Securities and Exchange Commission
Washington, DC 20549
Rule 23c-2 Notice of Intention to
Redeem Securities
of
Merrill Lynch Municipal Strategy Fund, Inc.
800 Scudders Mill Road
Plainsboro, NJ 08536
under the
Investment Company Act of 1940
Securities Act File No. 33-64311
Investment Company Act File No. 811-7203
(1) Title of the class of securities to be redeemed:
Auction Market Preferred Stock, Series A, par value of $.10 per share,
liquidation preference of $25,000 per share (the "Series A AMPS").
(2) Date on which the securities may be called or redeemed: June 16, 1998.
On April 21, 1998, Merrill Lynch Municipal Strategy Fund, Inc. (the
"Fund") will commence a tender offer for 2,000,000 shares of its common
stock (the "Tender Offer"). The Tender Offer will terminate on May 18,
1998, unless extended. As required by the Fund's Articles Supplementary
(the "Articles Supplementary"), at the conclusion of such tender offer,
the Fund may be required to redeem shares of its Series A AMPS in order
to comply with asset coverage tests required under the Investment
Company Act of 1940, as amended, and by rating agencies, each as
detailed in the Articles Supplementary (collectively, the "Asset
Coverage Tests"). If Series A AMPS must be redeemed, the Series A AMPS
will be called for redemption pursuant to a notice mailed to each holder
of Series A AMPS to be redeemed and published in The Wall Street Journal
on or about May 26, 1998. On such date the Fund will deposit with IBJ
Schroder Bank & Trust Company, the auction agent for the Series A AMPS
(the "Auction Agent"), cash or securities at least equal to the
redemption payment for the Series A AMPS to be redeemed along with
irrevocable instructions and authority to pay the redemption price to
the holders of such Series A AMPS in accordance with the Articles
Supplementary. Alternatively, the Fund may establish a segregated
account for the benefit of the Auction Agent with its custodian bank
consisting of cash or securities at least equal to the redemption
payment in accordance with the Articles Supplementary. Payment to the
holders of redeemed Series A AMPS will occur on or about June 16, 1998.
Pursuant to Section 4(c) of the Articles Supplementary, on the date of
the irrevocable deposit of the redemption payment with the Auction
Agent, or the establishment of the segregated account with the Fund's
custodian, the Series A AMPS relating to such deposit will no longer be
deemed outstanding.
(3) Applicable provisions of the governing instrument pursuant to which the
securities are to be redeemed:
The Series A AMPS are to be redeemed in accordance with Section 4 of the
Articles Supplementary, which document is filed as Exhibit A to this
notice and is incorporated herein by reference.
(4) The principal amount or number of shares and the basis upon which the
securities to be redeemed are to be selected:
As described above, the Fund will redeem, in whole or in part, such
number of Series A AMPS outstanding so as to comply with the Asset
Coverage Tests. The actual number of Series A AMPS cannot currently be
determined as such number is a function of the net asset value of the
common stock at the time of redemption and the number of shares of
common stock tendered in the Tender Offer.
Any Series A AMPS redeemed will be redeemed in accordance with Section 4
of the Articles Supplementary, which provides that in the event that
less than all the outstanding Series A AMPS are to be redeemed and there
is more than one holder of such shares, the shares to be redeemed shall
be selected by lot or such other method as the Fund may deem fair and
equitable.
Exhibit A: Articles Supplementary of Merrill Lynch Municipal Strategy
Fund, Inc.
Signature
_________
Pursuant to the requirements of Rule 23c-2, Merrill Lynch Municipal
Strategy Fund, Inc. has duly caused this Notice of Intention to Redeem
Securities pursuant to Rule 23c-2 under the Investment Company Act of 1940 to
be signed on its behalf by the undersigned thereunto duly authorized in the
City of Plainsboro and the State of New Jersey on this 14th day of April,
1998.
MERRILL LYNCH MUNICIPAL
STRATEGY FUND, INC.
By: /s/ Arthur Zeikel
_______________________
Name: Arthur Zeikel
Title: President
Exhibit A
MERRILL LYNCH MUNICIPAL STRATEGY FUND, INC.
Articles Supplementary creating five series of
Auction Market Preferred Stock
MERRILL LYNCH MUNICIPAL STRATEGY FUND, INC., a Maryland corporation
having its principal Maryland office in the City of Baltimore (the
"Corporation"), certifies to the State Department of Assessments and Taxation
of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by article fifth of its Charter, the Board of Directors
has reclassified 40,000 authorized and unissued shares of common stock of the
Corporation as preferred stock of the Corporation and has authorized the
issuance of five series of preferred stock, par value $.10 per share,
liquidation preference $25,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, to be
designated respectively: Auction Market Preferred Stock, Series A; Auction
Market Preferred Stock, Series B; Auction Market Preferred Stock, Series C;
Auction Market Preferred Stock, Series D; and Auction Market Preferred Stock,
Series E.
SECOND: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
shares of each such series of preferred stock are as follows:
DESIGNATION
SERIES A: A series of 8,000 shares of preferred stock, par value $.10
per share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series A." Each share
of Auction Market Preferred Stock, Series A (sometimes referred to herein as
"Series A AMPS") shall be issued on a date to be determined by the Board of
Directors of the Corporation or pursuant to their delegated authority; have
an Initial Dividend Rate and an Initial Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors of
the Corporation or pursuant to their delegated authority; and have such other
preferences, voting powers, limitations as to dividends, qualifications and
terms and conditions of redemption as are set forth in these Articles
Supplementary. The Auction Market Preferred Stock, Series A shall constitute
a separate series of preferred stock of the Corporation, and each share of
Auction Market Preferred Stock, Series A shall be identical.
SERIES B: A series of 8,000 shares of preferred stock, par value $.10
per share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series B." Each share
of Auction Market Preferred Stock, Series B (sometimes referred to herein as
"Series B AMPS") shall be issued on a date to be determined by the Board of
Directors of the Corporation or pursuant to their delegated authority; have
an Initial Dividend Rate and an Initial Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors of
the Corporation or pursuant to their delegated authority; and have such other
preferences, voting powers, limitations as to dividends, qualifications and
terms and conditions of redemption as are set forth in these Articles
Supplementary. The Auction Market Preferred Stock, Series B shall constitute
a separate series of preferred stock of the Corporation, and each share of
Auction Market Preferred Stock, Series B shall be identical.
SERIES C: A series of 8,000 shares of preferred stock, par value $.10
per share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon
is hereby designated "Auction Market Preferred Stock, Series C." Each share
of Auction Market Preferred Stock, Series C (sometimes referred to herein as
"Series C AMPS") shall be issued on a date to be determined by the Board of
Directors of the Corporation or pursuant to their delegated authority; have
an Initial Dividend Rate and an Initial Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors of
the Corporation or pursuant to their delegated authority; and have such other
preferences, voting powers, limitations as to dividends, qualifications and
terms and conditions of redemption as are set forth in these Articles
Supplementary. The Auction Market Preferred Stock, Series C shall constitute
a separate series of preferred stock of the Corporation, and each share of
Auction Market Preferred Stock, Series C shall be identical.
SERIES D: A series of 8,000 shares of preferred stock, par value $.10
per share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon
is hereby designated "Auction Market Preferred Stock, Series D." Each share
of Auction Market Preferred Stock, Series D (sometimes referred to herein as
"Series D AMPS") shall be issued on a date to be determined by the Board of
Directors of the Corporation or pursuant to their delegated authority; have
an Initial Dividend Rate and an Initial Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors of
the Corporation or pursuant to their delegated authority; and have such other
preferences, voting powers, limitations as to dividends, qualifications and
terms and conditions of redemption as are set forth in these Articles
Supplementary. The Auction Market Preferred Stock, Series D shall constitute
a separate series of preferred stock of the Corporation, and each share of
Auction Market Preferred Stock, Series D shall be identical.
SERIES E: A series of 8,000 shares of preferred stock, par value $.10
per share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon
is hereby designated "Auction Market Preferred Stock, Series E." Each share
of Auction Market Preferred Stock, Series E (sometimes referred to herein as
"Series E AMPS") shall be issued on a date to be determined by the Board of
Directors of the Corporation or pursuant to their delegated authority; have
an Initial Dividend Rate and an Initial Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors of
the Corporation or pursuant to their delegated authority; and have such other
preferences, voting powers, limitations as to dividends, qualifications and
terms and conditions of redemption as are set forth in these Articles
Supplementary. The Auction Market Preferred Stock, Series E shall constitute
a separate series of preferred stock of the Corporation, and each share of
Auction Market Preferred Stock, Series E shall be identical.
1. Definitions. a. Unless the context or use indicates another or
-----------
different meaning or intent, in these Articles Supplementary the following
terms have the following meanings, whether used in the singular or plural:
"'AA' Composite Commercial Paper Rate," on any date of
determination, means (i) the Interest Equivalent of the rate on
commercial paper placed on behalf of issuers whose corporate bonds are rated
"AA" by S&P or "Aa" by Moody's or the equivalent of such rating by another
nationally recognized rating agency, as such rate is made available on a
discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day immediately preceding such date, or (ii) in the event that the
Federal Reserve Bank of New York does not make available such a rate, then
the arithmetic average of the Interest Equivalent of the rate on commercial
paper placed on behalf of such issuers, as quoted on a discount basis or
otherwise by Merrill Lynch, Pierce, Fenner & Smith Incorporated or its
successors that are Commercial Paper Dealers, to the Auction Agent for the
close of business on the Business Day immediately preceding such date. If
one of the Commercial Paper Dealers does not quote a rate required to
determine the "AA" Composite Commercial Paper Rate, the "AA" Composite
Commercial Paper Rate will be determined on the basis of the quotation or
quotations furnished by any Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers selected by the Corporation to provide such rate or
rates not being supplied by the Commercial Paper Dealer. If the number of
Dividend Period Days shall be (i) 7 or more but fewer than 49 days, such rate
shall be the Interest Equivalent of the 30-day rate on such commercial paper;
(ii) 49 or more but fewer than 70 days, such rate shall be the Interest
Equivalent of the 60-day rate on such commercial paper; (iii) 70 or more days
but fewer than 85 days, such rate shall be the arithmetic average of the
Interest Equivalent on the 60-day and 90-day rates on such commercial paper;
(iv) 85 or more days but fewer than 99 days, such rate shall be the Interest
Equivalent of the 90-day rate on such commercial paper; (v) 99 or more days
but fewer than 120 days, such rate shall be the arithmetic average of the
Interest Equivalent of the 90-day and 120-day rates on such commercial paper;
(vi) 120 or more days but fewer than 141 days, such rate shall be the
Interest Equivalent of the 120-day rate on such commercial paper; (vii) 141
or more days but fewer than 162 days, such rate shall be the arithmetic
average of the Interest Equivalent of the 120-day and 180-day rates on such
commercial paper; and (viii) 162 or more days but fewer than 183 days, such
rate shall be the Interest Equivalent of the 180-day rate on such commercial
paper.
"Accountant's Confirmation" has the meaning set forth in paragraph 7(c)
of these Articles Supplementary.
