the meeting or who shall attend such meeting. Except as
otherwise specifically required by these By-Laws, a notice or waiver of
notice of any meeting need not state the purpose of such meeting.
Section 13. Quorum and Voting. One-third, but not less than
two, of the members of the entire Board shall be present in person at any
meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and except as otherwise expressly required by
statute, the Articles of Incorporation, these By-Laws, the Investment
Company Act of 1940, as amended, or other applicable statute, the act of a
majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board; provided, however, that the approval
of any contract with an investment adviser or principal underwriter, as
such terms are defined in the Investment Company Act of 1940, as amended,
which the Corporation enters into or any renewal or amendment thereof, the
approval of the fidelity bond required by the Investment Company Act of
1940, as amended, and the selection of the Corporation's independent public
accountants shall each require the affirmative vote of a majority of the
directors who are not interested persons, as defined in the Investment
Company Act of 1940, as amended, of the Corporation. In the absence of a
quorum at any meeting of the Board, a majority of the directors present
thereat may adjourn such meeting to another time and place until a quorum
shall be present thereat. Notice of the time and place of any such
adjourned meeting shall be given to the directors who were not present at
the time of the adjournment and, unless such time and place were announced
at the meeting at which the adjournment was taken, to the other directors.
At any adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
called.
Section 14. Organization. The Board may, by resolution adopted
by a majority of the entire Board, designate a Chairman of the Board, who
shall preside at each meeting of the Board. In the absence or inability of
the Chairman of the Board to preside at a meeting, the President or, in his
absence or inability to act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside
thereat. The Secretary (or, in his absence or inability to act, any person
appointed by the Chairman) shall act as secretary of the meeting and keep
the minutes thereof.
Section 15. Written Consent of Directors in Lieu of a Meeting.
Subject to the provisions of the Investment Company Act of 1940, as
amended, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a
meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writings or writing are filed with the
minutes of the proceedings of the Board or committee.
Section 16. Compensation. Directors may receive compensation
for services to the Corporation in their capacities as directors or
otherwise in such manner and in such amounts as may be fixed from time to
time by the Board.
Section 17. Investment Policies. It shall be the duty of the
Board of Directors to ensure that the purchase, sale, retention and
disposal of portfolio securities and the other investment practices of the
Corporation are at all times consistent with the investment policies and
restrictions with respect to securities investments and otherwise of the
Corporation, as recited in the then-current registration statement of the
Corporation covering the offering and sale of shares of its capital stock,
as filed with the Securities and Exchange Commission (or as such investment
policies and restrictions may be modified by the Board of Directors or, if
required, by majority vote of the stockholders of the Corporation in
accordance with the Investment Company Act of 1940, as amended) and as
required by the Investment Company Act of 1940, as amended. The Board,
however, may delegate the duty of management of the assets and the
administration of its day to day operations to one or more individuals or
corporate management companies and/or investment advisers pursuant to a
written contract or contracts which have obtained the requisite approvals,
including the requisite approvals of renewals thereof, of the Board of
Directors and/or the stockholders of the Corporation in accordance with the
provisions of the Investment Company Act of 1940, as amended.
Section 18. Asset Value. The Board of Directors shall determine
the times and method of calculation of the net asset value per share of the
Fund subject to conditions with the requirements of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board of Directors may
from time to time, by resolution adopted by a majority of the whole Board,
designate one or more committees of the Board, each such committee to
consist of two or more directors and to have such powers and duties as the
Board of Directors may, by resolution, prescribe.
Section 2. General. One-third, but not less than two, of the
members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business
at such meeting, and the act of a majority present shall be the act of such
committee. The Board may designate a chairman of any committee and such
chairman or any two members of any committee may fix the time and place of
its meetings unless the Board shall otherwise provide. In the absence or
disqualification of any member of any committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. The Board shall have the power at any time
to change the membership of any committee, to fill all vacancies, to
designate alternate members to replace any absent or disqualified member,
or to dissolve any such committee. Nothing herein shall be deemed to
prevent the Board from appointing one or more committees consisting in
whole or in part of persons who are not directors of the Corporation;
provided, however, that no such committee shall have or may exercise any
authority or power of the Board in the management of the business or
affairs of the Corporation.
ARTICLE V
Officers, Agents and Employees
Section 1. Number of Qualifications. The officers of the
Corporation shall be a President, who shall be a director of the
Corporation, a Secretary and a Treasurer, each of whom shall be elected by
the Board of Directors. The Board of Directors may elect or appoint one or
more Vice Presidents and may also appoint such other officers, agents and
employees as it may deem necessary or proper. Any two or more offices may
be held by the same person, except the offices of President and Vice
President, but no officer shall execute, acknowledge or verify any
instrument as an officer in more than one capacity. Such officers shall be
elected by the Board of Directors each year at its first meeting held after
the annual meeting of stockholders, each to hold office until the meeting
of the stockholders and until his successor shall have been duly elected
and shall have qualified, or until his death, or until he shall have
resigned, or have been removed, as hereinafter provided in these By-Laws.
