SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c)
or ss. 240.14a-12
American Government Term Trust Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LOGO]
Piper Capital Management
222 South Ninth Street
Minneapolis, MN 55402-3804
800 866-7778
Dear Shareholders:
Enclosed is the proxy statement for a special meeting of shareholders of the
American Government Term Trust to be held on December 7, 1995.
SHAREHOLDERS ARE BEING ASKED TO APPROVE THE LIQUIDATION OF THE AMERICAN
GOVERNMENT TERM TRUST AND THE DISTRIBUTION OF ITS NET ASSETS TO SHAREHOLDERS.
As we have previously reported to you, we have concluded that the fund cannot
be expected to reach $10 per share at termination without taking investment
risks that we feel are unacceptable. In addition, for reasons explained in
the proxy statement, the fund's portfolio now consists primarily of U.S.
Treasury zero-coupon securities, and the fund's investment policies require
that the fund retain these securities. We believe that, with this portfolio
structure, you most likely could receive a more favorable return going
forward by investing your underlying assets in another investment vehicle.
GIVEN THESE FACTS, PIPER CAPITAL RECOMMENDED TO THE FUND'S BOARD OF DIRECTORS
THAT THE FUND BE LIQUIDATED. The board also considered several alternatives
to liquidation, but concluded that these alternatives do not give
shareholders sufficient promise of additional value to justify pursuing them.
ACCORDINGLY, THE BOARD HAS RECOMMENDED THAT YOU FOR VOTE FOR THE LIQUIDATION
AND DISSOLUTION OF THE FUND. The following shareholder Q&A and proxy
statement provide more detailed information about the proposal and the
reasons why the board recommends you vote in favor of it.
PLEASE TAKE A MOMENT NOW TO READ THE INFORMATION AND SIGN AND RETURN THE
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. As the date of the meeting
approaches, if you haven't already voted, you may receive a telephone call
from Shareholder Communications Corporation, a professional proxy
solicitation firm, reminding you to exercise your right to vote. If you have
questions about this proposal, please contact your broker.
Sincerely,
/s/ William H. Ellis
William H. Ellis
President
[LOGO]
SHAREHOLDER Q&A
October , 1995
Piper Capital Management, as adviser to American Government Term Trust, has
concluded that the fund cannot be expected to accomplish its objective of
returning $10 per share on its termination date in August 2001 without taking
unacceptable risks. Piper Capital has proposed that the fund be liquidated,
and the fund's board of directors has agreed with that recommendation.
WHAT IS PREVENTING THE FUND FROM REACHING ITS $10 OBJECTIVE?
The fund realized significant losses in 1994 in the non-zero-coupon bond,
cash-producing portion of its portfolio which consisted primarily of
mortgage-backed securities. If the zero-coupon bonds currently held by the
portfolio could be held to maturity, shareholders would receive $10 per share
upon termination of the fund. However, in order for the fund to avoid the
payment of federal income taxes, it must pay dividends to shareholders that
include an amount equal to the accrued annual income on the zero-coupon bonds
even though the fund receives no interest payments on these securities. As a
result of the losses in 1994, the non-zero-coupon bond portion of the
portfolio is now too small to generate the cash needed to make dividend
payments for the six years remaining until the maturity of the fund. If the
fund continues, the fund's portfolio managers will be forced to begin selling
zero-coupon bonds sometime in 1998 (assuming stable interest rates, income
and dividend payments) to meet the requirements related to distribution of
income. Selling the zero-coupon bonds would prevent the fund from reaching
its $10 per share objective.
WHY DID PIPER CAPITAL PROPOSE THAT THE FUND BE LIQUIDATED?
As mentioned above, we have concluded that the fund cannot be expected to
reach $10 per share at termination without taking investment risks we feel
are unacceptable. In addition, for reasons explained in the proxy statement,
the fund's portfolio now consists primarily of U.S. Treasury zero-coupon
securities and the fund's investment policies require that the fund retain
these securities. We believe that, with this portfolio structure, you most
likely could receive a more favorable return going forward by investing your
underlying assets in another investment vehicle. Given these facts, we
recommended to the fund's board of directors that the fund be liquidated.
WHAT ALTERNATIVES TO LIQUIDATION DID THE BOARD CONSIDER?
The board discussed a number of alternatives to liquidation, including
changing the fund's investment policies in an effort to reach $10 per share,
reducing the fund's dividend, and converting the fund to an open-end
investment company with an elimination of the $10 per share objective and
changes in the fund's investment policies. The board concluded, however, that
the alternatives to liquidation do not give shareholders sufficient promise
of additional value to justify pursuing them. Accordingly, the board has
recommended that you vote in favor of the liquidation and dissolution of the
fund.
WHAT WOULD BE THE COSTS TO ME AS A SHAREHOLDER FOR IMPLEMENTING THIS
PROPOSAL?
There would be no costs to shareholders for liquidating the fund. Piper
Capital has agreed to pay for the costs specific to the liquidation. This
includes legal and accounting fees, proxy solicitation fees, shareholder
meeting expenses, and the costs of preparing, printing and mailing the proxy
statement and other printed materials.
WHAT ARE THE TAX CONSEQUENCES OF THE LIQUIDATION?
The payment of liquidation distributions to shareholders would be a taxable
event which means that, for federal income tax purposes, shareholders would
recognize capital gains or capital losses.
HOW DOES THE PENDING LAWSUIT AGAINST THE FUND AFFECT SHAREHOLDER'S DECISION
TO LIQUIDATE?
The pending lawsuit against the fund and other Piper Capital closed-end funds
will not delay the payment of proceeds to shareholders. Ordinarily, any claim
made against the fund would have to be paid or provided for by the fund prior
to distributing liquidation proceeds to shareholders. However, Piper Jaffray
Companies and Piper Capital have agreed that if the liquidation is approved,
they will pay all the costs and expenses involved with this lawsuit that
might otherwise be incurred by the fund. Therefore, the fund will not have to
hold back any liquidation proceeds from shareholders to cover possible
litigation costs and expenses.
WHEN WILL I RECEIVE THE VALUE FOR MY SHARES IF THE TERM TRUST LIQUIDATES?
If shareholders approve the liquidation by the special shareholder meeting
date, we anticipate that they will receive their distributions in late
December or early January. The Fund may elect not to declare the regular
December distribution in order to save administrative costs. Any undistributed
income would be included in the final liquidation check.
WHAT PERCENTAGE OF "YES" VOTES ARE NEEDED TO APPROVE THE LIQUIDATION?
More than fifty percent of the fund's outstanding shares must vote "yes" for
this proposal to pass.
WHEN IS MY PROXY DUE? WHERE DO I SEND IT?
We'd like to receive your completed, signed and dated proxy as soon as possible.
A postage-paid envelope is enclosed for mailing your proxy. If you have
misplaced your envelope, please mail your proxy to: Alamo Direct Mail,
_________________________________ . If you haven't returned your ballot as the
meeting date approaches, you may receive a call from Shareholder Communications
Corporation (SCC) reminding you to vote. Piper Capital has hired SCC to assist
with the solicitation of proxies.
WHEN AND WHERE WILL THE SPECIAL SHAREHOLDER MEETING TAKE PLACE?
The shareholder meeting will take place at 10 a.m. on December 7, 1995, on
the eleventh floor of the Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota. Regardless of whether you plan to attend the meeting,
you should return your proxy card in the mail as soon as possible.