"Additional Dividend" has the meaning set forth in paragraph 2(e) of
these Articles Supplementary.
"Adviser" means the Corporation's investment adviser which initially
shall be Fund Asset Management, L.P.
"Affiliate" means any Person, other than Merrill Lynch, Pierce, Fenner &
Smith Incorporated or its successors, known to the Auction Agent to be
controlled by, in control of, or under common control with, the Corporation.
"Agent Member" means a member of the Securities Depository that will act
on behalf of a Beneficial Owner of one or more shares of AMPS or a Potential
Beneficial Owner.
"AMPS" means, as the case may be, the Auction Market Preferred Stock,
Series A; Auction Market Preferred Stock, Series B; Auction Market Preferred
Stock, Series C; Auction Market Preferred Stock, Series D; or Auction Market
Preferred Stock, Series E.
"AMPS Basic Maintenance Amount," as of any Valuation Date, means the
dollar amount equal to (i) the sum of (A) the product of the number of shares
of AMPS of each series and Other AMPS Outstanding on such Valuation Date
multiplied by the sum of (a) $25,000 and (b) any applicable redemption
premium attributable to the designation of a Premium Call Period; (B) the
aggregate amount of cash dividends (whether or not earned or declared) that
will have accumulated for each share of AMPS and Other AMPS Outstanding, in
each case, to (but not including) the end of the current Dividend Period for
each series of AMPS that follows such Valuation Date in the event the then
current Dividend Period will end within 49 calendar days of such Valuation
Date or through the 49th day after such Valuation Date in the event the then
current Dividend Period will not end within 49 calendar days of such
Valuation Date; (C) in the event the then current Dividend Period will end
within 49 calendar days of such Valuation Date, the aggregate amount of cash
dividends that would accumulate at the Maximum Applicable Rate applicable to
a Dividend Period of 28 or fewer days on any shares of AMPS and Other AMPS
Outstanding from the end of such Dividend Period through the 49th day after
such Valuation Date, multiplied by the larger of the Moody's Volatility
Factor and the S&P Volatility Factor, determined from time to time by Moody's
and S&P, respectively (except that if such Valuation Date occurs during a
Non-Payment Period, the cash dividend for purposes of calculation would
accumulate at the then current Non-Payment Period Rate); (D) the amount of
anticipated expenses of the Corporation for the 90 days subsequent to such
Valuation Date; (E) the amount of the Corporation's Maximum Potential
Additional Dividend Liability as of such Valuation Date; (F) any amounts
payable for shares of Common Stock accepted for repurchase at their net asset
value pursuant to tender offers by the Corporation; and (G) any current
liabilities as of such Valuation Date to the extent not reflected in any of
(i)(A) through (i)(F) (including, without limitation, and immediately upon
determination, any amounts due and payable by the Corporation pursuant to
repurchase agreements and any amounts payable for Municipal Bonds purchased
as of such Valuation Date) less (ii) either (A) the Discounted Value of any
of the Corporation's assets, or (B) the face value of any of the
Corporation's assets if such assets mature prior to or on the date of
redemption of AMPS or payment of a liability and are either securities issued
or guaranteed by the United States Government or Deposit Securities, in both
cases irrevocably deposited by the Corporation for the payment of the amount
needed to redeem shares of AMPS subject to redemption or any of (i)(B)
through (i)(G).
"AMPS Basic Maintenance Cure Date," with respect to the failure by the
Corporation to satisfy the AMPS Basic Maintenance Amount (as required by
paragraph 7(a) of these Articles Supplementary) as of a given Valuation Date,
means the sixth Business Day following such Valuation Date.
"AMPS Basic Maintenance Report" means a report signed by any of the
President, Treasurer, any Senior Vice President or any Vice President of the
Corporation which sets forth, as of the related Valuation Date, the assets of
the Corporation, the Market Value and the Discounted Value thereof (seriatim
and in aggregate), and the AMPS Basic Maintenance Amount.
"Anticipation Notes" shall mean the following Municipal Bonds: revenue
anticipation notes, tax anticipation notes, tax and revenue anticipation
notes, grant anticipation notes and bond anticipation notes.
"Applicable Percentage" has the meaning set forth in paragraph
10(a)(vii) of these Articles Supplementary.
"Applicable Rate" means the rate per annum at which cash dividends are
payable on the AMPS or Other AMPS, as the case may be, for any Dividend
Period.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means IBJ Schroder Bank & Trust Company unless and until
another commercial bank, trust company or other financial institution
appointed by a resolution of the Board of Directors of the Corporation or a
duly authorized committee thereof enters into an agreement with the
Corporation to follow the Auction Procedures for the purpose of determining
the Applicable Rate and to act as transfer agent, registrar, dividend
disbursing agent and redemption agent for the AMPS and Other AMPS.
"Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 10 of these Articles Supplementary.
"Beneficial Owner" means a customer of a Broker-Dealer who is listed on
the records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of shares of AMPS or a Broker-Dealer that holds AMPS for its own
account.
"Broker-Dealer" means any broker-dealer, or other entity permitted by law
to perform the functions required of a Broker-Dealer in paragraph 10 of these
Articles Supplementary, that has been selected by the Corporation and has
entered into a Broker-Dealer Agreement with the Auction Agent that remains
effective.
"Broker-Dealer Agreement" means an agreement between the Auction Agent
and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in paragraph 10 of these Articles Supplementary.
"Business Day" means a day on which the New York Stock Exchange, Inc. is
open for trading and which is not a Saturday, Sunday or other day on which
banks in The City of New York are authorized or obligated by law to close.
"Charter" means the Articles of Incorporation, as amended and
supplemented (including these Articles Supplementary), of the Corporation on
file in the State Department of Assessments and Taxation of Maryland.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Merrill Lynch, Pierce,
Fenner & Smith Incorporated and such other commercial paper dealer or dealers
as the Corporation may from time to time appoint, or, in lieu of any thereof,
their respective affiliates or successors.
"Common Stock" means the common stock, par value $.10 per share, of the
Corporation.
"Corporation" means Merrill Lynch Municipal Strategy Fund, Inc., a
Maryland corporation.
"Date of Original Issue" means, with respect to any share of AMPS or
Other AMPS, the date on which the Corporation originally issues such share.
"Deposit Securities" means cash and Municipal Bonds rated at least A, P-
1, VMIG-1 or MIG-1 by Moody's or A, A-1+ or SP-1+ by S&P.
"Discounted Value" means (i) with respect to an S&P Eligible Asset, the
quotient of the Market Value thereof divided by the applicable S&P Discount
Factor and (ii) with respect to a Moody's Eligible Asset, the lower of par
and the quotient of the Market Value thereof divided by the applicable
Moody's Discount Factor.
"Dividend Payment Date," with respect to AMPS, has the meaning set forth
in paragraph 2(b)(i) of these Articles Supplementary and, with respect to
Other AMPS, has the equivalent meaning.
"Dividend Period" means the Initial Dividend Period, any 7-Day
Dividend Period, any 28-Day Dividend Period and any Special Dividend Period.
"Existing Holder" means a Broker-Dealer or any such other Person as may
be permitted by the Corporation that is listed as the holder of record of
shares of AMPS in the Stock Books.
"Forward Commitment" has the meaning set forth in paragraph 8(c) of
these Articles Supplementary.
"Holder" means a Person identified as a holder of record of shares of
AMPS in the Stock Register.
"Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is, with respect to the Corporation, an independent
public accountant or firm of independent public accountants under the
Securities Act of 1933, as amended.
"Initial Dividend Payment Date" means the Initial Dividend Payment Date
as determined by the Board of Directors of the Corporation with respect to
each series of AMPS or other AMPS, as the case may be.
"Initial Dividend Period," with respect to each series of AMPS, has the
meaning set forth in paragraph 2(c)(i) of these Articles Supplementary and,
with respect to Other AMPS, has the equivalent meaning.
"Initial Dividend Rate," with respect to each series of AMPS, means the
rate per annum applicable to the Initial Dividend Period for such series of
AMPS and, with respect to Other AMPS, has the equivalent meaning.
"Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a futures
contract.
"Interest Equivalent" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
"Long Term Dividend Period" means a Special Dividend Period consisting
of a specified period of one whole year or more but not greater than five
years.
"Mandatory Redemption Price" means $25,000 per share of AMPS plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption and excluding Additional
Dividends.
"Marginal Tax Rate" means the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum
marginal regular Federal corporate income tax rate, whichever is greater.
"Market Value" of any asset of the Corporation shall be the market value
thereof determined by the Pricing Service. Market Value of any asset shall
include any interest accrued thereon. The Pricing Service shall value
portfolio securities at the quoted bid prices or the mean between the quoted
bid and asked price or the yield equivalent when quotations are not readily
available. Securities for which quotations are not readily available shall
be valued at fair value as determined by the Pricing Service using methods
which include consideration of: yields or prices of municipal bonds of
comparable quality, type of issue, coupon, maturity and rating; indications
as to value from dealers; and general market conditions. The Pricing
Service may employ electronic data processing techniques and/or a matrix
system to determine valuations. In the event the Pricing Service is unable
to value a security, the security shall be valued at the lower of two
dealer bids obtained by the Corporation from dealers who are members of
the National Association of Securities Dealers, Inc. and who make a market
in the security, at least one of which shall be in writing. Futures contracts
and options are valued at closing prices for such instruments established by
the exchange or board of trade on which they are traded, or if market
quotations are not readily available, are valued at fair value on a
consistent basis using methods determined in good faith by the Board of
Directors.
"Maximum Applicable Rate," with respect to AMPS, has the meaning set
forth in paragraph 10(a)(vii) of these Articles Supplementary and, with
respect to Other AMPS, has the equivalent meaning.
"Maximum Potential Additional Dividend Liability," as of any Valuation
Date, means the aggregate amount of Additional Dividends that would be due if
the Corporation were to make Retroactive Taxable Allocations, with respect to
any fiscal year, estimated based upon dividends paid and the amount of undis-
tributed realized net capital gains and other taxable income earned by the
Corporation, as of the end of the calendar month immediately preceding such
Valuation Date and assuming such Additional Dividends are fully taxable.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes a Moody's Eligible
Asset, the percentage determined by reference to (a) the rating by Moody's or
S&P on such Bond and (b) the Moody's Exposure Period, in accordance with the
table set forth below:
<TABLE>
<CAPTION>
Rating Category
Moody's Exposure Period Aaa* Aa* A* Baa* Other** VM1G-1*** SP-1+***
<S> <C> <C> <C> <C> <C> <C> <C>
7 weeks or less . . . . . . 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but 154 164 173 205 235 137 149
greater than seven weeks
9 weeks or less but 158 169 179 209 242 138 150
greater than eight weeks
</TABLE>
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* Moody's rating.
** Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by
S&P.
*** Municipal Bonds rated MIG-1, VMIG-1 or P-1 or, if not rated by
Moody's, rated SP-1+ or A-1+ by S&P which do not mature or have a
demand feature at par exercisable within the Moody's Exposure
Period and which do not have a long-term rating. For the purposes
of the definition of Moody's Eligible Assets, these securities will
have an assumed rating of "A" by Moody's.