The Board may from time to time elect, or delegate to the President the
power to appoint, such officers (including one or more Assistant Vice
Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries) and such agents, as may be necessary or desirable for the
business of the Corporation. Such officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by
the Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may
resign at any time by giving written notice of resignation to the Board,
the Chairman of the Board, President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately
upon its receipt; and, unless otherwise specified therein, the acceptance
of such resignation shall be necessary to make it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer,
agent or employee of the Corporation may be removed by the Board of
Directors with or without cause at any time, and the Board may delegate
such power of removal as to agents and employees not elected or appointed
by the Board of Directors. Such removal shall be without prejudice to such
person's contract rights, if any, but the appointment of any person as an
officer, agent or employee of the Corporation shall not of itself create
contract rights.
Section 4. Vacancies. A vacancy in any office, either arising
from death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the
manner prescribed in these By-Laws for the regular election or appointment
to such office.
Section 5. Compensation. The compensation of the officers of
the Corporation shall be fixed by the Board of Directors, but this power
may be delegated to any officer in respect of other officers under his
control.
Section 6. Bonds or Other Security. If required by the Board,
any officer, agent or employee of the Corporation shall give a bond or
other security for the faithful performance of his duties, in such amount
and with such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief
executive officer of the Corporation. In the absence of the Chairman of
the Board (or if there be none), he shall preside at all meetings of the
stockholders and of the Board of Directors. He shall have, subject to the
control of the Board of Directors, general charge of the business and
affairs of the Corporation. He may employ and discharge employees and
agents of the Corporation, except such as shall be appointed by the Board,
and he may delegate these powers.
Section 8. Vice President. Each Vice President shall have such
powers and perform such duties as the Board of Directors or the President
may from time to time prescribe.
Section 9. Treasurer. The Treasurer shall
(a) have charge and custody of, and be responsible for, all
the funds and securities of the Corporation, except those which the
Corporation has placed in the custody of a bank or trust company or member
of a national securities exchange (as that term is defined in the
Securities Exchange Act of 1934, as amended) pursuant to a written
agreement designating such bank or trust company or member of a national
securities exchange as a custodian or sub-custodian of the property of the
Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to
the credit of the Corporation;
(d) receive, and give receipts for, moneys due and payable,
to the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking
proper vouchers therefor; and
(f) in general, perform all the duties incident to the
office of Treasurer and such other duties as from time to time may be
assigned to him by the Board or the President.
Section 10. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided
for the purpose, the minutes of all meetings of the Board, the committees
of the Board and the stockholders;
(b) see that all notices are duly given in accordance with
the provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates shall
be a facsimile, as hereinafter provided) and affix and attest the seal to
all other documents to be executed on behalf of the Corporation under its
seal;
(d) see that the books, reports, statements, certificates
and other documents and records required by law to be kept and filed are
properly kept and filed; and
(e) in general, perform all the duties incident to the
office of Secretary and such other duties as from time to time may be
assigned to him by the Board or the President.
Section 11. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer for the time being the powers or duties,
or any of them, of such officer upon any other officer or upon any
director.
ARTICLE VI
Indemnification
Each officer and director of the Corporation shall be indemnified
by the Corporation to the full extent permitted under the General Laws of
the State of Maryland, including the advancing of expenses, except that
such indemnity shall not protect any such person against any liability to
the Corporation or any stockholder thereof to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office. Absent a court determination that an officer or director
seeking indemnification was not liable on the merits or guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, the decision by the
Corporation to indemnify such person must be based upon the reasonable
determination of independent counsel or nonparty independent directors,
after review of the facts, that such officer or director is not guilty of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
The Corporation may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the
General Laws of the State of Maryland, from liability arising from his
activities as officer or director of the Corporation. The Corporation,
however, may not purchase insurance on behalf of any officer or director of
the Corporation that protects or purports to protect such person from
liability to the Corporation or to its stockholders to which such officer
or director would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved
in the conduct of his office.
The Corporation may indemnify or purchase insurance to the extent
provided in this Article VI on behalf of an employee or agent who is not an
officer or director of the Corporation.
ARTICLE VII
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon request to have a certificate or
certificates, in such form as shall be approved by the Board, representing
the number of shares of the Corporation owned by him, provided, however,
that certificates for fractional shares will not be delivered in any case.
The certificates representing shares of stock shall be signed by or in the
name of the Corporation by the President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and sealed with the seal of the Corporation. Any or all of the
signatures or the seal on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate shall be
issued, it may be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were still in office at the date of
issue.
Section 2. Books of Accounts and Record of Stockholders. There
shall be kept at the principal executive office of the Corporation correct
and complete books and records of account of all the business and
transactions of the Corporation. There shall be made available upon
request of any stockholder, in accordance with Maryland law, a record
containing the number of shares of stock issued during a specified period
not to exceed twelve months and the consideration received by the
Corporation for each such share.
Section 3. Transfers of Shares. Transfers of shares of stock of
the Corporation shall be made on the stock records of the Corporation only
by the registered holder thereof, or by his attorney thereunto authorized
by power of attorney duly executed and filed with the Secretary or with a
transfer agent or transfer clerk, and on surrender of the certificate or
certificates, if issued, for such shares properly endorsed or accompanied
by a duly executed stock transfer power and the payment of all taxes
thereon. Except as otherwise provided by law, the Corporation shall be
entitled to recognize the exclusive rights of a person in whose name any
share or shares stand on the record of stockholders as the owner of such
share or shares for all purposes, including, without limitation, the rights
to receive dividends or other distributions, and to vote as such owner, and
the Corporation shall not be bound to recognize any equitable or legal
claim to or interest in any such share or shares on the part of any other
person.