Please read the full text of the enclosed proxy statement for further
information.
AMERICAN GOVERNMENT TERM TRUST INC.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402-3804
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 7, 1995
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of American
Government Term Trust Inc. (the "Fund") will be held at 10:00 a.m., Central
Time, on Thursday, December 7, 1995, on the eleventh floor of the Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota. The purposes
of the meeting are as follow:
1. To consider and vote upon the liquidation and dissolution of the Fund
pursuant to the provisions of the Plan of Liquidation and Dissolution
of the Fund approved by the Fund's Board of Directors on October 9,
1995.
2. To transact such other business as may properly come before the
meeting.
Shareholders of record on October 24, 1995, are the only persons entitled to
notice of and to vote at the meeting.
Your attention is directed to the attached Proxy Statement. WHETHER OR NOT
YOU EXPECT TO BE PRESENT AT THE UPCOMING MEETING, PLEASE FILL IN, SIGN, DATE,
AND MAIL THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A stamped return
envelope is enclosed for your convenience.
David Evans Rosedahl
Secretary
Dated: November , 1995
PROXY STATEMENT
AMERICAN GOVERNMENT TERM TRUST INC.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402-3804
SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 7, 1995
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of American Government Term Trust Inc. (the "Fund") of
proxies to be voted at a special meeting of shareholders of the Fund to be
held December 7, 1995, and any adjournments thereof. The costs of
solicitation, including the cost of preparing and mailing the Notice of
Meeting and this Proxy Statement, will be paid by Piper Capital Management
Incorporated, the Fund's investment adviser and manager (the "Adviser"), and
such mailing will take place on approximately November , 1995. Additional
solicitation may be made by letter, telephone or telegraph by officers or
employees of the Adviser or Piper Jaffray Inc., an affiliate of the Adviser
and a principal underwriter of the initial public offering of the Fund's
shares, or by dealers and their representatives. In addition, the Fund has
engaged Shareholder Communications Corporation to assist in the solicitation
of proxies, the cost of which will be borne by the Adviser. The address of
the Adviser is that of the Fund as provided above.
A proxy may be revoked before the meeting by giving written notice of
revocation in person or by mail to the Secretary of the Fund, by delivery of
a duly executed proxy bearing a later date or by attending and voting at the
Meeting. A quorum of shareholders is required to take action at the Meeting.
A majority of the shares entitled to vote at the Meeting, represented in
person or by proxy, will constitute a quorum of shareholders at the Meeting.
For purposes of determining the approval of the proposal being submitted to
shareholders for a vote, in instances where a choice is specified by the
shareholder in the proxy, those proxies will be voted in accordance with the
shareholder's choice. If no specification is made in the proxy, it will be
voted for approval of the liquidation and dissolution of the Fund.
Abstentions will be counted as present for purposes of determining whether a
quorum of shares is present at the meeting, but will be counted as a vote
"against" the proposal to liquidate and dissolve the Fund. Under the Rules of
the New York Stock Exchange, the proposal to liquidate and dissolve the Fund
is considered a "non-discretionary" proposal, which means that brokers who
hold Fund shares in street name for customers are not authorized to vote on
such proposal on behalf of their customers without specific voting
instructions from such customers. If a broker returns a "non-vote" proxy,
indicating a lack of authority to vote on the proposal, then the shares
covered by such non-vote shall be deemed present at the meeting for purposes
of determining a quorum but shall not be deemed to be represented at the
meeting for purposes of calculating the vote with respect to the proposal. So
far as the Board of Directors of the Fund is aware, no matters other than
those described in this Proxy Statement will be acted upon at the meeting.
Should any other matters properly come before the meeting, it is the
intention of the persons named as proxies in the enclosed proxy to act upon
them according to their best judgment.
Only shareholders of record on October 24, 1995, may vote at the meeting or
any adjournments thereof. As of that date, there were issued and outstanding
common shares, $.01 par value, of the Fund. Common shares represent
the only class of securities of the Fund. Each shareholder of the Fund is
entitled to one vote for each share held. No person, to the knowledge of Fund
management, was the beneficial owner of more than 5% of the voting shares of
the Fund as of October 24, 1995. As of such date, the officers and directors
of the Fund, as a group, beneficially owned less than 1% of the Fund's
outstanding shares.
Under Minnesota law, none of the shareholders of the Fund will be entitled to
exercise any dissenter's rights or appraisal rights with respect to the
liquidation and dissolution of the Fund.
THE FUND'S ANNUAL AND SEMIANNUAL REPORTS FOR THE FISCAL YEAR ENDED NOVEMBER
30, 1994 AND THE SIX MONTHS ENDED MAY 31, 1995, INCLUDING FINANCIAL
STATEMENTS, WERE PREVIOUSLY MAILED TO SHAREHOLDERS. IF YOU HAVE NOT RECEIVED
THESE REPORTS OR WOULD LIKE TO RECEIVE ANOTHER COPY OF ONE OR BOTH REPORTS,
PLEASE CONTACT THE FUND AT 222 SOUTH NINTH STREET, MINNEAPOLIS, MINNESOTA
55402-3804, OR CALL 800-866-7778, AND COPIES WILL BE SENT, WITHOUT CHARGE, BY
FIRST-CLASS MAIL WITHIN ONE BUSINESS DAY OF YOUR REQUEST.
APPROVAL OF A PLAN OF LIQUIDATION AND DISSOLUTION
INTRODUCTION
At a meeting held on August 18, 1995, the Board of Directors approved the
liquidation and dissolution of the Fund. A Plan of Liquidation and
Dissolution of the Fund ("Liquidation Plan") was subsequently adopted by the
Board of Directors on October 9, 1995, subject to shareholder approval. A
copy of the Liquidation Plan is attached as Exhibit A to this Proxy
Statement. If the Liquidation Plan is approved by the shareholders, the
portfolio securities and other assets of the Fund will be sold, creditors
will be paid or reserves for such payments established, and the net proceeds
of such sales distributed to the shareholders in cash, pro rata in accordance
with their shareholdings. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE PLAN OF LIQUIDATION AND DISSOLUTION.
BACKGROUND
The Fund, which is located at 222 South Ninth Street, Minneapolis, Minnesota
55402, is a closed-end diversified management investment company incorporated
under the laws of the State of Minnesota. The Fund's shares were first
offered to the public in January 1989 and have been listed on the New York
Stock Exchange since that time under the symbol "AGT." The Fund's investment
objective is to manage a portfolio of high quality securities that will
provide high current income and return $10 per share (the initial offering
price per share) to investors on or shortly before August 31, 2001. As a
fundamental policy, at least 65% of the Fund's total assets must be invested
in U.S. Government securities and repurchase agreements for such securities.
The Fund was structured to achieve its objectives by investing in a pool of
zero-coupon securities maturing prior to August 31, 2001 with a stated
principal amount equal to $10 per share and a pool of non-zero-coupon
securities, consisting primarily of mortgage-backed securities, which would
provide cash flow to pay the Fund's monthly dividend. For the reasons
discussed below, however, the Adviser has determined that the Fund cannot be
expected to reach its $10 per share objective without incurring an
unacceptable level of risk.