Notwithstanding the foregoing, (i) no Moody's Discount Factor will be
applied to short-term Municipal Bonds so long as such Municipal Bonds are
rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand
feature at par exercisable within the Moody's Exposure Period, and the
Moody's Discount Factor for such Bonds will be 125% if such Bonds are not
rated by Moody's but are rated A-1+ or SP-1+ or AA by S&P and mature or have
a demand feature at par exercisable within the Moody's Exposure Period, and
(ii) no Moody's Discount Factor will be applied to cash or to Receivables for
Municipal Bonds Sold. "Receivables for Municipal Bonds Sold," for purposes
of calculating Moody's Eligible Assets as of any Valuation Date, means no
more than the aggregate of the following: (i) the book value of receivables
for Municipal Bonds sold as of or prior to such Valuation Date if such
receivables are due within five Business Days of such Valuation Date, and if
the trades which generated such receivables are (x) settled through clearing
house firms with respect to which the Corporation has received prior written
authorization from Moody's or (y) with counterparties having a Moody's
long-term debt rating of at least Baa3; and (ii) the Moody's Discounted Value
of Municipal Bonds sold as of or prior to such Valuation Date which generated
receivables, if such receivables are due within five Business Days of such
Valuation Date but do not comply with either of conditions (x) or (y) of the
preceding clause (i).
"Moody's Eligible Asset" means cash, Receivables for Municipal Bonds
Sold or a Municipal Bond that (i) pays interest in cash, (ii) is publicly
rated Baa or higher by Moody's or, if not rated by Moody's but rated by S&P,
is rated at least BBB- by S&P (provided that, for purposes of determining the
Moody's Discount Factor applicable to any such S&P-rated Municipal Bond, such
Municipal Bond (excluding any short-term Municipal Bond) will be deemed to
have a Moody's rating which is one full rating category lower than its S&P
rating), (iii) does not have its Moody's rating suspended by Moody's; and
(iv) is part of an issue of Municipal Bonds of at least $10,000,000. In
addition, Municipal Bonds in the Corporation's portfolio must be within the
following diversification requirements in order to be included within Moody's
Eligible Assets:
<TABLE>
<CAPTION>
Maximum State
Minimum Maximum or Territory
Issue Size Underlying Concentration
Rating ($ Millions) Obligor (%) (1) (%) (1) (3)
<S> <C> <C> <C>
Aaa . . . . . . . . . . . . . . . . . 10 100 100
Aa . . . . . . . . . . . . . . . . . 10 20 60
A . . . . . . . . . . . . . . . . . . 10 10 40
Baa . . . . . . . . . . . . . . . . . 10 6 20
Other (2) . . . . . . . . . . . . . . 10 4 12
</TABLE>
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(1) The referenced percentages represent maximum cumulative totals for the
related rating category and each lower rating category.
(2) Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by S&P.
(3) Territorial bonds (other than those issued by Puerto Rico and counted
collectively) are each limited to 10% of Moody's Eligible Assets. For
diversification purposes, Puerto Rico will be treated as a state.
For purposes of the maximum underlying obligor requirement described above,
any Municipal Bond backed by the guaranty, letter of credit or insurance
issued by a third party will be deemed to be issued by such third party if
the issuance of such third party credit is the sole determinant of the rating
on such Bond.
When the Corporation sells a Municipal Bond and agrees to repurchase it
at a future date, the Discounted Value of such Bond will constitute a Moody's
Eligible Asset and the amount the Corporation is required to pay upon
repurchase of such Bond will count as a liability for purposes of calculating
the AMPS Basic Maintenance Amount. When the Corporation purchases a
Municipal Bond and agrees to sell it at a future date to another party, cash
receivable by the Corporation thereby will constitute a Moody's Eligible
Asset if the long-term debt of such other party is rated at least A2 by
Moody's and such agreement has a term of 30 days or less; otherwise the
Discounted Value of such Bond will constitute a Moody's Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset if it is (i) held in a margin account, (ii) subject to any
material lien, mortgage, pledge, security interest or security agreement of
any kind, (iii) held for the purchase of a security pursuant to a Forward
Commitment or (iv) irrevocably deposited by the Corporation for the payment
of dividends or redemption.
"Moody's Exposure Period" means a period that is the same length or
longer than the number of days used in calculating the cash dividend
component of the AMPS Basic Maintenance Amount and shall initially be the
period commencing on and including a given Valuation Date and ending 48 days
thereafter.
"Moody's Hedging Transactions" has the meaning set forth in paragraph
8(b) of these Articles Supplementary.
"Moody's Volatility Factor" means 272% as long as there has been no
increase enacted to the Marginal Tax Rate. If such an increase is enacted
but not yet implemented, the Moody's Volatility Factor shall be as follows:
% Change in
Marginal Tax Moody's Volatility
Rate Factor
------------ ------------------
5% 292%
>5% but 10% 313%
>10% but 15% 338%
>15% but 20% 364%
>20% but 25% 396%
>25% but 30% 432%
>30% but 35% 472%
>35% but 40% 520%
Notwithstanding the foregoing, the Moody's Volatility Factor may mean such
other potential dividend rate increase factor as Moody's advises the
Corporation in writing is applicable.
"Municipal Bonds" means "Municipal Bonds" as defined in the
Corporation's Registration Statement on Form N-2 (File No. 811-7203) relating
to the AMPS on file with the Securities and Exchange Commission, as such
Registration Statement may be amended from time to time, as well as short-
term municipal obligations.
"Municipal Index" has the meaning set forth in paragraph 8(a) of these
Articles Supplementary.
"1940 Act" means the Investment Company Act of 1940, as amended from
time to time.
"1940 Act AMPS Asset Coverage" means asset coverage, as defined in
section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Corporation which are stock, including
all outstanding shares of AMPS and Other AMPS (or such other asset coverage
as may in the future be specified in or under the 1940 Act as the minimum
asset coverage for senior securities which are stock of a closed-end
investment company as a condition of paying dividends on its common stock).
"1940 Act Cure Date," with respect to the failure by the Corporation to
maintain the 1940 Act AMPS Asset Coverage (as required by paragraph 6 of
these Articles Supplementary) as of the last Business Day of each month,
means the last Business Day of the following month.
"Non-Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions".
"Non-Payment Period" means, with respect to each series of AMPS, any
period commencing on and including the day on which the Corporation shall
fail to (i) declare, prior to the close of business on the second Business
Day preceding any Dividend Payment Date, for payment on or (to the extent
permitted by paragraph 2(c)(i) of these Articles Supplementary) within three
Business Days after such Dividend Payment Date to the Holders as of 12:00
noon, New York City time, on the Business Day preceding such Dividend Payment
Date, the full amount of any dividend on shares of AMPS payable on such
Dividend Payment Date or (ii) deposit, irrevocably in trust, in same-day
funds, with the Auction Agent by 12:00 noon, New York City time, (A) on such
Dividend Payment Date the full amount of any cash dividend on such shares
payable (if declared) on such Dividend Payment Date or (B) on any redemption
date for any shares of AMPS called for redemption, the Mandatory Redemption
Price per share of such AMPS or, in the case of an optional redemption, the
Optional Redemption Price per share, and ending on and including the Business
Day on which, by 12:00 noon, New York City time, all unpaid cash dividends
and unpaid redemption prices shall have been so deposited or shall have
otherwise been made available to Holders in same-day funds; provided that, a
Non-Payment Period shall not end unless the Corporation shall have given at
least five days' but no more than 30 days' written notice of such deposit or
availability to the Auction Agent, all Existing Holders (at their addresses
appearing in the Stock Books) and the Securities Depository. Notwithstanding
the foregoing, the failure by the Corporation to deposit funds as provided
for by clauses (ii)(A) or (ii)(B) above within three Business Days after any
Dividend Payment Date or redemption date, as the case may be, in each case to
the extent contemplated by paragraph 2(c)(i) of these Articles Supplementary,
shall not constitute a "Non-Payment Period."
"Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 275% of such rate if the Corporation has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend pursuant to paragraph 2(f) hereof that net
capital gains or other taxable income will be included in such dividend on
shares of AMPS), provided that the Board of Directors of the Corporation
shall have the authority to adjust, modify, alter or change from time to time
the initial Non-Payment Period Rate if the Board of Directors of the
Corporation determines and Moody's and S&P (and any Substitute Rating Agency
in lieu of Moody's or S&P in the event either of such parties shall not rate
the AMPS) advise the Corporation in writing that such adjustment,
modification, alteration or change will not adversely affect their then
current ratings on the AMPS.
"Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of these Articles Supplementary.
"Notice of Redemption" means any notice with respect to the redemption
of shares of AMPS pursuant to paragraph 4 of these Articles Supplementary.
"Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii)
of these Articles Supplementary.
"Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.
"Optional Redemption Price" means $25,000 per share plus an amount equal
to accumulated but unpaid dividends (whether or not earned or declared) to
the date fixed for redemption and excluding Additional Dividends plus any
applicable redemption premium attributable to the designation of a Premium
Call Period.
"Other AMPS" means the auction rate preferred stock of the Corporation,
other than the AMPS.
"Outstanding" means, as of any date (i) with respect to AMPS, shares of
AMPS theretofore issued by the Corporation except, without duplication, (A)
any shares of AMPS theretofore cancelled or delivered to the Auction Agent
for cancellation, or redeemed by the Corporation, or as to which a Notice of
Redemption shall have been given and Deposit Securities shall have been
deposited in trust or segregated by the Corporation pursuant to paragraph
4(c) and (B) any shares of AMPS as to which the Corporation or any Affiliate
thereof shall be an Existing Holder, provided that shares of AMPS held by an
Affiliate shall be deemed outstanding for purposes of calculating the AMPS
Basic Maintenance Amount and (ii) with respect to shares of other Preferred
Stock, has the equivalent meaning.
"Parity Stock" means the AMPS and each other outstanding series of
Preferred Stock the holders of which, together with the holders of the AMPS,
shall be entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
proportion to the full respective preferential amounts to which they are
entitled, without preference or priority one over the other.
"Person" means and includes an individual, a partnership, a corporation,
a trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.
"Potential Beneficial Owner" means a customer of a Broker-Dealer or a
Broker-Dealer that is not a Beneficial Owner of shares of AMPS but that
wishes to purchase such shares, or that is a Beneficial Owner that wishes to
purchase additional shares of AMPS.
"Potential Holder" means any Broker-Dealer or any such other Person as
may be permitted by the Corporation, including any Existing Holder, who may
be interested in acquiring shares of AMPS (or, in the case of an Existing
Holder, additional shares of AMPS).
"Preferred Stock" means the preferred stock, par value $.10 per share,
of the Corporation, and includes AMPS and Other AMPS.
"Premium Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions".
"Pricing Service" means J.J. Kenny or any pricing service designated by
the Board of Directors of the Corporation provided the Corporation obtains
written assurance from S&P and Moody's that such designation will not impair
the rating then assigned by S&P and Moody's to the AMPS.
"Quarterly Valuation Date" means the twenty-fifth day of the last month
of each fiscal quarter of the Corporation (or, if such day is not a Business
Day, the next succeeding Business Day) in each fiscal year of the
Corporation, commencing April 25, 1996.