Section 4. Regulations. The Board may make such additional
rules any regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates
for shares of stock of the Corporation. It may appoint, or authorize any
officer or officers to appoint, one or more transfer agents or one or more
transfer clerks and one or more registrars and may require all certificates
for shares of stock to bear the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The
holder of any certificates representing shares of stock of the Corporation
shall immediately notify the Corporation of any loss, destruction or
mutilation of such certificate, and the Corporation may issue a new
certificate of stock in the place of any certificate theretofore issued by
it which the owner thereof shall allege to have been lost or destroyed or
which shall have been mutilated, and the Board may, in its discretion,
require such owner or his legal representatives to give to the Corporation
a bond in such sum, limited or unlimited, and in such form and with such
surety or sureties, as the Board in its absolute discretion shall
determine, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss or destruction of any such
certificate, or issuance of a new certificate. Anything herein to the
contrary notwithstanding, the Board, in its absolute discretion, may refuse
to issue any such new certificate, except pursuant to legal proceedings
under the laws of the State of Maryland.
Section 6. Fixing of a Record Date for Dividends and
Distributions. The Board may fix, in advance, a date not more than ninety
days preceding the date fixed for the payment of any dividend or the making
of any distribution. Once the Board of Directors fixes a record date as
the record date for the determination of the stockholders entitled to
receive any such dividend or distribution, in such case only the
stockholders of record at the time so fixed shall be entitled to receive
such dividend or distribution.
Section 7. Information to Stockholders and Others. Any
stockholder of the Corporation or his agent may inspect and copy during
usual business hours the Corporation's By-Laws, minutes of the proceedings
of its stockholders, annual statements of its affairs, and voting trust
agreements on file at its principal office.
ARTICLE VIII
Seal
The seal of the Corporation shall be circular in form and shall
bear, in addition to any other emblem or device approved by the Board of
Directors, the name of the Corporation, the year of its incorporation and
the words "Corporate Seal" and "Maryland". Said seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
ARTICLE IX
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 31st day of December.
ARTICLE X
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors
of the Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments
shall be deposited in the safe keeping of such banks or other companies as
the Board of Directors of the Corporation may from time to time determine.
Every arrangement entered into with any bank or other company for the safe
keeping of the securities and investments of the Corporation shall contain
provisions complying with the Investment Company Act of 1940, as amended,
and the general rules and regulations thereunder.
ARTICLE XI
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the
payment of money shall be signed by such officer or officers or person or
persons as the Board of Directors by resolution shall from time to time
designate.
Section 2. Sale or Transfer of Securities. Stock certificates,
bonds or other securities at any time owned by the Corporation may be held
on behalf of the Corporation or sold, transferred or otherwise disposed of
subject to any limits imposed by these By-Laws and pursuant to
authorization by the Board and, when so authorized to be held on behalf of
the Corporation or sold, transferred or otherwise disposed of, may be
transferred from the name of the Corporation by the signature of the
President or a Vice President or the Treasurer or pursuant to any procedure
approved by the Board of Directors, subject to applicable law.
ARTICLE XII
Independent Public Accountants
The firm of independent public accountants which shall sign or
certify the financial statements of the Corporation which are filed with
the Securities and Exchange Commission shall be selected annually by the
Board of Directors and ratified by the stockholders in accordance with the
provisions of the Investment Company Act of 1940, as amended.
ARTICLE XIII
Annual Statement
The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period
of the Corporation and at such other times as may be directed by the Board.
A report to the stockholders based upon each such examination shall be
mailed to each stockholder of the Corporation of record on such date with
respect to each report as may be determined by the Board, at his address as
the same appears on the books of the Corporation. Such annual statement
shall also be available at the annual meeting of stockholders and be placed
on file at the Corporation's principal office in the State of Maryland.
Each such report shall show the assets and liabilities of the Corporation
as of the close of the annual or quarterly period covered by the report and
the Securities in which the funds of the Corporation were then invested.
Such report shall also show the Corporation's income and expenses for the
period from the end of the Corporation's preceding fiscal year to the close
of the annual or quarterly period covered by the report and any other
information required by the Investment Company Act of 1940, as amended, and
shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
ARTICLE XIV
Amendments
The Board of Directors, by affirmative vote of a majority
thereof, shall have the exclusive right to amend, alter or repeal these By-
Laws at any regular or special meeting of the Board of Directors, except
any particular By-Law which is specified as not subject to alteration or
repeal by the Board of Directors, subject to the requirements of the
Investment Company Act of 1940, as amended.
EXHIBIT G
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated October 30th, 1998, between BGT Subsidiary Inc.
(the "Fund"), a Maryland corporation, and BlackRock Financial Management,
Inc. (the "Adviser"), a Delaware corporation.
In consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Fund with respect to the investment of the Fund's
assets and to supervise and arrange the purchase of securities for and the
sale of securities held in the investment portfolio of the Fund.