Commencing February 1994, the Federal Reserve Board initiated seven separate
increases to short-term interest rates. This rapid and significant increase
in interest rates caused the Fund to realize significant losses in its
non-zero-coupon securities. If the zero-coupon securities in the Fund's
portfolio could be held to maturity, shareholders would receive approximately
$10 per share upon termination of the Fund. However, in order to avoid the
payment of federal income taxes at the Fund level, the Fund must pay
dividends to shareholders that include an amount equal to the accrued income
from original issue discount on the Fund's zero-coupon securities, even
though the Fund receives no cash payments of interest on these securities. It
was expected that the Fund would be able to pay these dividends by limiting
the reinvestment of principal returned on investments and by liquidating
substantially all of its assets other than the zero-coupon securities over
time. As a result of losses realized during 1994 in the Fund's
non-zero-coupon securities, however, the non-zero-coupon security portion of
the Fund's portfolio is now too small to generate the cash needed to pay the
dividends for the six years remaining until maturity. Assuming stable
interest rates, income, and dividend payments, the Fund will be forced to
begin liquidating zero-coupon securities sometime in 1998 to meet income
distribution requirements. Sale of these zero-coupon securities would reduce
the value of the Fund at termination, thereby preventing the Fund from
reaching its $10 per share objective.
In addition, as a result of the reduced earnings level of the Fund, the
Fund's monthly dividend was reduced in February 1995 from $.0650 to $.0525
per share, and then further reduced in May 1995 to $.0400 per share. Since
February 1995, the Fund's shares generally have traded at a discount to their
net asset value. Prior thereto, the Fund's shares generally traded at a
premium to their net asset value. See "Net Asset Value and Market Price"
below.
After conducting an in-depth review of the Fund's portfolio, the Adviser
announced, concurrently with the announcement of the Fund's May dividend
reduction, that the reduced earning capacity of the Fund due to losses
realized in the non-zero-coupon security portion of the Fund's portfolio
would likely affect the Fund's ability to return $10 per share upon
termination. The Adviser also announced that it would waive its management
and administrative fees from April 1995 through at least November 1995 while
it explored alternatives for the Fund. In July 1995, the Adviser concluded
that the Fund could not be expected to reach $10 per share at termination
without taking investment risks that the Adviser deemed unacceptable. The
Adviser also noted that, because of the decreasing size of the non-zero
coupon security component of the Fund's portfolio and because of investment
policies that require the Fund to retain its zero-coupon securities (except
as necessary to avoid the payment of federal income taxes), the Fund now
consists primarily of U.S. Treasury zero-coupon obligations. As a result,
absent a significant change in the fund's investment policies, investors
could likely receive a more favorable return by investing their underlying
assets in another investment vehicle. Accordingly, the Adviser presented to
the Fund's Board of Directors for their consideration a written report
recommending the liquidation and dissolution of the Fund.
RECOMMENDATION OF THE BOARD OF DIRECTORS
On August 18, 1995, the Board of Directors held a meeting at which the
possibility of liquidation and dissolution of the Fund was discussed in
detail. Alternatives to liquidation and dissolution were discussed at length,
including (a) a change in the Fund's investment policies whereby the Fund
would sell all or a portion of its zero-coupon securities and reinvest in
other types of securities in an effort to reach $10 per share at maturity,
(b) reducing the Fund's dividend to the minimum amount necessary to avoid the
payment of federal income taxes at the Fund level, and (c) converting the
Fund to an open-end investment company with an elimination of the $10 per
share objective. The Board of Directors determined that it would not be in
the best interests of Fund shareholders to pursue any of these alternatives.
In considering the first alternative set forth above, the Directors noted the
Adviser's representation that it would be necessary to significantly increase
the risk in the Fund's portfolio in order to reach $10 per share at maturity
and determined that changing investment policies to take such risk was not
appropriate. In considering the second alternative set forth above, the
Directors noted that, according to the Adviser, even if dividends were
reduced to the minimum amount necessary for the Fund to continue to qualify
as a regulated investment company, the $10 per share objective would most
likely still not be attainable. Moreover, in the Adviser's view, such a
reduced level of dividend income would be unattractive to shareholders.
Finally, in considering the option of converting the Fund to an open-end
investment company, the Board considered the Adviser's representation that,
in order to operate as an open-end investment company, the Fund would have to
change its investment policies to significantly reduce its holdings of
zero-coupon securities in order to produce earnings that could be distributed
to shareholders. Thus, although conversion to an open-end investment company
would provide the benefit of eliminating the current market discount of the
Fund's shares, it also would require transformation of the Fund into a
significantly different investment vehicle than originally selected by
shareholders.
The Board of Directors concluded that the alternatives to liquidation and
dissolution did not afford to shareholders sufficient promise of additional
value to justify pursuing those alternatives. In addition, the Board noted
that liquidation and dissolution would permit shareholders to receive the net
asset value underlying their shares, rather than the discounted market price
that they would be able to receive upon a sale of those shares in the open
market, and to invest that amount in investment vehicles of their own choice.
The Directors also noted that shareholders would be permitted to invest the
cash distributions to be received by them upon liquidation of the Fund in the
shares of any mutual fund managed by the Adviser and open to new investors
without payment of a sales charge. (Any such sales would be subject to the
eligibility of share purchases in the shareholder's state as well as the
minimum investment requirements and any other applicable terms in the
prospectus of the fund being acquired.) Accordingly, the Board of Directors
of the Fund, including all of the Directors who are not "interested persons"
of the Fund, as defined in the Investment Company Act of 1940, unanimously
adopted a resolution declaring the proposed liquidation and dissolution
advisable and directing the Adviser to prepare a Plan of Liquidation and
Dissolution (the "Liquidation Plan"). On October 9, 1995, the Board of
Directors adopted the Liquidation Plan and directed that it be submitted to
the Fund's shareholders for their consideration.
DESCRIPTION OF THE LIQUIDATION PLAN AND RELATED TRANSACTIONS
If the Liquidation Plan is approved by the Fund's shareholders, the Fund will
file a notice of intent to dissolve with the Minnesota Secretary of State.
When such notice has been filed, the Fund will cease to carry on its business
and will proceed to sell all of its portfolio securities and other assets for
cash at one or more public or private sales and at such prices and on such
terms and conditions as the Adviser determines to be reasonable and in the
best interests of the Fund and its shareholders. The Fund then will apply its
assets to the payment, satisfaction and discharge of all existing debts and
obligations of the Fund, and distribute in one or more payments the remaining
assets among the shareholders of the Fund, with each shareholder receiving
his or her proportionate share of each liquidation distribution in cash.
Thereafter, the Fund will file articles of dissolution with the Minnesota
Secretary of State in accordance with Minnesota law. Upon such filing, the
Fund will be statutorily dissolved and will cease to exist, and no
shareholder will have any interest whatsoever in the Fund. The expenses of
liquidation of the Fund, other than brokerage commissions and taxes, if any,
will be borne by the Adviser.
If the Plan is adopted, the Adviser currently estimates that the liquidation
distributions will be paid to shareholders during late December 1995 or early
January 1996. However, the exact date of the liquidation distributions will
depend on the time required to liquidate the Fund's assets. The Fund may, if
deemed appropriate, hold back sufficient assets to deal with any disputed
claims or other contingent liabilities which may then exist against the Fund.
Any amount that is held back relating to any such claim will be deducted pro
rata from the net assets distributable to shareholders and held until the
claim is settled or otherwise determined. The Adviser does not anticipate,
however, that it will be necessary to hold back any assets to deal with
disputed claims or other contingent liabilities. Articles of dissolution may
not be filed by the Fund until claims of all known creditors and claimants
have been paid or adequately provided for. In the event that claims are not
adequately provided for or are brought after dissolution by previously
unknown creditors or claimants, Fund directors and officers could be held
personally liable. In addition, claims possibly could be pursued against
shareholders to the extent of distributions received by them in liquidation.