"Receivables for Municipal Bonds Sold" for Moody's has the meaning set
forth under the definition of Moody's Discount Factor, and for S&P has the
meaning set forth under the definition of S&P Discount Factor.
"Reference Rate" means: (i) with respect to a Dividend Period or a Short
Term Dividend Period having 28 or fewer days, the higher of the applicable
"AA" Composite Commercial Paper Rate and the Taxable Equivalent of the Short-
Term Municipal Bond Rate, (ii) with respect to any Short Term Dividend Period
having more than 28 but fewer than 183 days, the applicable "AA" Composite
Commercial Paper Rate, (iii) with respect to any Short Term Dividend Period
having 183 or more but fewer than 364 days, the applicable U.S. Treasury Bill
Rate and (iv) with respect to any Long Term Dividend Period, the applicable
U.S. Treasury Note Rate.
"Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.
"Response" has the meaning set forth in paragraph 2(c)(iii) of these
Articles Supplementary.
"Retroactive Taxable Allocation" has the meaning set forth in paragraph
2(e) of these Articles Supplementary.
"Right," with respect to each series of AMPS, has the meaning set forth
in paragraph 2(e) of these Articles Supplementary and, with respect to Other
AMPS, has the equivalent meaning.
"S&P" means Standard & Poor's Ratings Group or its successors.
"S&P Discount Factor" means, for purposes of determining the Discounted
Value of any Municipal Bond which constitutes an S&P Eligible Asset, the
percentage determined by reference to (a) the rating by S&P or Moody's on
such Bond and (b) the S&P Exposure Period, in accordance with the tables set
forth below:
Rating Category
---------------
S&P Exposure Period AAA* AA* A* BBB*
- ------------------- -------------------
40 Business Days 190% 195% 210% 250%
22 Business Days 170 175 190 230
10 Business Days 155 160 175 215
7 Business Days 150 155 170 210
3 Business Days 130 135 150 190
- -------------------
* S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term Municipal Bonds will be 115%, so long as such Municipal Bonds are
rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable in
30 days or less, or 125% if such Municipal Bonds are not rated by S&P but are
rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, such short-term
Municipal Bonds rated by Moody's but not rated by S&P having a demand feature
exercisable in 30 days or less must be backed by a letter of credit,
liquidity facility or guarantee from a bank or other financial institution
having a short-term ating of at least A-1+ from S&P; and further provided
that such short-term Municipal Bonds rated by Moody's but not rated by S&P
may comprise no more than 50% of short-term Municipal Bonds that qualify as
S&P Eligible Assets and (ii) no S&P Discount Factor will be applied to cash
or to Receivables for Municipal Bonds Sold. "Receivables for Municipal Bonds
Sold," for purposes of calculating S&P's Eligible Assets as of any Valuation
Date, means the book value of receivables for Municipal Bonds sold as of or
prior to such Valuation Date if such receivables are due within five Business
Days of such Valuation Date. For purposes of the foregoing, Anticipation
Notes rated SP-1+ or, if not rated by S&P, rated VMIG-1 by Moody's, which do
not mature or have a demand feature exercisable in 30 days and which do not
have a long-term rating, shall be considered to be short-term Municipal
Bonds.
"S&P Eligible Asset" means cash, Receivables for Municipal Bonds Sold or
a Municipal Bond that (i) is issued by any of the 50 states, the territories
and their subdivisions, counties, cities, towns, villages, and school
districts, agencies, such as authorities and special districts created by the
states, and certain federally sponsored agencies such as local housing
authorities (payments made on these bonds are exempt from regular federal
income taxes and are generally exempt from state and local taxes in the state
of issuance), (ii) is interest bearing and pays interest at least semi-
annually; (iii) is payable with respect to principal and interest in United
States Dollars; (iv) is publicly rated BBB or higher by S&P or, except in the
case of Anticipation Notes that are grant anticipation notes or bond
anticipation notes which must be rated by S&P to be included in S&P Eligible
Assets, if not rated by S&P but rated by Moody's, is rated at least A by
Moody's (provided that such Moody's-rated Municipal Bonds will be included in
S&P Eligible Assets only to the extent the Market Value of such Municipal
Bonds does not exceed 50% of the aggregate Market Value of the S&P Eligible
Assets; and further provided that, for purposes of determining the S&P
Discount Factor applicable to any such Moody's-rated Municipal Bond, such
Municipal Bond will be deemed to have an S&P rating which is one full rating
category lower than its Moody's rating); (v) is not subject to a covered call
or covered put option written by the Corporation; (vi) is not part of a
private placement of Municipal Bonds; and (vii) is part of an issue of
Municipal Bonds with an original issue size of at least $20 million or, if of
an issue with an original issue size below $20 million (but in no event below
$10 million), is issued by an issuer with a total of at least $50 million of
securities outstanding. Notwithstanding the foregoing:
i. Municipal Bonds of any one issuer or guarantor (excluding bond
insurers) will be considered S&P Eligible Assets only to the extent the
Market Value of such Municipal Bonds does not exceed 10% of the
aggregate Market Value of the S&P Eligible Assets, provided that 2% is
added to the applicable S&P Discount Factor for every 1% by which the
Market Value of such Municipal Bonds exceeds 5% of the aggregate Market
Value of the S&P Eligible Assets;
ii. Municipal Bonds guaranteed or insured by any one bond insurer
will be considered S&P Eligible Assets only to the extent the Market
Value of such Municipal Bonds does not exceed 25% of the aggregate
Market Value of the S&P Eligible Assets; and
iii. Municipal Bonds issued by issuers in any one state or
territory will be considered S&P Eligible Assets only to the extent the
Market Value of such Municipal Bonds does not exceed 20% of the
aggregate Market Value of S&P Eligible Assets.
"S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the AMPS Basic Maintenance
Cure Date, that the Corporation has under these Articles Supplementary to
cure any failure to maintain, as of such Valuation Date, the Discounted Value
for its portfolio at least equal to the AMPS Basic Maintenance Amount (as
described in paragraph 7(a) of these Articles Supplementary).
"S&P Hedging Transactions" has the meaning set forth in paragraph 8(a)
of these Articles Supplementary.
"S&P Volatility Factor" means 277% or such other potential dividend rate
increase factor as S&P advises the Corporation in writing is applicable.
"Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Corporation as securities
depository for the shares of AMPS that agrees to follow the procedures
required to be followed by such securities depository in connection with the
shares of AMPS.
"Service" means the United States Internal Revenue Service.
"7-Day Dividend Period" means, with respect to Series A AMPS, Series B
AMPS and Series C AMPS, a Dividend Period consisting of seven days.
"Short Term Dividend Period" means a Special Dividend Period consisting
of a specified number of days (other than seven in the case of Series A AMPS,
Series B AMPS and Series C AMPS and other than 28 in the case of Series D
AMPS and Series E AMPS), evenly divisible by seven and not fewer than seven
nor more than 364.
"Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than seven in the case of Series A AMPS,
Series B AMPS and Series C AMPS and other than 28 in the case of Series D
AMPS and Series E AMPS), evenly divisible by seven, and not fewer than seven
nor more than 364 or (ii) a specified period of one whole year or more but
not greater than five years (in each case subject to adjustment as provided
in paragraph 2(b)(i)).
"Specific Redemption Provisions" means, with respect to a Special
Dividend Period either, or any combination of, (i) a period (a "Non-Call
Period") determined by the Board of Directors of the Corporation, after
consultation with the Auction Agent and the Broker-Dealers, during which the
shares of AMPS subject to such Dividend Period shall not be subject to
redemption at the option of the Corporation and (ii) a period (a "Premium
Call Period"), consisting of a number of whole years and determined by the
Board of Directors of the Corporation, after consultation with the Auction
Agent and the Broker-Dealers, during each year of which the shares of AMPS
subject to such Dividend Period shall be redeemable at the Corporation's
option at a price per share equal to $25,000 plus accumulated but unpaid
dividends plus a premium expressed as a percentage of $25,000, as determined
by the Board of Directors of the Corporation after consultation with the
Auction Agent and the Broker-Dealers.
"Stock Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the AMPS.
"Stock Register" means the register of Holders maintained on behalf of
the Corporation by the Auction Agent in its capacity as transfer agent and
registrar for the AMPS.
"Subsequent Dividend Period," with respect to AMPS, has the meaning set
forth in paragraph 2(c)(i) of these Articles Supplementary and, with respect
to Other AMPS, has the equivalent meaning.
"Substitute Commercial Paper Dealers" means such Substitute Commercial
Paper Dealer or Dealers as the Corporation may from time to time appoint or,
in lieu of any thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by
Merrill Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and
successors, after consultation with the Corporation, to act as the substitute
rating agency or substitute rating agencies, as the case may be, to determine
the credit ratings of the shares of AMPS.
"Taxable Equivalent of the Short-Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the Kenny S&P 30 day High Grade Index (the "Kenny
Index") or any successor index, made available for the Business Day
immediately preceding such date but in any event not later than 8:30 A.M.,
New York City time, on such date by Kenny Information Systems Inc. or any
successor thereto, based upon 30-day yield evaluations at par of bonds the
interest on which is excludable for regular Federal income tax purposes under
the Code of "high grade" component issuers selected by Kenny Information
Systems Inc. or any such successor from time to time in its discretion, which
component issuers shall include, without limitation, issuers of general
obligation bonds but shall exclude any bonds the interest on which
constitutes an item of tax preference under Section 57(a)(5) of the Code, or
successor provisions, for purposes of the "alternative minimum tax," divided
by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal); provided,
however, that if the Kenny Index is not made so available by 8:30 A.M., New
York City time, on such date by Kenny Information Systems Inc. or any
successor, the Taxable Equivalent of the Short-Term Municipal Bond Rate shall
mean the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the most recent Kenny Index so made available for
any preceding Business Day, divided by (B) 1.00 minus the Marginal Tax Rate
(expressed as a decimal). The Corporation may not utilize a successor index
to the Kenny Index unless Moody's and S&P provide the Corporation with
written confirmation that the use of such successor index will not adversely
affect the then current respective Moody's and S&P ratings of the AMPS.
"Treasury Bonds" has the meaning set forth in paragraph 8(a) of these
Articles Supplementary.
"28-Day Dividend Period" means, with respect to Series D AMPS and Series
E AMPS, a Dividend Period consisting of 28 days.
"U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent
of the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities
report for such Business Day, or (ii) if such yield as so calculated is not
available, the Alternate Treasury Bill Rate on such date. "Alternate
Treasury Bill Rate" on any date means the Interest Equivalent of the yield as
calculated by reference to the arithmetic average of the bid price quotations
of the actively traded Treasury Bill with a maturity most nearly comparable
to the length of the related Dividend Period, as determined by bid price
quotations as of any time on the Business Day immediately preceding such
date, obtained from at least three recognized primary U.S. Government
securities dealers selected by the Auction Agent.