2. Duties and obligations of the Adviser with
respect to investments of assets of the Fund
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Fund's Board of Directors, the
Adviser shall (i) act as investment adviser for and supervise and manage
the investment and reinvestment of the Fund's assets and in connection
therewith have complete discretion in purchasing and selling securities and
other assets for the Fund and in voting, exercising consents and exercising
all other rights appertaining to such securities and other assets on behalf
of the Fund; (ii) supervise continuously the investment program of the Fund
and the composition of its investment portfolio; and (iii) arrange, subject
to the provisions of paragraph 3 hereof, for the purchase and sale of
securities and other assets held in the investment portfolio of the Fund.
(b) In the performance of its duties under this Agreement,
the Adviser shall at all times conform to, and act in accordance with, any
requirements imposed by (i) the provisions of the Investment Company Act of
1940 (the "Act"), and of any rules or regulations in force thereunder; (ii)
any other applicable provision of law; (iii) the provisions of the Articles
of Incorporation and By-Laws of the Fund, as such documents are amended
from time to time; (iv) the investment objective and policies of the Fund
as set forth in its Registration Statement on Form N-2; and (v) any
policies and determinations of the Board of Directors of the Fund.
(c) The Adviser will bear all costs and expenses of its
partners and employees and any overhead incurred in connection with its
duties hereunder and shall bear the costs of any salaries or directors fees
of any officers or directors of the Fund who are affiliated persons (as
defined in the Act) of the Adviser except that the Board of Directors of
the Fund may approve reimbursement to the Adviser of the pro rata portion
of the salaries, bonuses, health insurance, retirement benefits and all
similar employment costs for the time spent on Fund operations (other than
the provision of investment advice) of all personnel employed by the
Adviser who devote substantial time to Fund operations or the operations of
other investment companies advised by the Adviser.
(d) The Adviser shall give the Fund the benefit of its best
judgment and effort in rendering services hereunder, but the Adviser shall
not be liable for any act or omission or for any loss sustained by the Fund
in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of its reckless disregard of
its obligations and duties under this Agreement.
(e) Nothing in this Agreement shall prevent the Adviser or
any partner, officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from
engaging in any other lawful activity, and shall not in any way limit or
restrict the Adviser or any of its partners, officers, employees or agents
from buying, selling or trading any securities for its or their own
accounts or for the accounts of others for whom it or they may be acting,
provided, however that the Adviser will undertake no activities which, in
its judgment, will adversely affect the performance of its obligations
under this Agreement.
3. Portfolio Transactions and Brokerage
The Adviser is authorized, for the purchase and sale of the Fund's
portfolio securities, to employ such securities dealers as may, in the
judgment of the Adviser, implement the policy of the Fund to obtain the
best net results taking into account such factors as price, including
dealer spread, the size, type and difficulty of the transaction involved,
the firm's general execution and operational facilities and the firm's risk
in positioning the securities involved. Consistent with this policy, the
Adviser is authorized to direct the execution of the Fund's portfolio
transactions to dealers and brokers furnishing statistical information or
research deemed by the Adviser to be useful or valuable to the performance
of its investment advisory functions for the Fund.
4. Compensation of The Adviser
The Parties to this Agreement agree that the Adviser will receive
compensation for the services it renders under this Agreement from The
BlackRock Strategic Term Trust Inc.
5. Indemnity
(a) The Fund hereby agrees to indemnify the Adviser and each
of the Adviser's directors, officers, employees, agents, associates and
controlling persons and the members, partners, directors, officers,
employees and agents thereof (including any individual who serves at the
Adviser's request as director, officer, partner, trustee or the like of
another corporation) (each such person being an "indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees (all
as provided in accordance with applicable corporate law) reasonably
incurred by such indemnitee in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or criminal, before
any court or administrative or investigative body in which he may be or may
have been involved as a party or otherwise or with which he may be or may
have been threatened, while acting in any capacity set forth above in this
Section 5 or thereafter by reason of his having acted in any such capacity,
except with respect to any matter as to which he shall have been
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interest of the Fund and furthermore, in the
case of any criminal proceeding, so long as he had no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no
indemnitee shall be indemnified hereunder against any liability to the Fund
or its shareholders or any expense of such indemnitee arising by reason of
(i) willful misfeasance, (ii) bad faith, (iii) gross negligence or (iv)
reckless disregard of the duties involved in the conduct of his position
(the conduct referred to in such clauses (i) through (iv) being sometimes
referred to herein as "disabling conduct"), (2) as to any matter disposed
of by settlement or a compromise payment by such indemnitee, pursuant to a
consent decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless there has been a
determination that such settlement or compromise is in the best interests
of the Fund and that such indemnitee appears to have acted in good faith in
the reasonable belief that his action as in the best interest of the Fund
and did not involve disabling conduct by such indemnitee and (3) with
respect to any action, suit or other proceeding voluntarily prosecuted by
any indemnitee as plaintiff, indemnification shall be mandatory only if the
prosecution of such action, suit or other proceeding by such indemnitee was
authorized by a majority of the full Board of the Fund.