A complaint purporting to be a class action has been filed against the Fund
and other defendants in United States District Court. See "Litigation" below.
Under the statutory dissolution procedures described above, the Fund may not
distribute assets to shareholders unless adequate provision has been made for
this claim. Piper Jaffray Companies Inc. ("Piper") and the Adviser have
agreed, pursuant to an Assumption Agreement between and among Piper, the
Adviser and the Fund, to assume all liabilities of the Fund in connection
with such lawsuit in the event Fund shareholders approve the liquidation and
dissolution of the Fund. Accordingly, the Board of Directors of the Fund has
determined that it will not be necessary to hold back Fund assets to provide
for such lawsuit. A copy of the agreement is attached as Exhibit B to this
Proxy Statement.
The Fund does not currently intend to create a trust to administer
liquidation distributions; however, in the event the Fund is unable to
distribute all of its assets pursuant to the Plan because of its inability to
locate shareholders to whom liquidation distributions are payable, the Fund
may create a liquidating trust with a financial institution and deposit any
remaining assets of the Fund in such trust for the benefit of the
shareholders that cannot be located. The expenses of any such trust will be
charged against the liquidation distributions held therein.
As soon as practicable after the distribution of all of the Fund's assets in
complete liquidation, the officers of the Fund will close the books of the
Fund and prepare and file, in a timely manner, any and all required income
tax returns and other documents and instruments. The Fund will also file a
Form N-8F with the SEC when it has distributed substantially all of its
assets to shareholders and has effected, or is in the process of effecting, a
winding up of its affairs in order to deregister the Fund under the
Investment Company Act of 1940, and file, or cause to be filed, any and all
other documents and instruments necessary to terminate the regulation of the
Fund and its business and affairs by the SEC.
The Fund may elect not to declare the regular monthly distribution that
would be payable in December pending the vote on the Plan in order to save
the administrative costs that would be associated with payment of such
distribution. If the shareholder meeting is adjourned, additional monthly
distributions may also be suspended. Any amount that would otherwise have
been paid as a monthly distribution will be declared as a distribution when
the liquidation proceeds are paid to shareholders and paid with the rest of
the proceeds of liquidation.
EXCHANGE OF STOCK CERTIFICATES FOR LIQUIDATION DISTRIBUTIONS
Prior to completion of the liquidation, the Fund will send to its
shareholders of record (shareholders with stock certificates) a letter of
transmittal form for the purpose of exchanging each shareholder's Fund shares
for liquidation distributions. Shareholders whose shares are held in the name
of their broker or other financial institution will receive their
distributions through their nominee firms. No amount will be distributed by
the Fund to a shareholder of record unless and until such shareholder
delivers to the Fund a signed letter of transmittal form and the certificates
representing the shareholder's Fund shares or, in the event a share
certificate has been lost, a lost certificate affidavit and such surety bonds
and other documents and instruments as are reasonably required by the Fund,
together with appropriate forms of assignment, endorsed in blank and with any
and all signatures thereon guaranteed by a financial institution reasonably
acceptable to the Fund.
The right of a shareholder to sell his or her Fund shares on the New York
Stock Exchange at any time prior to the Fund's filing of a notice of intent
to dissolve will not be impaired by the adoption of the Liquidation Plan. The
Fund expects that on or about the date that the Fund files such notice, the
listing of the Fund's shares on such exchange will terminate.
FEDERAL INCOME TAX CONSEQUENCES
PAYMENT BY THE FUND OF LIQUIDATION DISTRIBUTIONS TO SHAREHOLDERS WILL BE A
TAXABLE EVENT. BECAUSE THE INCOME TAX CONSEQUENCES FOR A PARTICULAR
SHAREHOLDER MAY VARY DEPENDING ON INDIVIDUAL CIRCUMSTANCES, EACH SHAREHOLDER
IS URGED TO CONSULT HIS OR HER OWN TAX ADVISER CONCERNING THE FEDERAL, STATE
AND LOCAL TAX CONSEQUENCES OF RECEIPT OF A LIQUIDATING DISTRIBUTION.
The Fund currently qualifies, and intends to continue to qualify through the
end of the liquidation period, for treatment as a regulated investment
company under the Internal Revenue Code of 1986, as amended, so that it will
be relieved of federal income tax on any investment company taxable income or
net capital gain (the excess of net long-term capital gain over net
short-term capital loss) from the sale of its assets.
The payment of liquidation distributions will be a taxable event to
shareholders. Each shareholder will be viewed as having sold his or her Fund
shares for an amount equal to the liquidation distribution(s) he or she
receives. Each shareholder will recognize gain or loss in an amount equal to
the difference between (a) the shareholder's adjusted basis in the Fund
shares, and (b) such liquidation distribution(s). The gain or loss will be
capital gain or loss to the shareholder if the Fund shares were capital
assets in the shareholder's hands and generally will be long-term if the Fund
shares were held for more than one year before the liquidation distribution
is received.
The Fund generally will be required to withhold tax at the rate of 31% with
respect to any liquidation distribution paid to individuals and certain other
non-corporate shareholders who fail to certify to the Fund that their social
security number or taxpayer identification number provided to the Fund is
correct and that the shareholder is not subject to backup withholding.
The foregoing summary is generally limited to the material federal income tax
consequences to shareholders who are individual United States citizens and
who hold shares as capital assets. It does not address the federal income tax
consequences to shareholders who are corporations, trusts, estates,
tax-exempt organizations or non-resident aliens. This summary does not
address state or local tax consequences. Shareholders are urged to consult
their own tax advisers to determine the extent of the federal income tax
liability they would incur as a result of receiving a liquidation
distribution, as well as any tax consequences under any applicable state,
local or foreign laws.
FINANCIAL HIGHLIGHTS
The following financial highlights for the Fund (other than for the six
months ended May 31, 1995) have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon appears in the Fund's annual
report to shareholders for the year ended November 30, 1994. Representatives
of KPMG Peat Marwick LLP are expected to be present at the meeting and
available to respond to appropriate questions, and they will have the
opportunity to make a statement if they desire to do so. Financial statements
for the year ended November 30, 1994 and the six months ended May 31, 1995
are contained in the Fund's annual and semiannual reports to shareholders for
such periods.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED 5/31/95 YEAR ENDED NOVEMBER 30,
UNAUDITED 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 7.76 9.85 9.47 9.97 9.13 9.34
Operations:
Net investment income 0.30 0.78 0.90 0.87 1.09 0.95
Net realized and unrealized gains
(losses) on investments 0.93 (2.09) 0.34 (0.43) 0.70 (0.26)
Total from operations 1.23 (1.31) 1.24 0.44 1.79 0.69
Distributions to shareholders:
From net investment income (0.33) (0.59) (0.66) (0.85) (0.95) (0.90)
Tax return of capital -- (0.19) (0.20) -- -- --
From net realized gains -- -- -- (0.09) -- --
Total distributions to shareholders (0.33) (0.78) (0.86) (0.94) (0.95) (0.90)
Net asset value, end of period $ 8.66 7.76 9.85 9.47 9.97 9.13
Per-share market value, end of period $ 7.50 8.63 10.25 10.88 10.38 10.00
SELECTED INFORMATION
Total investment return, market value* (9.26%) (8.58%) 2.12% 14.29% 13.68% 5.38%
Total investment return, net asset
value** 16.17% (13.75%) 13.54% 4.54% 20.49% 8.07%
Net assets at end of period (in millions) $ 69 63 79 76 80 74
Ratio of expenses to average weekly
net assets+++ 0.61%+ 0.82% 0.86% 1.04% 1.11% 1.05%
Ratio of net investment income to
average weekly net assets+++ 7.46%+ 9.02% 9.28% 8.93% 11.48% 10.59%
Portfolio turnover rate (excluding
short-term securities) 100 % 47 % 79 % 70 % 53 % 44 %
Amount of borrowings outstanding
at end of period (in millions)*** $ -- 4 19 13 20 21
Per-share amount of borrowings
outstanding at end of period $ -- 0.53 2.41 1.60 2.47 2.58
Per-share amount of net assets,
excluding borrowings, at end of period $ -- 8.29 12.26 11.07 12.44 11.71
Asset coverage ratio++ $ -- 1,554 % 509 % 693 % 503 % 454 %
</TABLE>
* Based on the change in market price of a share during the period. Assumes
reinvestment of distributions at actual prices pursuant to the Fund's
dividend reinvestment plan.