"U.S. Treasury Note Rate" on any date means (i) the yield as calculated
by reference to the bid price quotation of the actively traded, current
coupon Treasury Note with a maturity most nearly comparable to the length of
the related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of
New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities
report for such Business Day, or (ii) if such yield as so calculated is not
available, the Alternate Treasury Note Rate on such date. "Alternate
Treasury Note Rate" on any date means the yield as calculated by reference to
the arithmetic average of the bid price quotations of the actively traded,
current coupon Treasury Note with a maturity most nearly comparable to the
length of the related Dividend Period, as determined by the bid price
quotations as of any time on the Business Day immediately preceding such
date, obtained from at least three recognized primary U.S. Government
securities dealers selected by the Auction Agent.
"Valuation Date" means, for purposes of determining whether the
Corporation is maintaining the AMPS Basic Maintenance Amount, each Business
Day commencing with the Date of Original Issue.
"Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Corporation, the amount of cash or securities
paid to or received from a broker (subsequent to the Initial Margin payment)
from time to time as the price of such futures contract fluctuates.
b. The foregoing definitions of Accountant's Confirmation, AMPS Basic
Maintenance Amount, AMPS Basic Maintenance Cure Date, AMPS Basic Maintenance
Report, Deposit Securities, Discounted Value, Independent Accountant, Initial
Margin, Market Value, Maximum Potential Additional Dividend Liability,
Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure Period,
Moody's Hedging Transactions, Moody's Volatility Factor, S&P Discount Factor,
S&P Eligible Asset, S&P Exposure Period, S&P Hedging Transactions, S&P
Volatility Factor, Valuation Date and Variation Margin have been determined
by the Board of Directors of the Corporation in order to obtain a "aaa"
rating from Moody's and a AAA rating from S&P on the AMPS on their Date of
Original Issue; and the Board of Directors of the Corporation shall have the
authority, without shareholder approval, to amend, alter or repeal from time
to time the foregoing definitions and the restrictions and guidelines set
forth thereunder if Moody's and S&P or any Substitute Rating Agency advises
the Corporation in writing that such amendment, alteration or repeal will not
adversely affect their then current ratings on the AMPS.
2. Dividends. a. The Holders shall be entitled to receive, when, as
---------
and if declared by the Board of Directors of the Corporation, out of funds
legally available therefor, cumulative dividends each consisting of (i) cash
at the Applicable Rate, (ii) a Right to receive cash as set forth in
paragraph 2(e) below, and (iii) any additional amounts as set forth in
paragraph 2(f) below, and no more, payable on the respective dates set forth
below. Dividends on the shares of AMPS so declared and payable shall be paid
(i) in preference to and in priority over any dividends declared and payable
on the Common Stock, and (ii) to the extent permitted under the Code and to
the extent available, out of net tax-exempt income earned on the
Corporation's investments. To the extent permitted under the Code, dividends
on shares of AMPS will be designated as exempt-interest dividends. For the
purposes of this section, the term "net tax-exempt income" shall exclude
capital gains of the Corporation.
b. (1) Cash dividends on shares of AMPS shall accumulate from the
Date of Original Issue and shall be payable, when, as and if declared by the
Board of Directors, out of funds legally available therefor, commencing on
the Initial Dividend Payment Date with respect to each series of AMPS.
Following the Initial Dividend Payment Date for each series of AMPS,
dividends on each series of AMPS will be payable, at the option of the
Corporation, either (i) with respect to any 7-Day Dividend Period, any 28-Day
Dividend Period and any Short Term Dividend Period of 35 or fewer days on the
day next succeeding the last day thereof, or (ii) with respect to any Short
Term Dividend Period of more than 35 days and with respect to any Long Term
Dividend Period, monthly on the first Business Day of each calendar month
during such Short Term Dividend Period or Long Term Dividend Period and on
the day next succeeding the last day thereof (each such date referred to in
clause (i) or (ii) being herein referred to as a "Normal Dividend Payment
Date"), except that if such Normal Dividend Payment Date is not a Business
Day, then (i) the Dividend Payment Date shall be the first Business Day next
succeeding such Normal Dividend Payment Date if such Normal Dividend Payment
Date is a Monday, Tuesday, Wednesday or Thursday, or (ii) the Dividend
Payment Date shall be the first Business Day next preceding such Normal
Dividend Payment Date if such Normal Dividend Payment Date is a Friday.
Although any particular Dividend Payment Date may not occur on the originally
scheduled date because of the exceptions discussed above, the next succeeding
Dividend Payment Date, subject to such exceptions, will occur on the next
following originally scheduled date. If for any reason a Dividend Payment
Date cannot be fixed as described above, then the Board of Directors shall
fix the Dividend Payment Date. The Initial Dividend Period, 7-Day Dividend
Periods, 28-Day Dividend Periods and Special Dividend Periods are hereinafter
sometimes referred to as Dividend Periods. Each dividend payment date
determined as provided above is hereinafter referred to as a "Dividend
Payment Date."
(2) Each dividend shall be paid to the Holders as they appear in
the Stock Register as of 12:00 noon, New York City time, on the Business Day
preceding the Dividend Payment Date. Dividends in arrears for any past
Dividend Period may be declared and paid at any time, without reference to
any regular Dividend Payment Date, to the Holders as they appear on the Stock
Register on a date, not exceeding 15 days prior to the payment date therefor,
as may be fixed by the Board of Directors of the Corporation.
c. (1) During the period from and including the first Date of
Original Issue for each series of AMPS to but excluding the Initial Dividend
Payment Date for each series of AMPS (the "Initial Dividend Period"), the
Applicable Rate shall be the Initial Dividend Rate. Commencing on the
Initial Dividend Payment Date for each series of AMPS, the Applicable Rate
for each subsequent dividend period (hereinafter referred to as a "Subsequent
Dividend Period"), which Subsequent Dividend Period shall commence on and
include a Dividend Payment Date and shall end on and include the calendar day
prior to the next Dividend Payment Date (or last Dividend Payment Date in a
Dividend Period if there is more than one Dividend Payment Date), shall be
equal to the rate per annum that results from implementation of the Auction
Procedures.
The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a 7-Day Dividend Period in the case of Series A AMPS, Series
B AMPS and Series C AMPS and a 28-Day Dividend Period in the case of Series D
AMPS and Series E AMPS, provided that if the preceding Dividend Period for
Series D AMPS or Series E AMPS is a Special Dividend Period of less than 28
days, the Dividend Period commencing during a Non-Payment Period will be the
same length as such preceding Dividend Period. Except in the case of the
willful failure of the Corporation to pay a dividend on a Dividend Payment
Date or to redeem any shares of AMPS on the date set for such redemption, any
amount of any dividend due on any Dividend Payment Date (if, prior to the
close of business on the second Business Day preceding such Dividend Payment
Date, the Corporation has declared such dividend payable on such Dividend
Payment Date to the Holders of such shares of AMPS as of 12:00 noon, New York
City time, on the Business Day preceding such Dividend Payment Date) or
redemption price with respect to any shares of AMPS not paid to such Holders
when due may be paid to such Holders in the same form of funds by 12:00 noon,
New York City time, on any of the first three Business Days after such
Dividend Payment Date or due date, as the case may be, provided that, such
amount is accompanied by a late charge calculated for such period of
non-payment at the Non-Payment Period Rate applied to the amount of such
non-payment based on the actual number of days comprising such period divided
by 365. In the case of a willful failure of the Corporation to pay a
dividend on a Dividend Payment Date or to redeem any shares of AMPS on the
date set for such redemption, the preceding sentence shall not apply and the
Applicable Rate for the Dividend Period commencing during the Non-Payment
Period resulting from such failure shall be the Non-Payment Period Rate. For
the purposes of the foregoing, payment to a person in same-day funds on any
Business Day at any time shall be considered equivalent to payment to such
person in New York Clearing House (next-day) funds at the same time on the
preceding Business Day, and any payment made after 12:00 noon, New York City
time, on any Business Day shall be considered to have been made instead in
the same form of funds and to the same person before 12:00 noon, New York
City time, on the next Business Day.
(2) The amount of cash dividends per share of any series of AMPS pay-
able (if declared) on the Initial Dividend Payment Date, each 7-Day Dividend
Period, each 28-Day Dividend Period and each Short Term Dividend Period shall
be computed by multiplying the Applicable Rate for such Dividend Period by a
fraction, the numerator of which will be the number of days in such Dividend
Period or part thereof that such share was outstanding and the denominator of
which will be 365, multiplying the amount so obtained by $25,000, and
rounding the amount so obtained to the nearest cent. During any Long Term
Dividend Period, the amount of cash dividends per share of AMPS payable (if
declared) on any Dividend Payment Date shall be computed by multiplying the
Applicable Rate for such Dividend Period by a fraction, the numerator of
which will be such number of days in such part of such Dividend Period that
such share was outstanding and for which dividends are payable on such
Dividend Payment Date and the denominator of which will be 360, multiplying
the amount so obtained by $25,000, and rounding the amount so obtained to the
nearest cent.