(b) The Fund shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification
might be sought hereunder if the Fund receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the
Fund unless it is subsequently determined that he is entitled to such
indemnification and if the directors of the Fund determine that the facts
then known to them would not preclude indemnification. In addition, at
least one of the following conditions must be met: (A) the indemnitee
shall provide a security for his undertaking, (B) the Fund shall be insured
against losses arising by reason of any lawful advances, or (C) a majority
of a quorum consisting of directors of the Fund who are neither "interested
persons" of the Fund (as defined in Section 2(a)(19) of the Act) nor
parties to the proceeding ("Disinterested Non-Party Directors") or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the indemnitee ultimately
will be found entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such indemnitee is
not liable by reason of disabling conduct or, (2) in the absence of such a
decision, by (i) a majority vote of a quorum of the Disinterested Non-Party
Directors of the Fund, or (ii) if such a quorum is not obtainable or event,
if obtainable, if a majority vote of such quorum so directs, independent
legal counsel in a written opinion. All determinations that advance
payments in connection with the expense of defending any proceeding shall
be authorized shall be made in accordance with the immediately preceding
clause (2) above.
The rights accruing to any indemnitee under these provisions shall
not exclude any other right to which he may be lawfully entitled.
6. Duration and Termination
This Agreement shall become effective on the date it is approved
by the stockholder of the Fund and shall continue in effect for a period of
two years and thereafter from year to year, but only so long as such
continuation is specifically approved at least annually in accordance with
the requirements of the Act.
This Agreement may be terminated by the Adviser at any time
without penalty upon giving the Fund sixty days written notice (which
notice may be waived by the Fund) and may be terminated by the Fund at any
time without penalty upon giving the Adviser sixty days notice (which
notice may be waived by the Adviser), provided that such termination by the
Fund shall be directed or approved by the vote of a majority of the
Directors of the Fund in office at the time or by the vote of the holders of
a "majority" (as defined in the Act) of the voting securities of the Fund at
the time outstanding and entitled to vote. This Agreement shall terminate
automatically in the event of its assignment (as "assignment" is defined in
the Act).
7. Notices
Any notice under this Agreement shall be in writing to the other
party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the
earlier of the date actually received or on the fourth day after the
postmark if such notice is mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the laws of
the State of New York for contracts to be performed entirely therein
without reference to choice of law principles thereof and in accordance
with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the
day and the year first above written.
BGT SUBSIDIARY INC.
[SEAL] By: /s/ Ralph Schlosstein
____________________________
Name: Ralph Schlosstein
Title: President
BLACKROCK FINANCIAL MANAGEMENT, INC.
By: /s/ Ralph Schlosstein
_____________________________
Name: Ralph Schlosstein
Title: President
EXHIBIT J
CUSTODIAN CONTRACT
Between
BGT SUBSIDIARY, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It . . . . . . . 1
2. Duties of the Custodian with Respect to Property of the
Fund Held By the Custodian . . . . . . . . . . . . . . . . . . . . . 1
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . . . 1
2.3 Registration of Securities . . . . . . . . . . . . . . . . . . 3
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Availability of Federal Funds . . . . . . . . . . . . . . . . . 4
2.6 Collection of Income . . . . . . . . . . . . . . . . . . . . . 4
2.7 Payment of Fund Monies . . . . . . . . . . . . . . . . . . . . 5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . . . . . . . . . . . 6
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . . . . 6
2.10 Deposit of Fund Assets in Securities Systems . . . . . . . . . 6
2.11 Fund Assets Held in the Custodian's Direct Paper System . . . . 7
2.12 Segregated Account . . . . . . . . . . . . . . . . . . . . . . 8
2.13 Ownership Certificates for Tax Purposes . . . . . . . . . . . . 8
2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.15 Communications Relating to Fund Securities . . . . . . . . . . 9
2.16 Reports to Fund by Independent Public Accountants . . . . . . . 9
3. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . . 9
4. Actions Permitted without Express Authority . . . . . . . . . . . 10
5. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . 10
6. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income . . . . . . . . 10
7. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8. Opinion of Fund's Independent Accountant . . . . . . . . . . . . . 11
9. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . 11
10. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . 11
11. Effective Period, Termination and Amendment . . . . . . . . . . . 12
12. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . 13
13. Interpretive and Additional Provisions . . . . . . . . . . . . . . 13
14. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . 14
15. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 14
16. Shareholder Communications Election . . . . . . . . . . . . . . . 14
CUSTODIAN CONTRACT
This Contract between BGT Subsidiary, Inc., a corporation organized
and existing under the laws of Maryland, having its principal place of
business at 345 Park Avenue, New York, New York 10154, hereinafter called
the "Fund", and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Articles of Incorporation. The Fund
agrees to deliver to the Custodian all securities and cash owned by it, and
all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Fund from time
to time, and the cash consideration received by it for such new or treasury
shares of capital stock, $ par value, ("Shares") of the Fund as may be
issued or sold from time to time. The Custodian shall not be responsible
for any property of the Fund held or received by the Fund and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
3), the Custodian shall from time to time employ one or more
sub-custodians, but only in accordance with an applicable vote by the Board
of Directors of the Fund, and provided that the Custodian shall have no
more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all
securities owned by the Fund, other than (a) securities which are
maintained pursuant to Section 2.10 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
"Securities System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct
Paper System of the Custodian pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper
book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility
or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except
as may arise from the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is
to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the delivery
of securities owned by the Fund prior to the receipt of such
collateral;
11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund;
14) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive
Committee signed by an officer and certified by the Secretary or
an Assistant Secretary, specifying the securities of the Fund to
be delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund or
in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies
having the same investment adviser as the Fund, or in the name or
nominee name of any agent appointed pursuant to Section 2.9 or in the
name or nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on behalf of the
Fund under the terms of this Contract shall be in "street name" or
other good delivery form. If, however, the Fund directs the Custodian
to maintain securities in "street name", the Custodian shall utilize
its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or
order by the Custodian acting pursuant to the terms of this Contract,
and shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the Fund,