** Based on the change in net asset value ("NAV") of a share during the
period. Assumes reinvestment of distributions at net asset value. During
the six months ended May 31, 1995, certain investment management and
administrative fees were waived by the Adviser. Had fees not been waived,
the Fund's NAV total return would have been 16.04%.
*** Securities purchased on a when-issued basis for which liquid, high-grade
debt obligations are maintained in a segregated account are not considered
borrowings. See footnote 2 in the Notes to Financial Statements.
+ Adjusted to an annual basis.
++ Represents net assets, excluding borrowings, at end of period divided by
borrowings outstanding at end of period.
+++ During the six months ended May 31, 1995, certain investment management and
administrative fees were waived by the Adviser. Had fees not been waived,
the annualized ratios of expenses and net investment income to average
weekly net assets would have been 0.81%/7.26%.
NET ASSET VALUE AND MARKET PRICE
The Fund's shares currently trade on the New York Stock Exchange. The
following table shows the history of public trading of the Fund's shares, by
quarter, for the last two fiscal years and for each full fiscal quarter since
the beginning of the current fiscal year, as reported on the New York Stock
Exchange.
<TABLE>
<CAPTION>
PERCENTAGE
QUARTER NET ASSET VALUE MARKET PRICE DISCOUNT PERCENTAGE PREMIUM
ENDED HIGH LOW HIGH LOW HIGH LOW HIGH LOW
<S> <C> <C> <C> <C> <C> <C> <C> <C>
02/28/93 $9.64 $9.44 $11.125 $10.125 N/A N/A 17.23% 9.83%
05/31/93 $9.72 $9.55 $10.875 $10.000 N/A N/A 11.88% 5.56%
08/31/93 $9.92 $9.54 $10.750 $9.750 N/A N/A 10.14% 3.31%
11/30/93 $10.06 $9.57 $10.750 $9.500 1.32% 1.32% 9.36% 1.73%
02/28/94 $9.94 $9.39 $10.500 $10.000 N/A N/A 7.07% 1.52%
05/31/94 $9.19 $8.30 $10.000 $8.625 N/A N/A 9.94% 1.95%
08/31/94 $8.48 $8.22 $9.500 $8.375 N/A N/A 12.83% 1.27%
11/30/94 $8.33 $7.69 $9.125 $7.875 N/A N/A 13.92% 3.49%
02/28/95 $8.18 $7.73 $8.625 $7.250 7.64% 6.44% 9.82% 3.09%
05/31/95 $8.66 $8.13 $7.625 $6.875 17.37% 7.75% N/A N/A
08/31/95 $8.76 $8.51 $8.250 $7.375 14.84% 3.06% N/A N/A
</TABLE>
On August 18, 1995, the last trading day before the public announcement of
the approval of the liquidation of the Fund by the Board, the high, low and
closing prices of the shares quoted on the New York Stock Exchange were
$8.25, $8.125 and $8.125, respectively. The closing price on such date was at
a discount of 4.64% from the net asset value of $8.52 per share.
Since February 1995, the shares of the Fund have generally traded at a
discount from their net asset value. Prior to that time, the shares of the
Fund generally traded for an amount exceeding net asset value. The Fund has
had a share repurchase program in place since , pursuant to which
the Fund may repurchase shares of its common stock in the open market on any
day when the previous day's closing market price per share was at a discount
from net asset value. Under this program, as of September 30, 1995, the Fund
had repurchased a total of 54,300 shares.
LITIGATION
On September 7, 1995, Christian Fellowship Foundation Peace United Church of
Christ and other plaintiffs filed an amended complaint purporting to be a
class action in the United States District Court for the District of
Washington. The complaint was filed against the Fund, seven other closed-end
investment companies for which the Adviser acts as investment adviser
(American Government Income Portfolio, Inc., American Government Income Fund
Inc., American Strategic Income Portfolio Inc., American Strategic Income
Portfolio Inc.--II, American Strategic Income Portfolio Inc.--III, American
Opportunity Income Fund Inc. and American Select Portfolio Inc.), Piper
Jaffray Companies Inc., Piper Jaffray Inc., the Adviser and certain
associated individuals. The complaint alleges generally that the prospectus
and financial statements of each investment company were false and
misleading. Specific violations of various federal securities laws are
alleged with respect to each investment company. With respect to the Fund,
the complaint alleges that the Adviser has received excessive compensation in
violation of Section 36(b) of the Investment Company Act of 1940. The
complaint also alleges that the defendants violated the Racketeer Influenced
and Corrupt Organizations Act, the Washington State Securities Act and the
Washington Consumer Protection Act. Damages are being sought in an
unspecified amount. The defendants intend to defend the lawsuit vigorously.
REQUIRED VOTE
The affirmative vote of a majority of the Fund's shares entitled to vote at
the meeting is required to approve the Liquidation Plan. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE LIQUIDATION
PLAN.
INCORPORATION BY REFERENCE
The audited statement of assets and liabilities, including the schedule of
investments in securities, of the Fund as of November 30, 1994, and the
related statements of operations and cash flows for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period ended November 30, 1994, and the financial highlights for each of the
years in the five-year period ended November 30, 1994, are incorporated
herein by reference to the Fund's annual report to shareholders for the year
ended November 30, 1994. In addition, the unaudited financial statements of
the Fund for the six-month period ended May 31, 1995 are incorporated herein
by reference to the Fund's semiannual report to shareholders for the six
months ended May 31, 1995. Copies of the Fund's annual and semiannual reports
for such periods may be obtained by writing to the Fund at 222 South Ninth
Street, Minneapolis, Minnesota 55402-3804 or by calling 800-866-7778. Copies
will be sent, without charge, by first-class mail within one business day of
a request.
SUPPLEMENTAL INFORMATION AND SHAREHOLDER PROPOSALS
Based on Fund records and other information, the Fund believes that all SEC
filing requirements applicable to its directors and officers, the Adviser and
companies affiliated with the Adviser, pursuant to Section 16(a) of the
Securities Exchange Act of 1934, with respect to the Fund's fiscal year ended
November 30, 1994, were satisfied.