(3) With respect to each Dividend Period that is a Special Dividend
Period, the Corporation may, at its sole option and to the extent permitted
by law, by telephonic and written notice (a "Request for Special Dividend
Period") to the Auction Agent and to each Broker-Dealer, request that the
next succeeding Dividend Period for a series of AMPS be a number of days
(other than seven in the case of Series A AMPS, Series B AMPS and Series C
AMPS and other than 28 in the case of Series D AMPS and Series E AMPS),
evenly divisible by seven, and not fewer than seven nor more than 364 in the
case of a Short Term Dividend Period or one whole year or more but not
greater than five years in the case of a Long Term Dividend Period, specified
in such notice, provided that the Corporation may not give a Request for
Special Dividend Period of greater than 28 days (and any such request shall
be null and void) unless, for any Auction occurring after the initial
Auction, Sufficient Clearing Bids were made in the last occurring Auction and
unless full cumulative dividends, any amounts due with respect to
redemptions, and any Additional Dividends payable prior to such date have
been paid in full. Such Request for Special Dividend Period, in the case of
a Short Term Dividend Period, shall be given on or prior to the second
Business Day but not more than seven Business Days prior to an Auction Date
for a series of AMPS and, in the case of a Long Term Dividend Period, shall
be given on or prior to the second Business Day but not more than 28 days
prior to an Auction Date for the AMPS. Upon receiving such Request for
Special Dividend Period, the Broker-Dealer(s) shall jointly determine
whether, given the factors set forth below, it is advisable that the
Corporation issue a Notice of Special Dividend Period for the series of AMPS
as contemplated by such Request for Special Dividend Period and the Optional
Redemption Price of the AMPS during such Special Dividend Period and the
Specific Redemption Provisions and shall give the Corporation and the Auction
Agent written notice (a "Response") of such determination by no later than
the second Business Day prior to such Auction Date. In making such
determination the Broker-Dealer(s) will consider (1) existing short-term and
long-term market rates and indices of such short-term and long-term rates,
(2) existing market supply and demand for short-term and long-term
securities, (3) existing yield curves for short-term and long-term securities
comparable to the AMPS, (4) industry and financial conditions which may
affect the AMPS, (5) the investment objective of the Corporation, and (6) the
Dividend Periods and dividend rates at which current and potential beneficial
holders of the AMPS would remain or become beneficial holders. If the
Broker-Dealer(s) shall not give the Corporation and the Auction Agent a
Response by such second Business Day or if the Response states that given the
factors set forth above it is not advisable that the Corporation give a
Notice of Special Dividend Period for the series of AMPS, the Corporation may
not give a Notice of Special Dividend Period in respect of such Request for
Special Dividend Period. In the event the Response indicates that it is
advisable that the Corporation give a Notice of Special Dividend Period for
the series of AMPS, the Corporation may by no later than the second Business
Day prior to such Auction Date give a notice (a "Notice of Special Dividend
Period") to the Auction Agent, the Securities Depository and each Broker--
Dealer which notice will specify (i) the duration of the Special Dividend
Period, (ii) the Optional Redemption Price as specified in the related
Response and (iii) the Specific Redemption Provisions, if any, as specified
in the related Response. The Corporation shall also provide a copy of such
Notice of Special Dividend Period to Moody's and S&P. The Corporation shall
not give a Notice of Special Dividend Period and, if the Corporation has
given a Notice of Special Dividend Period, the Corporation is required to
give telephonic and written notice of its revocation (a "Notice of
Revocation") to the Auction Agent, each Broker-Dealer, and the Securities
Depository on or prior to the Business Day prior to the relevant Auction Date
if (x) either the 1940 Act AMPS Asset Coverage is not satisfied or the
Corporation shall fail to maintain S&P Eligible Assets and Moody's Eligible
Assets each with an aggregate Discounted Value at least equal to the AMPS
Basic Maintenance Amount, in each case on each of the two Valuation Dates
immediately preceding the Business Day prior to the relevant Auction Date on
an actual basis and on a pro forma basis giving effect to the proposed
Special Dividend Period (using as a pro forma dividend rate with respect to
such Special Dividend Period the dividend rate which the Broker-Dealers shall
advise the Corporation is an approximately equal rate for securities similar
to the AMPS with an equal dividend period), provided that, in calculating the
aggregate Discounted Value of Moody's Eligible Assets for this purpose, the
Moody's Exposure Period shall be deemed to be one week longer, (y) sufficient
funds for the payment of dividends payable on the immediately succeeding
Dividend Payment Date have not been irrevocably deposited with the Auction
Agent by the close of business on the third Business Day preceding the
related Auction Date or (z) the Broker-Dealer(s) jointly advise the
Corporation that after consideration of the factors listed above they have
concluded that it is advisable to give a Notice of Revocation. The
Corporation shall also provide a copy of such Notice of Revocation to Moody's
and S&P. If the Corporation is prohibited from giving a Notice of Special
Dividend Period as a result of any of the factors enumerated in clause (x),
(y) or (z) above or if the Corporation gives a Notice of Revocation with
respect to a Notice of Special Dividend Period for any series of AMPS, the
next succeeding Dividend Period for that series will be a 7-Day Dividend
Period in the case of Series A AMPS, Series B AMPS and Series C AMPS and a
28-Day Dividend Period in the case of Series D AMPS and Series E AMPS,
provided that if the then current Dividend Period for Series D AMPS or Series
E AMPS is a Special Dividend Period of less than 28 days, the next succeeding
Dividend Period for such series of AMPS will be the same length as such
current Dividend Period. In addition, in the event Sufficient Clearing Bids
are not made in the applicable Auction or such Auction is not held for any
reason, such next succeeding Dividend Period will be a 7-Day Dividend Period
(in the case of Series A AMPS, Series B AMPS and Series C AMPS) or a 28-Day
Dividend Period (in the case of Series D AMPS and Series E AMPS) and the
Corporation may not again give a Notice of Special Dividend Period for the
AMPS (and any such attempted notice shall be null and void) until Sufficient
Clearing Bids have been made in an Auction with respect to a 7-Day Dividend
Period (in the case of Series A AMPS, Series B AMPS and Series C AMPS) or a
28-Day Dividend Period (in the case of Series D AMPS and Series E AMPS).
d. (1) Holders shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of full cumulative dividends
and applicable late charges, as herein provided, on the shares of AMPS
(except for Additional Dividends as provided in paragraph 2(e) hereof and
additional payments as provided in paragraph 2(f) hereof). Except for the
late charge payable pursuant to paragraph 2(c)(i) hereof, no interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment on the shares of AMPS that may be in arrears.
(2) For so long as any share of AMPS is Outstanding, the Corporation
shall not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares of, or
options, warrants or rights to subscribe for or purchase, Common Stock or
other stock, if any, ranking junior to the shares of AMPS as to dividends or
upon liquidation) in respect of the Common Stock or any other stock of the
Corporation ranking junior to or on a parity with the shares of AMPS as to
dividends or upon liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any shares of the Common Stock or any
other such junior stock (except by conversion into or exchange for stock of
the Corporation ranking junior to the shares of AMPS as to dividends and upon
liquidation) or any other such Parity Stock (except by conversion into or
exchange for stock of the Corporation ranking junior to or on a parity with
the shares of AMPS as to dividends and upon liquidation), unless (A)
immediately after such transaction, the Corporation shall have S&P Eligible
Assets and Moody's Eligible Assets each with an aggregate Discounted Value
equal to or greater than the AMPS Basic Maintenance Amount and the
Corporation shall maintain the 1940 Act AMPS Asset Coverage, (B) full
cumulative dividends on shares of AMPS and shares of Other AMPS due on or
prior to the date of the transaction have been declared and paid or shall
have been declared and sufficient funds for the payment thereof deposited
with the Auction Agent, (C) any Additional Dividend required to be paid under
paragraph 2(e) below on or before the date of such declaration or payment has
been paid and (D) the Corporation has redeemed the full number of shares of
AMPS required to be redeemed by any provision for mandatory redemption
contained herein.
e. Each dividend shall consist of (i) cash at the Applicable Rate,
(ii) an uncertificated right (a "Right") to receive an Additional Dividend
(as defined below), and (iii) any additional amounts as set forth in
paragraph 2(f) below. Each Right shall thereafter be independent of the
share or shares of AMPS on which the dividend was paid. The Corporation
shall cause to be maintained a record of each Right received by the
respective Holders. A Right may not be transferred other than by operation
of law. If the Corporation retroactively allocates any net capital gains or
other income subject to regular Federal income taxes to shares of AMPS
without having given advance notice thereof to the Auction Agent as described
in paragraph 2(f) hereof solely by reason of the fact that such allocation is
made as a result of the redemption of all or a portion of the outstanding
shares of AMPS or the liquidation of the Corporation (the amount of such
allocation referred to herein as a "Retroactive Taxable Allocation"), the
Corporation will, within 90 days (and generally within 60 days) after the end
of the Corporation's fiscal year for which a Retroactive Taxable Allocation
is made, provide notice thereof to the Auction Agent and to each holder of a
Right applicable to such shares of AMPS (initially Cede & Co. as nominee of
the Depository Trust Company) during such fiscal year at such holder's
address as the same appears or last appeared on the Stock Books of the
Corporation. The Corporation will, within 30 days after such notice is given
to the Auction Agent, pay to the Auction Agent (who will then distribute to
such holders of Rights), out of funds legally available therefor, an amount
equal to the aggregate Additional Dividend with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in question.
An "Additional Dividend" means payment to a present or former holder of
shares of AMPS of an amount which, when taken together with the aggregate
amount of Retroactive Taxable Allocations made to such holder with respect to
the fiscal year in question, would cause such holder's dividends in dollars
from the aggregate of both the Retroactive Taxable Allocations and the
Additional Dividend to be equal to the dollar amount of the dividends which
would have been received by such holder if the amount of the aggregate
Retroactive Taxable Allocations would have been excludable from the gross
income of such holder. Such Additional Dividend shall be calculated (i)
without consideration being given to the time value of money; (ii) assuming
that no holder of shares of AMPS is subject to the Federal alternative
minimum tax with respect to dividends received from the Corporation; and
(iii) assuming that each Retroactive Taxable Allocation would be taxable in
the hands of each holder of shares of AMPS at the greater of: (x) the
maximum marginal regular Federal individual income tax rate applicable to
ordinary income or capital gains depending on the taxable character of the
distribution (including any surtax); or (y) the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income or capital
gains depending on the taxable character of the distribution (disregarding in
both (x) and (y) the effect of any state or local taxes and the phase out of,
or provision limiting, personal exemptions, itemized deductions, or the
benefit of lower tax brackets).
f. Except as provided below, whenever the Corporation intends to
include any net capital gains or other income subject to regular Federal
income taxes in any dividend on shares of AMPS, the Corporation will notify
the Auction Agent of the amount to be so included at least five Business Days
prior to the Auction Date on which the Applicable Rate for such dividend is
to be established. The Corporation may also include such income in a
dividend on shares of a series of AMPS without giving advance notice thereof
if it increases the dividend by an additional amount calculated as if such
income was a Retroactive Taxable Allocation and the additional amount was an
Additional Dividend, provided that the Corporation will notify the Auction
Agent of the additional amounts to be included in such dividend at least five
Business Days prior to the applicable Dividend Payment Date.
g. No fractional shares of AMPS shall be issued.
3. Liquidation Rights. Upon any liquidation, dissolution or winding
------------------
up of the Corporation, whether voluntary or involuntary, the Holders shall be
entitled to receive, out of the assets of the Corporation available for
distribution to shareholders, before any distribution or payment is made upon
any Common Stock or any other capital stock ranking junior in right of
payment upon liquidation to the AMPS, the sum of $25,000 per share plus
accumulated but unpaid dividends (whether or not earned or declared) thereon
to date of distribution, and after such payment the holders of AMPS will be
entitled to no other payments other than Additional Dividends as provided in
paragraph 2(e) hereof. If upon any liquidation, dissolution or winding up of
the Corporation, the amounts payable with respect to the AMPS and any other
Outstanding class or series of Preferred Stock of the Corporation ranking on
a parity with the AMPS as to payment upon liquidation are not paid in full,
the Holders and the holders of such other class or series will share ratably
in any such distribution of assets in proportion to the respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the
Holders will not be entitled to any further participation in any distribution
of assets by the Corporation except for any Additional Dividends. A
consolidation, merger or statutory share exchange of the Corporation with or
into any other corporation or entity or a sale, whether for cash, shares of
stock, securities or properties, of all or substantially all or any part of
the assets of the Corporation shall not be deemed or construed to be a
liquidation, dissolution or winding up of the Corporation.
4. Redemption. a. Shares of AMPS shall be redeemable by the
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Corporation as provided below:
(1) To the extent permitted under the 1940 Act and Maryland law,
upon giving a Notice of Redemption, the Corporation at its option may
redeem shares of AMPS, in whole or in part, out of funds legally
available therefor, at the Optional Redemption Price per share, on any
Dividend Payment Date; provided that no share of AMPS may be redeemed at
the option of the Corporation during (i) the Initial Dividend Period
with respect to a series of shares or (ii) a Non-Call Period to which
such share is subject. In addition, holders of AMPS which are redeemed
shall be entitled to receive Additional Dividends to the extent provided
herein. The Corporation may not give a Notice of Redemption relating to
an optional redemption as described in this paragraph 4(a)(i) unless, at
the time of giving such Notice of Redemption, the Corporation has
available Deposit Securities with maturity or tender dates not later
than the day preceding the applicable redemption date and having a value
not less than the amount due to Holders by reason of the redemption of
their shares of AMPS on such redemption date.