other than cash maintained by the Fund in a bank account established
and used in accordance with Rule 17f-3 under the Investment Company
Act of 1940. Funds held by the Custodian for the Fund may be
deposited by it to its credit as Custodian in the Banking Department
of the Custodian or in such other banks or trust companies as it may
in its discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each such
bank or trust company and the funds to be deposited with each such
bank or trust company shall be approved by vote of a majority of the
Board of Directors of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by
the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in
the amount of checks received in payment for Shares of the Fund which
are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered securities held hereunder to which
the Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income
and other payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the Custodian or
its agent thereof and shall credit such income, as collected, to the
Fund's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held
hereunder. Income due the Fund on securities loaned pursuant to the
provisions of Section 2.2(10) shall be the responsibility of the
Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which the Fund is
properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the parties,
the Custodian shall pay out monies of the Fund in the following cases
only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Fund but only
(a) against the delivery of such securities or evidence of title
to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended,
to act as a custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of the Fund or
in the name of a nominee of the Custodian referred to in Section
2.3 hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance with
the conditions set forth in Section 2.10 hereof; (c) in the case
of a purchase involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Fund
of securities owned by the Custodian along with written evidence
of the agreement by the Custodian to repurchase such securities
from the Fund or (e) for transfer to a time deposit account of
the Fund in any bank; such transfer may be effected prior to
receipt of a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions as defined in Section 3;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
3) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
4) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
5) For payment of the amount of dividends received in respect of
securities sold short;
6) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board of Directors or of the Executive Committee of the
Fund signed by an officer of the Fund and certified by its
Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment is
to be made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of securities for the account of
the Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions
from the Fund to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account
of the Fund upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund.
The Custodian shall transfer securities sold for the account of
the Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian
and be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each transfer to
or from the account of the Fund in the form of a written advice
or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund;
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received the initial certificate
required by Article 12 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from failure
of the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such loss or
damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by the Fund in
the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which
shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt
of payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transaction in
the Securities System for the account of the Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may reasonably
request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options
purchased, sold or written by the Fund or commodity futures contracts
or options thereon purchased or sold by the Fund, (iii) for the
purposes of compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, but only, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Directors or of the
Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by it and in
connection with transfers of such securities.
2.14 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Fund Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by
the Fund and the maturity of futures contracts purchased or sold by
the Fund) received by the Custodian from issuers of the securities
being held for the Fund. With respect to tender or exchange offers,
the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Fund desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Fund shall notify the Custodian at least
three business days prior to the date on which the Custodian is to
take such action.
2.16 Reports to Fund by Independent Public Accountants. The Custodian
shall provide the Fund, at such times as the Fund may reasonably
require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the Custodian
under this Contract; such reports, shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund, to
provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies,
the reports shall so state.
3. Proper Instructions
Proper Instructions as used herein means a writing signed or
initialled by one or more person or persons as the Board of Directors shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the Custodian
reasonably believes them to have been given by a person authorized to give
such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors of the Fund accompanied by a
detailed description of procedures approved by the Board of Directors,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of
Directors and the Custodian are satisfied that such procedures afford
adequate safeguards for the Fund's assets. For purposes of this Section,
Proper Instructions shall include instructions received by the Custodian
pursuant to any three-party agreement which requires a segregated asset
account in accordance with Section 2.12.
4. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from
the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, provided that all such payments shall be accounted
for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Fund
except as otherwise directed by the Board of Directors of the
Fund.
5. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed
by it to be genuine and to have been properly executed by or on behalf of
the Fund. The Custodian may receive and accept a certified copy of a vote
of the Board of Directors of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Directors pursuant to the
Articles of Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
6. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund to
keep the books of account of the Fund and/or compute the net asset value
per share of the outstanding shares of the Fund or, if directed in writing
to do so by the Fund, shall itself keep such books of account and/or
compute such net asset value per share. If so directed, the Custodian
shall also calculate weekly the net income of the Fund as described in the
Fund's currently effective prospectus and shall advise the Fund and the
Transfer Agent weekly of the total amounts of such net income and, if
instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and
the weekly income of the Fund shall be made at the time or times described
from time to time in the Fund's currently effective prospectus.
7. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet
the obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation
of securities owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
8. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from
the Fund's independent accountants with respect to its activities hereunder
in connection with the preparation of the Fund's Form N-2, and Form N-SAR
or other annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
9. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between the Fund and the Custodian.
10. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper
party or parties, including any futures commission merchant acting pursuant
to the terms of a three-party futures or options agreement. The Custodian
shall be held to the exercise of reasonable care in carrying out the
provisions of this Contract, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may,
in the opinion of the Custodian, result in the Custodian or its nominee
assigned to the Fund being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in
an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements and assumed settlement) or in the event
that the Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall
be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash and to
dispose of the Fund's assets to the extent necessary to obtain
reimbursement.
11. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties hereto and
may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect
not sooner than thirty (30) days after the date of such delivery or
mailing; provided, however that the Custodian shall not act under Section
2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund
has approved the initial use of a particular Securities System, as required
by Rule 17f-4 under the Investment Company Act of 1940, as amended and that
the Custodian shall not act under Section 2.11 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors has approved the initial use of the
Direct Paper System; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any applicable federal
or state regulations, or any provision of the Articles of Incorporation,
and further provided, that the Fund may at any time by action of its Board
of Directors (i) substitute another bank or trust company for the Custodian
by giving notice as described above to the Custodian, or (ii) immediately
terminate this Contract in the event of the appointment of a conservator or
receiver for the Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
12. Successor Custodian
If a successor custodian shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in
the form for transfer, all securities then held by it hereunder and shall
transfer to an account of the successor custodian all of the Fund's
securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the
Board of Directors of the Fund, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance with
such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Directors shall have been
delivered to the Custodian on or before the date when such termination
shall become effective, then the Custodian shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the Investment
Company Act of 1940, doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian and all
instruments held by the Custodian relative thereto and all other property
held by it under this Contract and to transfer to an account of such
successor custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the successor of
the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to
or of the Board of Directors to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its services during
such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Contract relating to the
duties and obligations of the Custodian shall remain in full force and
effect.
13. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund, may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Articles of Incorporation of the Fund.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
14. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
15. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody
of the Fund's assets.
16. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by
issuers of securities for the names, addresses and holdings of beneficial
owners of securities of that issuer held by the bank unless the beneficial
owner has expressly objected to disclosure of this information. In order
to comply with the rule, the Custodian needs the Fund to indicate whether
it authorizes the Custodian to provide the Fund's name, address, and share
position to requesting companies whose securities the Fund owns. If the
Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes"
or does not check either "yes" or "no" below, the Custodian is required by
the rule to treat the Fund as consenting to disclosure of this information
for all securities owned by the Fund or any funds or accounts established
by the Fund. For the Fund's protection, the Rule prohibits the requesting
company from using the Fund's name and address for any purpose other than
corporate communications. Please indicate below whether the Fund consents
or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the 30th day of October, 1998.
ATTEST BGT SUBSIDIARY INC.
/s/ James Kong By: /s/ Henry Gabbay
____________________ ______________________________
James Kong Henry Gabbay
Treasurer
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ James Kong By: /s/ Ronald E. Logue
_____________________ ________________________________
James Kong Ronald E. Logue
Executive Vice President
EXHIBIT K
BGT SUBSIDIARY INC.
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, made as of the 30th day of October, 1998
between BGT SUBSIDIARY INC., a Maryland Corporation (the "Company"), and
Morgan Stanley Dean Witter Advisors Inc., a Delaware corporation (the
"Administrator").
W I T N E S S E T H:
WHEREAS, the Company is a diversified closed-end management investment
company registered under the Investment Company Act of 1940, as amended
(the "Investment Company Act"); and
WHEREAS, the Company has retained an investment advisor for the
purpose of investing its assets in securities and desires to retain the
Administrator for certain administrative services, and the Administrator is
willing to furnish such administrative services on the terms and conditions
hereinafter set forth,
NOW, THEREFORE, the parties hereto agree as follows:
1. The Company hereby appoints the Administrator to provide the
services set forth below, subject to the overall supervision of the Board
of Directors of the Company for the period and on the terms set forth in
this Agreement. The Administrator hereby accepts such appointment and
agrees during such period to render the services herein described and to
assume the obligations herein set forth, for the compensation herein
provided.