In the event that the Fund has not previously been dissolved, proposals of
shareholders intended to be presented at the next Annual Meeting must be
received at the Fund's offices, Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota 55402, no later than March 15, 1996.
David Evans Rosedahl
Secretary
Dated: November , 1995
EXHIBIT A
PLAN OF LIQUIDATION AND DISSOLUTION
OF AMERICAN GOVERNMENT TERM TRUST INC.
(a) As soon as practicable after the date of approval of this Plan of
Liquidation and Dissolution by the shareholders of American Government Term
Trust Inc. (the "Corporation"), the proper officers of the Corporation shall
perform such acts, execute and deliver such documents, and do all things as
may be reasonably necessary or advisable to complete the liquidation and
dissolution of the Corporation, including, but not limited to, the following:
(i) file a notice of intent to dissolve with the Minnesota Secretary of
State; (ii) sell all of the portfolio securities and any and all other
property and assets of the Corporation for cash at one or more public or
private sales and at such prices and on such terms and conditions as such
officers shall determine to be reasonable and in the best interests of the
Corporation and its shareholders; (iii) to the extent possible, prosecute,
settle or compromise all claims or actions of the Corporation or to which the
Corporation is subject; (iv) with respect to the action which has been
brought against the Corporation by the Christian Fellowship Foundation Peace
United Church of Christ and other plaintiffs in the United States District
Court for the District of Washington, enter into an agreement on behalf of
the Corporation with Piper Jaffray Companies Inc. ("Piper Jaffray") and Piper
Capital Management Incorporated ("Piper Capital") whereby Piper Jaffray and
Piper Capital assume all liabilities of the Corporation in connection with
such action; (v) file Form 966 with the Internal Revenue Service, together
with certified copies of the directors' and shareholders' resolutions
approving this Plan; and (vi) execute in the name and on behalf of the
Corporation those contracts of sale, deeds, assignments, notices and other
documents as in the judgment of such officers may be necessary, desirable or
convenient in connection with the carrying out of the liquidation and
dissolution of the Corporation. (All references in this Plan of Liquidation
and Dissolution to the "proper officers of the Corporation" shall include,
where appropriate, proper officers of the Corporation's investment adviser,
acting on behalf of the Corporation.)
(b) The proper officers of the Corporation then shall apply the assets of the
Corporation to the payment, satisfaction and discharge of all existing debts
and obligations of the Corporation and distribute in one or more payments the
remaining assets among the shareholders of the Corporation, with each
shareholder receiving his or her proportionate share of each payment. All
expenses of the liquidation and dissolution of the Corporation, other than
brokerage commissions and taxes, if any, will be borne by Piper Capital
Management Incorporated.
(c) The proper officers of the Corporation may, if such officers deem it
appropriate, establish a reserve to meet any contingent liabilities of the
Corporation, including any claims or actions to which the Corporation is
subject, and any amount that is placed in such reserve shall be deducted from
the net assets distributable to shareholders until the contingent liabilities
have been settled or otherwise determined and discharged.
(d) In the event the Corporation is unable to distribute all of the net
assets distributable to shareholders because of the inability to locate
shareholders to whom liquidation distributions are payable, the proper
officers of the Corporation may create in the name and on behalf of the
Corporation a liquidation trust with a financial institution and, subject to
applicable abandoned property laws, deposit any remaining assets of the
Corporation in such trust for the benefit of the shareholders that cannot be
located. The expenses of any such trust shall be charged against the assets
held therein.
(e) As soon as practicable after the foregoing, the proper officers of the
Corporation shall file articles of dissolution with the Secretary of State of
the State of Minnesota in accordance with Minnesota law.
EXHIBIT B
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated as of __________, 1995, by and among American
Government Term Trust Inc., a Minnesota corporation (the "Fund"), Piper Jaffray
Companies Inc., a Delaware Corporation ("PJC"), and Piper Capital Management
Incorporated, a Delaware corporation (together with PJC, the "Corporations").
WHEREAS, the Fund anticipates effecting a Plan of Liquidation and
Dissolution of the Fund, in the form of Exhibit A to the Fund's proxy statement
relating to a special meeting of Fund shareholders to be held December 7, 1995
(the "Plan");
WHEREAS, the Corporations desire to facilitate the Plan and to permit the
Plan to proceed, notwithstanding the potential liability associated with the
Assumed Liabilities (as hereinafter defined); and
WHEREAS, the parties hereto are desirous that the Corporations shall assume
certain liabilities of the Fund upon the terms set forth herein and shall
otherwise enter into the undertakings set forth herein, all in furtherance of
the Plan.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Assumption. The Fund hereby assigns to the Corporations and the
Corporations jointly and severally, effective from and after the time (the
"Effective Time") of approval of the Plan by the shareholders of the Fund,
assume and agree to pay, perform and discharge in full when due, the Assumed
Liabilities (as hereinafter defined). As used herein, the term "Assumed
Liabilities" means any and all Losses (as hereinafter defined), duties,
liabilities, obligations and commitments of or in respect of the Fund, of any
nature, arising in connection with, incurred by or relating to (a) the legal
proceedings currently pending in the United States District Court for the
Western District of Washington at Seattle (the "Litigation"), as more
specifically described on Schedule A hereto, as amended and modified from time
to time, including, without limitation, any claims, actions, suits, proceedings,
appeals, arbitrations, investigations, compromises, assessments or judgments,
negotiations or settlements of any nature whatsoever relating to, arising from
or in connection with the Litigation; or (b) any matter, cause, claim, fact or
thing that is contemplated in, is associated with, or is the subject matter of,
the Litigation. The assumption and obligations undertaken by the Corporations
under this Section 1 shall be in addition to all of the other obligations of the
Corporations set forth herein.
2. Indemnification. From and after the Effective Time, the Corporations
(each, an "Indemnifying Party" and collectively, the "Indemnifying Parties")
jointly and severally agree to defend, indemnify and hold harmless the Fund, its
officers, directors and shareholders (each such entity or person, an
"Indemnified Party" and collectively, the "Indemnified Parties") from and
against any and all Losses (as hereinafter defined) incurred or sustained by any
such Indemnified Party arising from or in connection with (a) the Assumed
Liabilities, including, without limitation, any claim or demand by a third party
(whether or not successful) to pay or discharge any of the Assumed Liabilities;
(b) any breach of any of the representations, warranties or agreements made by
the Corporations in this Agreement (including, without limitation, Section 1
hereof); and (c) any action, suit, proceeding, compromise, settlement,
assessment or judgment arising out of or incident to any of the matters
indemnified against in this Section 2.
As used herein, the term "Losses" means all losses, claims, payments
(including, without limitation, indemnification payments), expenses (including,
without limitation, attorneys' fees and disbursements), penalties, fines, fees,
damages, liabilities (including, without limitation, amounts paid in settlement
of or otherwise in connection with any claim, litigation, arbitration or
mediation) and costs (including, without limitation, interest that may be
imposed in connection with any of the foregoing and court costs).