(2) The Corporation shall redeem, out of funds legally available
therefor, at the Mandatory Redemption Price per share, shares of AMPS to
the extent permitted under the 1940 Act and Maryland law, on a date
fixed by the Board of Directors, if the Corporation fails to maintain
S&P Eligible Assets and Moody's Eligible Assets each with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount as provided in paragraph 7(a) or to satisfy the 1940 Act AMPS
Asset Coverage as provided in paragraph 6 and such failure is not cured
on or before the AMPS Basic Maintenance Cure Date or the 1940 Act Cure
Date (herein collectively referred to as a "Cure Date"), as the case may
be. In addition, holders of AMPS so redeemed shall be entitled to
receive Additional Dividends to the extent provided herein. The number
of shares of AMPS to be redeemed shall be equal to the lesser of (i) the
minimum number of shares of AMPS the redemption of which, if deemed to
have occurred immediately prior to the opening of business on the Cure
Date, together with all shares of other Preferred Stock subject to
redemption or retirement, would result in the Corporation having S&P
Eligible Assets and Moody's Eligible Assets each with an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance
Amount or satisfaction of the 1940 Act AMPS Asset Coverage, as the case
may be, on such Cure Date (provided that, if there is no such minimum
number of shares of AMPS and shares of other Preferred Stock the
redemption of which would have such result, all shares of AMPS and
shares of other Preferred Stock then Outstanding shall be redeemed), and
(ii) the maximum number of shares of AMPS, together with all shares of
other Preferred Stock subject to redemption or retirement, that can be
redeemed out of funds expected to be legally available therefor on such
redemption date. In determining the number of shares of AMPS required
to be redeemed in accordance with the foregoing, the Corporation shall
allocate the number required to be redeemed which would result in the
Corporation having S&P Eligible Assets and Moody's Eligible Assets each
with an aggregate Discounted Value equal to or greater than the AMPS
Basic Maintenance Amount or satisfaction of the 1940 Act AMPS Asset
Coverage, as the case may be, pro rata among shares of AMPS of all
series, Other AMPS and other Preferred Stock subject to redemption
pursuant to provisions similar to those contained in this paragraph
4(a)(ii); provided that, shares of AMPS which may not be redeemed at the
option of the Corporation due to the designation of a Non-Call Period
applicable to such shares (A) will be subject to mandatory redemption
only to the extent that other shares are not available to satisfy the
number of shares required to be redeemed and (B) will be selected for
redemption in an ascending order of outstanding number of days in the
Non-Call Period (with shares with the lowest number of days to be
redeemed first) and by lot in the event of shares having an equal number
of days in such Non-Call Period. The Corporation shall effect such
redemption on a Business Day which is not later than 35 days after such
Cure Date, except that if the Corporation does not have funds legally
available for the redemption of all of the required number of shares of
AMPS and shares of other Preferred Stock which are subject to mandatory
redemption or the Corporation otherwise is unable to effect such
redemption on or prior to 35 days after such Cure Date, the Corporation
shall redeem those shares of AMPS which it is unable to redeem on the
earliest practicable date on which it is able to effect such redemption
out of funds legally available therefor.
b. Notwithstanding any other provision of this paragraph 4, no shares
of AMPS may be redeemed pursuant to paragraph 4(a)(i) of these Articles
Supplementary (i) unless all dividends in arrears on all remaining
outstanding shares of Parity Stock shall have been or are being
contemporaneously paid or declared and set apart for payment and (ii) if
redemption thereof would result in the Corporation's failure to maintain
Moody's Eligible Assets or S&P Eligible Assets with an aggregate Discounted
Value equal to or greater than the AMPS Basic Maintenance Amount. In the
event that less than all the outstanding shares of a series of AMPS are to be
redeemed and there is more than one Holder, the shares of that series of AMPS
to be redeemed shall be selected by lot or such other method as the
Corporation shall deem fair and equitable.
c. Whenever shares of AMPS are to be redeemed, the Corporation, not
less than 17 nor more than 30 days prior to the date fixed for redemption,
shall mail a notice ("Notice of Redemption") by first-class mail, postage
prepaid, to each Holder of shares of AMPS to be redeemed and to the Auction
Agent. The Corporation shall cause the Notice of Redemption to also be
published in the eastern and national editions of The Wall Street Journal.
The Notice of Redemption shall set forth (i) the redemption date, (ii) the
amount of the redemption price, (iii) the aggregate number of shares of AMPS
of such series to be redeemed, (iv) the place or places where shares of AMPS
of such series are to be surrendered for payment of the redemption price,
(v) a statement that dividends on the shares to be redeemed shall cease
to accumulate on such redemption date (except that holders may be entitled
to Additional Dividends) and (vi) the provision of these Articles
Supplementary pursuant to which such shares are being redeemed. No
defect in the Notice of Redemption or in the mailing or publication
thereof shall affect the validity of the redemption proceedings, except as
required by applicable law.
If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Corporation shall have deposited in trust
with the Auction Agent, or segregated in an account at the Corporation's
custodian bank for the benefit of the Auction Agent, Deposit Securities (with
a right of substitution) having an aggregate Discounted Value (utilizing in
the case of S&P an S&P Exposure Period of 22 Business Days) equal to the
redemption payment for the shares of AMPS as to which such Notice of
Redemption has been given with irrevocable instructions and authority to pay
the redemption price to the Holders of such shares, then upon the date of
such deposit or, if no such deposit is made, then upon such date fixed for
redemption (unless the Corporation shall default in making the redemption
payment), all rights of the Holders of such shares as shareholders of the
Corporation by reason of the ownership of such shares will cease and
terminate (except their right to receive the redemption price in respect
thereof and any Additional Dividends, but without interest), and such shares
shall no longer be deemed outstanding. The Corporation shall be entitled to
receive, from time to time, from the Auction Agent the interest, if any, on
such Deposit Securities deposited with it and the Holders of any shares so
redeemed shall have no claim to any of such interest. In case the Holder of
any shares, so called for redemption shall not claim the redemption payment
for his shares within one year after the date of redemption, the Auction
Agent shall, upon demand, pay over to the Corporation such amount remaining
on deposit and the Auction Agent shall thereupon be relieved of all
responsibility to the Holder of such shares called for redemption and such
Holder thereafter shall look only to the Corporation for the redemption
payment.
5. Voting Rights. a. General. Except as otherwise provided in the
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Charter or By-Laws, each Holder of shares of AMPS shall be entitled to one
vote for each share held on each matter submitted to a vote of shareholders
of the Corporation, and the holders of outstanding shares of Preferred Stock,
including AMPS, and of shares of Common Stock shall vote together as a single
class; provided that, at any meeting of the shareholders of the Corporation
held for the election of directors, the holders of outstanding shares of
Preferred Stock, including AMPS, shall be entitled, as a class, to the
exclusion of the holders of all other securities and classes of capital stock
of the Corporation, to elect two directors of the Corporation. Subject to
paragraph 5(b) hereof, the holders of outstanding shares of capital stock of
the Corporation, including the holders of outstanding shares of Preferred
Stock, including AMPS, voting as a single class, shall elect the balance of
the directors.
b. Right to Elect Majority of Board of Directors. During any period
---------------------------------------------
in which any one or more of the conditions described below shall exist (such
period being referred to herein as a "Voting Period"), the number of
directors constituting the Board of Directors shall be automatically
increased by the smallest number that, when added to the two directors
elected exclusively by the holders of shares of Preferred Stock, would
constitute a majority of the Board of Directors as so increased by such
smallest number; and the holders of shares of Preferred Stock shall be
entitled, voting separately as one class (to the exclusion of the holders of
all other securities and classes of capital stock of the Corporation), to
elect such smallest number of additional directors, together with the two
directors that such holders are in any event entitled to elect. A Voting
Period shall commence:
(1) if at any time accumulated dividends (whether or not earned or
declared, and whether or not funds are then legally available in an
amount sufficient therefor) on the outstanding shares of AMPS equal to
at least two full years' dividends shall be due and unpaid and
sufficient cash or specified securities shall not have been deposited
with the Auction Agent for the payment of such accumulated dividends; or
(2) if at any time holders of any other shares of Preferred Stock
are entitled to elect a majority of the directors of the Corporation
under the 1940 Act.
Upon the termination of a Voting Period, the voting rights described in
this paragraph 5(b) shall cease, subject always, however, to the reverting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this paragraph 5(b).
c. Right to Vote with Respect to Certain Other Matters. So long as
---------------------------------------------------
any shares of AMPS are outstanding, the Corporation shall not, without the
affirmative vote of the holders of a majority of the shares of Preferred
Stock Outstanding at the time, voting separately as one class: (i)
authorize, create or issue (other than with respect to the issuance of the
AMPS authorized hereby), or increase the authorized or issued aggregate
stated capital amount of (other than with respect to the issuance of the AMPS
authorized hereby), any class or series of stock ranking prior to or on a
parity with any series of Preferred Stock with respect to payment of
dividends or the distribution of assets on liquidation, or increase the
authorized aggregate stated capital amount of AMPS or any other Preferred
Stock, or (ii) amend, alter or repeal the provisions of the Charter, whether
by merger, consolidation or otherwise, so as to adversely affect any of the
contract rights expressly set forth in the Charter of holders of shares of
AMPS or any other Preferred Stock. To the extent permitted under the 1940
Act, in the event shares of more than one series of AMPS are outstanding, the
Corporation shall not approve any of the actions set forth in clause (i) or
(ii) which adversely affects the contract rights expressly set forth in the
Charter of a Holder of shares of a series of AMPS differently than those of a
Holder of shares of any other series of AMPS without the affirmative vote of
the holders of at least a majority of the shares of AMPS of each series
adversely affected and outstanding at such time (each such adversely affected
series voting separately as a class). The Corporation shall notify Moody's
and S&P ten Business Days prior to any such vote described in clause (i) or
(ii). Unless a higher percentage is provided for under the Charter, the
affirmative vote of the holders of a majority of the outstanding shares of
Preferred Stock, including AMPS, voting together as a single class, will be
required to approve any plan of reorganization (including bankruptcy
proceedings) adversely affecting such shares or any action requiring a vote
of security holders under Section 13(a) of the 1940 Act. The class vote of
holders of shares of Preferred Stock, including AMPS, described above will in
each case be in addition to a separate vote of the requisite percentage of
shares of Common Stock and shares of Preferred Stock, including AMPS, voting
together as a single class necessary to authorize the action in question.
d. Voting Procedures.