2. Subject to the supervision of the Board of Directors and officers
of the Company, the Administrator shall provide facilities for meetings of
the Board of Directors and arrange for facilities for shareholder meetings
of the Company and provide office facilities and personnel to assist the
officers of the Company in the performance of the following services:
(a) Oversee the determination and publication of the Company's net
asset value by State Street Bank & Trust Company;
(b) Oversee the maintenance by State Street Bank and Trust Company of
certain books and records of the Company as required under the
Investment Company Act of 1940 and maintain (or oversee maintenance
by such other persons as approved by the Board of Directors) such
other books and records (other than those maintained by the
investment advisor) required by law or for the proper operation of
the Company;
(c) Maintain tax accounting records and provide information to assist
the Company's independent accountants in preparing the Company's
federal, state and local income tax returns;
(d) Review the appropriateness of and arrange for payment of the
Company's expenses;
(e) Prepare for review and approval by officers of the Company
financial information for the Company's semi-annual and annual
reports, proxy statements and other communications with
shareholders required or otherwise to be sent to Company
shareholders, and arrange for the printing and dissemination of
such reports and communications to shareholders;
(f) Prepare for review by an officer of the Company the Company's
periodic financial reports required to be filed with the Securities
and Exchange Commission ("SEC') on Form N-SAR and such other
reports, forms or filings, as may be mutually agreed upon;
(g) Prepare reports relating to the business and affairs of the Company
as may mutually be agreed upon, including information necessary for
meetings of the Board of Directors;
(h) Prepare such information, reports and notices as may be required by
any stock exchange or exchanges on which the Company's shares are
listed and to transmit to any such exchange or exchanges any such
materials as required by the rules of any such exchange or
exchanges;
(i) Make such reports and recommendations to the Board concerning the
performance of the independent accountants as the Board may
reasonably request or deem appropriate;
(j) Make such reports and recommendations to the Board concerning the
performance and fees of the Company's custodian and transfer and
dividend disbursing agents as the Board may reasonably request or
deem appropriate;
(k) Oversee and review calculations of fees paid to the Administrator,
the investment advisor, the custodian and the transfer and dividend
disbursing agent;
(l) Consult with the Company's officers, independent accountants, legal
counsel, custodian, accounting agent and transfer and dividend
disbursing agent in establishing the accounting policies of the
Company;
(m) Review implementation of any stock purchase or dividend
reinvestment programs authorized by the Board of Directors;
(n) Provide such mutually agreed to assistance as the investment
advisor, the custodian and the Company's counsel and auditors
generally may require to properly carry on the business and
operations of the Company;
(o) Respond to or refer to the Company's officers or transfer agent,
shareholder inquiries relating to the Company; and
(p) Provide to Standard & Poor's Corporation ("S&P"), upon its request,
corporate or financial information reasonably available to the
Administrator to assist S&P in the rating of the Company's shares.
All services are to be furnished through the medium of any
directors,
officers or employees of the Administrator as the Administrat
deems
appropriate in order to fulfill its obligations hereunder
Each party shall bear all its own expenses incurred in connection
with
the performance of its respective duties under this Agreement
3. The parties hereto agree that the Administrator will receive
compensation for the services it renders under this Agreement from Black
Rock Strategic Term Trust, Inc. The Company shall not pay the
Administrator any fee for services rendered under this Agreement.
4. The Administrator assumes no responsibility under this Agreement
other than to render the services called for hereunder, and specifically
assumes no responsibilities for legal advice, federal and state tax advice,
investment advice or the investment or reinvestment of the Company's
assets.
5. The Administrator shall not be liable for any error of judgment or
for any loss suffered by the Company in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance
of, or from reckless disregard by it of its obligations and duties under,
this Agreement.
6. This Agreement shall become effective as of the date on which the
Company's Registration Statement on Form N-2 shall be declared effective by
the SEC and shall thereafter continue in effect unless terminated as herein
provided. This Agreement may be terminated by either party hereto (without
penalty) at any time upon not less than 60 days' prior written notice to
the other party hereto.
7. The Services of the Administrator to the Company hereunder are not
exclusive and nothing in this Agreement shall limit or restrict the right
of the Administrator to engage in any other business or to render services
of any kind to any other corporation, firm, individual or association. The
Administrator shall be deemed to be an independent contractor, unless
otherwise expressly provided or authorized by this Agreement.
8. During the term of this Agreement, the Company agrees to furnish
the Administrator at the principal office of the Administrator prior to use
thereof all prospectuses, proxy statements, reports to shareholders, sales
literature, or other material prepared for distribution to shareholders of
the Company or the public that refer in any way to the Administrator. If
the Administrator reasonably objects in writing to such references within
five business days (or such other time as may be mutually agreed) after
receipt thereof, the Company will modify such references in a manner
reasonably satisfactory to the Administrator. In the event of termination
of this Agreement, the Company will continue to furnish to the
Administrator copies of any of the above-mentioned materials that refer in
any way to the Administrator. The Company shall furnish or otherwise make
available to the Administrator such other information relating to the
business affairs of the Company as the Administrator at any time, or from
time to time, reasonably requests in order to discharge its obligations
hereunder.
9. This Agreement may be amended by mutual written consent.
10. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Administrator at Two World
Trade Center, New York, New York 10048, Attention: Secretary or (2) to the
Company at 345 Park Avenue, New York, New York 10154, Attention: President.
11. This Agreement sets forth the agreement and understanding of the
parties hereto solely with respect to the matters covered hereby and the
relationship between the Company and Morgan Stanley Dean Witter Advisors
Inc. as Administrator. Nothing in this Agreement shall govern, restrict or
limit in any respect any other business dealings between the parties hereto
unless otherwise expressly provided herein.
12. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without reference to choice of law
principles thereof and in accordance with the Investment Company Act. In
the case of any conflict the Investment Company Act shall control.
IN WITNESS WHEREOF, the parties hereto have
caused this instrume
to be executed by their officers designated below as
of the day and year fir
above written.
BGT SUBSIDIARY INC.
By: /s/ Ralph Schlosstein
__________________________
Ralph L. Schlosstein
Title: President
MORGAN STANLEY DEAN WITTER ADVISORS INC.
By: /s/ Mitchell M. Merin
___________________________
Mitchell M. Merin
Title: President
Acknowledged:
BLACK ROCK STRATEGIC
TERM TRUST, INC.
By: /s/ Ralph Schlosstein
________________________
Ralph L. Schlosstein
Title: President