3. Right to Defend, etc. If any legal proceeding shall be instituted or any
claim or demand made against any of the Indemnified Parties in respect of which
any of the Indemnifying Parties may be liable under this Agreement, then one or
more of such Indemnified Parties, reasonably promptly after obtaining knowledge
thereof, shall give written notice thereof to the Indemnifying Parties in
reasonable detail (unless the Indemnifying Parties have knowledge thereof, in
which case no such notice is necessary); provided, however, that the failure to
receive such notice shall not relieve any Indemnifying Party of any liability
hereunder, except to the extent the Indemnifying Parties are prejudiced by such
failure. The Indemnifying Parties shall have the right (without prejudice to the
right of each of the Indemnified Parties to participate at its own expense
through counsel of its own choosing) to defend such proceeding, claim or demand,
at the Indemnifying Parties' expense and through counsel of their own choosing,
if the Indemnifying Parties give notice of their intention to do so, not later
than ten days following their receipt of notice of such proceeding, claim or
demand from the relevant Indemnified Parties or, if the Indemnifying Parties had
knowledge thereof, not later than ten days following the date on which the
Indemnifying Parties first had such knowledge (or such shorter time period as is
required so that the interests of the Indemnified Parties would not be
prejudiced as a result of their failure to have received such notice from the
Indemnifying Parties); provided, however, that if the defendants in any action
shall include one or more Indemnifying Parties and one or more Indemnified
Parties and one or more of such Indemnified Parties shall have reasonably
concluded that counsel selected by the Indemnifying Parties may have a potential
conflict of interest, whether because of the availability of different or
additional defenses to such Indemnified Parties or otherwise, such Indemnified
Parties shall have the right to select separate counsel to participate in the
defense of such action on their behalf, at the expense of the Indemnifying
Parties; provided, however, that in no event shall the Indemnifying Parties be
required to pay the costs and expenses of more than one such counsel for all
Indemnified Parties similarly situated. The Indemnifying Parties shall not have
the power to bind any Indemnified Party without such Indemnified Party's prior
written consent, which shall not be unreasonably withheld or delayed, with
respect to any settlement pursuant to which anything is required other than the
payment of money, and then only to the extent that the Indemnifying Parties
shall make full payment of such money. If the Indemnifying Parties do not so
choose to defend any such proceeding, claim or demand asserted by a third party
for which one or more Indemnified Parties would be entitled to indemnification
hereunder, then each such Indemnified Party shall be entitled to undertake the
same and make any compromise or settlement thereof and to recover from the
Indemnifying Parties, on a monthly basis, all of such Indemnified Party's
attorneys' fees and disbursements and other costs and expenses of litigation of
any nature whatsoever incurred in the defense of such proceeding, claim or
demand or the compromise or settlement thereof. If any one or more of the
Indemnifying Parties assume the defense of any such proceeding, claim or demand,
the Indemnifying Parties will hold such Indemnified Parties harmless from and
against any and all damages arising out of any settlement approved by the
Indemnifying Parties or any judgment in connection with such proceeding, claim
or demand. Notwithstanding the assumption of the defense of any proceeding,
claim or demand by the Indemnifying Parties pursuant to this Agreement, each
Indemnified Party shall have the right to approve the terms of any settlement of
a proceeding, claim or demand (which approval shall not be unreasonably withheld
or delayed); provided, however, that the Indemnified Parties shall not have the
right to approve the terms of any such settlement where the Indemnifying Parties
obtain the complete release of the Indemnified Parties from all liability under
any such proceeding, claim or demand. Notwithstanding anything to the contrary
contained herein, the Indemnifying Parties will not be liable for any settlement
of a proceeding, claim or demand effected without their prior written consent;
provided, however, that such consent shall not be unreasonably withheld or
delayed.
4. Representations and Warranties of the Fund. The Fund represents and
warrants to the Corporations as follows:
4.1 Existence and Authority. The Fund is a corporation duly organized
and validly existing and in good standing under the laws of the State of
Minnesota. It has all necessary corporate power and authority and has taken
all corporate action necessary to enter into this Agreement, to consummate
the transactions contemplated hereby and to perform its obligations
hereunder.
4.2 Authorization and Enforceability. This Agreement has been duly
executed and delivered by the Fund and is a legal, valid and binding
obligation of the Fund, enforceable against it in accordance with its
terms, except as such enforceability may be limited by (a) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the rights and remedies
of creditors generally, and (b) general principles of equity, whether such
enforceability is considered in a proceeding in equity or at law.
4.3 No Violation. Neither the execution and delivery by the Fund of
this Agreement nor the performance by the Fund of its obligations hereunder
will (a) with or without the giving of notice or the passage of time, or
both, violate, or be in conflict with, or permit the termination of, or
constitute a default under, or cause the acceleration of the maturity of,
any agreement, debt or obligation of any nature of the Fund or to which it
is a party or bound; (b) require the consent of any party to any agreement,
instrument or commitment to which the Fund is a party or to which the Fund
or its properties is bound; or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court, regulatory
authority or other governmental agency or authority to which the Fund is
subject.
4.4 Governmental and Other Consents. No consent, approval or
authorization of, or declaration, filing or registration with, any
regulatory authority or other governmental agency or authority is required
to be made or obtained by it in connection with the execution, delivery and
performance by it in connection with the execution, delivery and
performance of this Agreement, the performance by the Fund of its
obligations hereunder or the consummation of the transactions contemplated
hereby.
5. Representations and Warranties of the Corporations. Each of the
Corporations, jointly and severally, represent and warrant to the Fund as
follows:
5.1 Existence and Authority. Each Corporation is a corporation duly
organized and validly existing and in good standing under the laws of the
State of Delaware. Each Corporation has all necessary corporate power and
authority and has taken all corporate action necessary to enter into this
Agreement, to consummate the transactions contemplated hereby and to
perform their respective obligations hereunder.
5.2 Authorization and Enforceability. This Agreement has been duly
executed and delivered by each Corporation and is a legal, valid and
binding obligation of each, enforceable against each in accordance with its
terms, except as such enforceability may be limited by (a) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the rights and remedies
of creditors generally; and (b) general principles of equity, whether such
enforceability is considered in a proceeding in equity or at law.
5.3 No Violation. Neither the execution and delivery by the
Corporations of this Agreement nor the performance of their respective
obligations hereunder will (a) with or without the giving of notice or the
passage of time, or both, violate, or be in conflict with, or permit the
termination of, or constitute a default under, or cause the acceleration of
the maturity of, any agreement, debt or obligation of any nature of either
Corporation or to which either of them is a party or bound; (b) require the
consent of any party to any agreement, instrument or commitment to which
either Corporation is a party or to which either Corporation or their
respective properties are bound; or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court, regulatory
authority or other governmental agency or authority to which either
Corporation is subject.
5.4 Governmental and Other Consents. No consent, approval or
authorization of, or declaration, filing or registration with, any
regulatory authority or other governmental agency or authority is required
to be made or obtained by either Corporation in connection with the
execution, delivery and performance of this Agreement, the performance by
each of their respective obligations hereunder or the consummation of the
transactions contemplated hereby.
6. Miscellaneous.
6.1 Further Instruments. The parties hereto agree that they will
execute and deliver, or cause to be executed and delivered to the other
such documents and instruments in form and substance reasonably
satisfactory to the other, as may reasonably be necessary or desirable to
carry out or implement any provisions of this Agreement.
6.2 Choice of Law. This Agreement shall be governed and interpreted,
and all rights and obligations of the parties hereunder shall be governed
and determined, in accordance with the laws of the State of Minnesota,
without regard to its conflict of laws rules.
