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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] 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):
[ ] $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:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(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 30, 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: Piper Capital Management
Proxy Services, American Government Term Trust, P.O. Box 731, Deer Park, New
York, 11729-9852. 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
third 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 third 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: October 30, 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 1, 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. In the event that sufficient proxy votes
in favor of the proposal to liquidate and dissolve the Fund are not received by
December 7, 1995, the persons named as proxies may propose one or more
adjournments of the meeting to permit further solicitation of proxies. Such
adjournments will require the affirmative vote of the holders of a majority of
the shares present in person or by proxy at the meeting. The persons named as
proxies will vote in favor of such adjournments if they are instructed by more
than a majority of the shares represented in person or by proxy to vote for the
liquidation proposal.
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
8,005,700 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 THREE BUSINESS DAYS OF YOUR REQUEST.
APPROVAL OF A PLAN OF LIQUIDATION AND DISSOLUTION
INTRODUCTION
At a meeting held on August 18, 1995, the Board of Directors considered a
written report of the Adviser recommending the liquidation and dissolution of
the Fund and approved the Adviser's recommendation. 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.
As of September 30, 1995, the Fund had $5,432,170 in net capital loss
carryforwards and current capital losses that could be used to offset current or
future capital gains. The Fund had $2,589,882 in unrealized capital gains as of
the same date. If the liquidation and dissolution of the Fund is approved and
all or a portion of such capital gains or any additional capital gains are
realized, the Fund will be able to use a portion of its net capital loss
carryforwards to offset such gains. Any remaining capital loss carryforwards
that are not used to offset capital gains realized upon liquidation will be
lost, and the benefit of such capital loss carryforwards will not pass through
to shareholders. If the Fund did not liquidate, it is possible that sufficient
capital gains could be generated in the future to use the entire amount of the
Fund's capital loss carryforwards. Given the current portfolio structure and the
requirement that the Fund retain its zero-coupon securities, however, the
Adviser believes that this is unlikely.
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. This
discount has narrowed somewhat since public announcement of the Board's
approval of the liquidation. On October 26, 1995, the high, low and closing
prices of the shares quoted on the New York Stock Exchange were $8.625,
$8.500 and $8.500, respectively, and the net asset value per share was $8.77.
The closing price on such date was at a discount of 3.08% from the net asset
value 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 been purchasing
shares of its common stock under a share repurchase program since March 1995.
Pursuant to this program, 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. 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.
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: October 30, 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 October 26, 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 ("PCM") (PCM and PJC are referred to
collectively as 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: /S/ WILLIAM H. ELLIS
President
PIPER CAPITAL MANAGEMENT INCORPORATED
By: /S/ WILLIAM H. ELLIS
President and Chairman of the Board
AMERICAN GOVERNMENT TERM TRUST INC.
By: /S/ WILLIAM H. ELLIS
President and Chairman of the Board
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
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.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AMERICAN
GOVERNMENT TERM TRUST INC.
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.
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
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 mark, sign exactly as your name appears below, date and return this proxy
promptly using the enclosed postage-prepaid envelope. 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
<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>