6.3 Notices. Except as otherwise specifically provided in this
Agreement, all notices, requests, demands, waivers, consents, approvals,
invoices or other communications to either party hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally
to such party or sent to such party by Federal Express, DHL or other
reputable overnight courier service, telegram or telex, or by registered or
certified mail, postage prepaid, to the following addresses:
If to the Corporations: 222 South Ninth Street
Minneapolis, MN 55402
Attn: William H. Ellis
With a copy to: David Evans Rosedahl
Piper Jaffray Companies Inc.
222 South Ninth Street
Minneapolis, MN 55402
If to the Fund: 222 South Ninth Street
Minneapolis, MN 55402
Attn: William H. Ellis
With a copy to: David Evans Rosedahl
Piper Jaffray Companies Inc.
222 South Ninth Street
Minneapolis, MN 55402
or to such other address as the addressee may have specified in notice duly
given to the sender as provided herein. Such notice, request, demand,
waiver, consent, approval, invoice or other communications will be deemed
to have been given as of the date so delivered, telegraphed or telexed, or
five days after so mailed.
6.4 Severability. Any provision of this Agreement that may be
prohibited or unenforceable in law or equity in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions thereof. Any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law that renders any provision of this Agreement prohibited or
unenforceable in any respect. In addition, in the event of any such
prohibition or unenforceability, the parties agree that it is their
intention and agreement that any such provision which is held or determined
to be prohibited or unenforceable, as written, in any jurisdiction shall
nonetheless be in force and binding to the fullest extent permitted by law
of such jurisdiction as though such provision had been written in such a
manner and to such an extent as to be enforceable therein under the
circumstances.
6.5 Entire Agreement; Amendments. This Agreement states the entire
agreement reached between the parties hereto with respect to the subject
matter hereof and may not be amended or modified except by written
instrument duly executed by the parties hereto. Any and all previous
agreements and understandings between the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement.
6.6 Headings; Construction. All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement, and shall not affect in any way the meaning or interpretation of
this Agreement.
6.7 Counterparts. This Agreement may be executed in any number of
counterparts and each party hereto may execute any such counterpart, each
of which when executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the
same instrument. It shall not be necessary in making proof of this
agreement or any counterpart hereof to account for any of the other
counterparts.
6.8 Survival. All of the representations, warranties, covenants,
agreements and indemnities contained in this Agreement shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated by the Plan.
6.9 Binding Effect. This Agreement and the rights and interests
granted herein shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors (whether by merger or
otherwise) and assigns.
6.10 No Waiver. No failure or delay by any party hereto to insist upon
the strict performance of any term, condition, covenant or agreement
contained in this Agreement or to exercise any right, power or remedy
hereunder or consequent upon a breach hereof shall constitute a waiver of
any such term, condition, covenant, agreement, right, power or remedy or of
any such breach, or preclude such party from exercising any such right,
power or remedy at any later time or times.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on the day and year first above written.
PIPER JAFFRAY COMPANIES INC.
By: _______________________
Name: ____________________
Title: ____________________
PIPER CAPITAL MANAGEMENT
INCORPORATED
By: _______________________
Name: _____________________
Title: ____________________
AMERICAN GOVERNMENT TERM
TRUST INC.
By: _______________________
Name: _____________________
Title: ____________________
SCHEDULE A
Description of the Litigation:
First Amended Class Action Complaint filed in the United States District Court
for the Western District of Washington at Seattle on September 7, 1995 by
Christian Fellowship Foundation Peace United Church of Christ, Gary E. Nelson
and Lloyd Schmidt, plaintiffs, against American Government Income Portfolio,
Inc., American Government Income Fund Inc., American Government Term Trust Inc.,
American Strategic Income Portfolio Inc., American Strategic Income Portfolio
Inc.-II, American Strategic Income Portfolio Inc.-III, American Opportunity
Income Fund Inc., American Select Portfolio Inc., Piper Jaffray Companies Inc.,
Piper Capital Management Incorporated, Piper Jaffray Inc., Worth Bruntjen,
Charles Hayssen, Michael Jansen, William H. Ellis and Edward J. Kohler,
defendants.
AMERICAN GOVERNMENT TERM TRUST INC.
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
TIME:
THURSDAY, DECEMBER 7, 1995
AT 10:00 A.M.
PLACE:
PIPER JAFFRAY TOWER, THIRD FLOOR
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA
IMPORTANT:
PLEASE DATE AND SIGN YOUR
PROXY CARD AND RETURN IT PROMPTLY
USING THE ENCLOSED REPLY ENVELOPE.
- --------------------------------------------------------------------------------
AMERICAN GOVERNMENT TERM TRUST INC.
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE MANAGEMENT OF AMERICAN
GOVERNMENT TERM TRUST INC.
The undersigned hereby appoints William H. Ellis, Charles N. Hayssen and David
Evans Rosedahl, and each of them, with power to act without the other and with
the right of substitution in each, as proxies of the undersigned and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of American Government Term Trust Inc. (the "Fund"), held of record by
the undersigned on October 24, 1995, at the Special Meeting of shareholders of
the Fund to be held on December 7, 1995, or any adjournments or postponements
thereof, with all powers the undersigned would possess if present in person. All
previous proxies given with respect to the Special Meeting are hereby revoked.
THE PROXIES ARE INSTRUCTED TO VOTE AS FOLLOWS:
PROPOSAL TO APPROVE THE LIQUIDATION AND DISSOLUTION OF THE FUND pursuant to the
provisions of the Plan of Liquidation and Dissolution of the Fund approved by
the Fund's Board of Directors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Special Meeting or any adjournments or
postponements thereof.
(continued on other side)
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" THE ABOVE PROPOSAL. RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE PROXY STATEMENT RELATING TO THE MEETING IS ACKNOWLEDGED BY
YOUR EXECUTION OF THIS PROXY.
PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS BELOW. WHEN SHARES ARE HELD
BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY PARTNER OR OTHER
AUTHORIZED PERSON.
DATED: ______________________, 1995
______________________________________
Signature
[SHAREHOLDER INFORMATION]
______________________________________
Signature if held jointly
TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
FINANCIAL DATA SCHEDULE FOR SEMI-ANNUAL REPORT DATED MAY 31, 1995
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 66,851,427
<INVESTMENTS-AT-VALUE> 69,284,345
<RECEIVABLES> 196,454
<ASSETS-OTHER> 8,912
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 69,489,711
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69,447
<TOTAL-LIABILITIES> 69,447
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71,853,189
<SHARES-COMMON-STOCK> 8,014,900
<SHARES-COMMON-PRIOR> 8,060,000
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (236,422)
<ACCUMULATED-NET-GAINS> (4,629,421)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,432,918
<NET-ASSETS> 69,420,264
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,545,675
<OTHER-INCOME> 130,962
<EXPENSES-NET> 258,470
<NET-INVESTMENT-INCOME> 2,418,167
<REALIZED-GAINS-CURRENT> (1,412,877)
<APPREC-INCREASE-CURRENT> 8,844,152
<NET-CHANGE-FROM-OPS> 9,849,442
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,638,248
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 45,100
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,880,576
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,216,544)
<OVERDISTRIB-NII-PRIOR> 16,341
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 145,842
<INTEREST-EXPENSE> 61,730
<GROSS-EXPENSE> 323,191
<AVERAGE-NET-ASSETS> 64,996,650
<PER-SHARE-NAV-BEGIN> 7.76
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> .93
<PER-SHARE-DIVIDEND> .33
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.66
<EXPENSE-RATIO> .61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