-----------------
(1) As soon as practicable after the accrual of any right of the
holders of shares of Preferred Stock to elect additional directors as
described in paragraph 5(b) above, the Corporation shall call a special
meeting of such holders and instruct the Auction Agent to mail a notice
of such special meeting to such holders, such meeting to be held not
less than 10 nor more than 20 days after the date of mailing of such
notice. If the Corporation fails to send such notice to the Auction
Agent or if the Corporation does not call such a special meeting, it may
be called by any such holder on like notice. The record date for
determining the holders entitled to notice of and to vote at such
special meeting shall be the close of business on the fifth Business Day
preceding the day on which such notice is mailed. At any such special
meeting and at each meeting held during a Voting Period, such Holders,
voting together as a class (to the exclusion of the holders of all other
securities and classes of capital stock of the Corporation), shall be
entitled to elect the number of directors prescribed in paragraph 5(b)
above. At any such meeting or adjournment thereof in the absence of a
quorum, a majority of such holders present in person or by proxy shall
have the power to adjourn the meeting without notice, other than by an
announcement at the meeting, to a date not more than 120 days after the
original record date.
(2) For purposes of determining any rights of the Holders to vote
on any matter or the number of shares required to constitute a quorum,
whether such right is created by these Articles Supplementary, by the
other provisions of the Charter, by statute or otherwise, a share of
AMPS which is not Outstanding shall not be counted.
(3) The terms of office of all persons who are directors of the
Corporation at the time of a special meeting of Holders and holders of
other Preferred Stock to elect directors shall continue, notwithstanding
the election at such meeting by the Holders and such other holders of
the number of directors that they are entitled to elect, and the persons
so elected by the Holders and such other holders, together with the two
incumbent directors elected by the Holders and such other holders of
Preferred Stock and the remaining incumbent directors elected by the
holders of the Common Stock and Preferred Stock, shall constitute the
duly elected directors of the Corporation.
(4) Simultaneously with the expiration of a Voting Period, the
terms of office of the additional directors elected by the Holders and
holders of other Preferred Stock pursuant to paragraph 5(b) above shall
terminate, the remaining directors shall constitute the directors of the
Corporation and the voting rights of the Holders and such other holders
to elect additional directors pursuant to paragraph 5(b) above shall
cease, subject to the provisions of the last sentence of paragraph 5(b).
e. Exclusive Remedy. Unless otherwise required by law, the Holders
----------------
of shares of AMPS shall not have any rights or preferences other than those
specifically set forth herein. The Holders of shares of AMPS shall have no
preemptive rights or rights to cumulative voting. In the event that the
Corporation fails to pay any dividends on the shares of AMPS, the exclusive
remedy of the Holders shall be the right to vote for directors pursuant to
the provisions of this paragraph 5.
f. Notification to S&P and Moody's. In the event a vote of Holders of
-------------------------------
AMPS is required pursuant to the provisions of Section 13(a) of the 1940 Act,
the Corporation shall, not later than ten Business Days prior to the date on
which such vote is to be taken, notify S&P and Moody's that such vote is to
be taken and the nature of the action with respect to which such vote is to
be taken and, not later than ten Business Days after the date on which such
vote is taken, notify S&P and Moody's of the result of such vote.
6. 1940 Act AMPS Asset Coverage. The Corporation shall maintain, as
----------------------------
of the last Business Day of each month in which any share of AMPS is
outstanding, the 1940 Act AMPS Asset Coverage.
7. AMPS Basic Maintenance Amount. a. The Corporation shall maintain,
-----------------------------
on each Valuation Date, and shall verify to its satisfaction that it is
maintaining on such Valuation Date, (i) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount and (ii) Moody's Eligible Assets having an aggregate
Discounted Value equal to or greater than the AMPS Basic Maintenance Amount.
Upon any failure to maintain the required Discounted Value, the Corporation
will use its best efforts to alter the composition of its portfolio to
reattain a Discounted Value at least equal to the AMPS Basic Maintenance
Amount on or prior to the AMPS Basic Maintenance Cure Date.
b. On or before 5:00 p.m., New York City time, on the third Business
Day after a Valuation Date on which the Corporation fails to satisfy the AMPS
Basic Maintenance Amount, the Corporation shall complete and deliver to the
Auction Agent, and Moody's and S&P, as the case may be, a complete AMPS Basic
Maintenance Report as of the date of such failure, which will be deemed to
have been delivered to the Auction Agent if the Auction Agent receives a copy
or telecopy, telex or other electronic transcription thereof and on the same
day the Corporation mails to the Auction Agent for delivery on the next
Business Day the complete AMPS Basic Maintenance Report. The Corporation
will deliver an AMPS Basic Maintenance Report to the Auction Agent and
Moody's and S&P, as the case may be, on or before 5:00 p.m., New York City
time, on the third Business Day after a Valuation Date on which the
Corporation cures its failure to maintain Moody's Eligible Assets or S&P
Eligible Assets, as the case may be, with an aggregate Discounted Value equal
to or greater than the AMPS Basic Maintenance Amount or on which the
Corporation fails to maintain Moody's Eligible Assets or S&P Eligible Assets,
as the case may be, with an aggregate Discounted Value which exceeds the AMPS
Basic Maintenance Amount by 5% or more. The Corporation will also deliver an
AMPS Basic Maintenance Report to the Auction Agent, Moody's and S&P as of
each Quarterly Valuation Date on or before the third Business Day after such
date. Additionally, on or before 5:00 p.m., New York City time, on the third
Business Day after the first day of a Special Dividend Period, the
Corporation will deliver an AMPS Basic Maintenance Report to S&P and the
Auction Agent. The Corporation shall also provide Moody's and S&P with an
AMPS Basic Maintenance Report when specifically requested by either Moody's
or S&P. A failure by the Corporation to deliver an AMPS Basic Maintenance
Report under this paragraph 7(b) shall be deemed to be delivery of an AMPS
Basic Maintenance Report indicating the Discounted Value for S&P Eligible
Assets and Moody's Eligible Assets of the Corporation is less than the AMPS
Basic Maintenance Amount, as of the relevant Valuation Date.
c. Within ten Business Days after the date of delivery of an AMPS
Basic Maintenance Report in accordance with paragraph 7(b) above relating to
a Quarterly Valuation Date, the Independent Accountant will confirm in
writing to the Auction Agent, S&P and Moody's (i) the mathematical accuracy
of the calculations reflected in such Report (and in any other AMPS Basic
Maintenance Report, randomly selected by the Independent Accountant, that was
delivered by the Corporation during the quarter ending on such Quarterly
Valuation Date), (ii) that, in such Report (and in such randomly selected
Report), the Corporation correctly determined the assets of the Corporation
which constitute S&P Eligible Assets or Moody's Eligible Assets, as the case
may be, at such Quarterly Valuation Date in accordance with these Articles
Supplementary, (iii) that, in such Report (and in such randomly selected
Report), the Corporation determined whether the Corporation had, at such
Quarterly Valuation Date (and at the Valuation Date addressed in such
randomly selected Report) in accordance with these Articles Supplementary,
S&P Eligible Assets of an aggregate Discounted Value at least equal to the
AMPS Basic Maintenance Amount and Moody's Eligible Assets of an aggregate
Discounted Value at least equal to the AMPS Basic Maintenance Amount, (iv)
with respect to the S&P ratings on Municipal Bonds, the issuer name, issue
size and coupon rate listed in such Report, that the Independent Accountant
has requested that S&P verify such information and the Independent Accountant
shall provide a listing in its letter of any differences, (v) with respect to
the Moody's ratings on Municipal Bonds, the issuer name, issue size and
coupon rate listed in such Report, that such information has been verified by
Moody's (in the event such information is not verified by Moody's, the
Independent Accountant will inquire of Moody's what such information is, and
provide a listing in its letter of any differences), (vi) with respect to the
bid or mean price (or such alternative permissible factor used in calculating
the Market Value) provided by the custodian of the Corporation's assets to
the Corporation for purposes of valuing securities in the Corporation's
portfolio, the Independent Accountant has traced the price used in such
Report to the bid or mean price listed in such Report as provided to the
Corporation and verified that such information agrees (in the event such
information does not agree, the Independent Accountant will provide a listing
in its letter of such differences) and (vii) with respect to such
confirmation to Moody's, that the Corporation has satisfied the requirements
of paragraph 9(b) of these Articles Supplementary (such confirmation is
herein called the "Accountant's Confirmation").
d. Within ten Business Days after the date of delivery to the Auction
Agent, S&P and Moody's of an AMPS Basic Maintenance Report in accordance with
paragraph 7(b) above relating to any Valuation Date on which the Corporation
failed to maintain S&P Eligible Assets with an aggregate Discounted Value and
Moody's Eligible Assets with an aggregate Discounted Value equal to or
greater than the AMPS Basic Maintenance Amount, and relating to the AMPS
Basic Maintenance Cure Date with respect to such failure, the Independent
Accountant will provide to the Auction Agent, S&P and Moody's an Accountant's
Confirmation as to such AMPS Basic Maintenance Report.
e. If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this paragraph 7 shows that an error was made in the AMPS Basic
Maintenance Report for a particular Valuation Date for which such
Accountant's Confirmation as required to be delivered, or shows that a lower
aggregate Discounted Value for the aggregate of all S&P Eligible Assets or
Moody's Eligible Assets, as the case may be, of the Corporation was
determined by the Independent Accountant, the calculation or determination
made by such Independent Accountant shall be final and conclusive and shall
be binding on the Corporation, and the Corporation shall accordingly amend
and deliver the AMPS Basic Maintenance Report to the Auction Agent, S&P and
Moody's promptly following receipt by the Corporation of such Accountant's
Confirmation.
f. On or before 5:00 p.m., New York City time, on the first Business
Day after the Date of Original Issue of the shares of AMPS, the Corporation
will complete and deliver to S&P and Moody's an AMPS Basic Maintenance Report
as of the close of business on such Date of Original Issue. Within five
Business Days of such Date of Original Issue, the Independent Accountant will
confirm in writing to S&P and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the aggregate Discounted
Value of S&P Eligible Assets and the aggregate Discounted Value of Moody's
Eligible Assets reflected thereon equals or exceeds the AMPS Basic
Maintenance Amount reflected thereon. Also, on or before 5:00 p.m., New York
City time, on the first Business Day after shares of Common Stock are
repurchased by the Corporation, the Corporation will complete and deliver to
S&P and Moody's an AMPS Basic Maintenance Report as of the close of business
on such date that Common Stock is repurchased.
g. For so long as the shares of AMPS are rated by S&P and Moody's, as
of the termination of a tender offer by the Corporation for shares of the
Common Stock, the Corporation shall have S&P Eligible Assets and Moody's
Eligible Assets having an aggregate Discounted Value equal to or greater than
the AMPS Basic Maintenance Amount calculated as if the shares of Common Stock
so tendered had been accepted for repurchase by the Corporation.
h. For so long as shares of AMPS are rated by Moody's, in managing the
Corporation's portfolio, the Adviser will not alter the composition of the
Corporation's portfolio if, in the reasonable belief of the Adviser, the
effect of any such alteration would be to cause the Corporation to have
Moody's Eligible Assets with an aggregate Discounted Value, as of the
immediately preceding Valuation Date, less than the AMPS Basic Maintenance
Amount as of such Valuation Date; provided, however, that in the event that,
as of the immediately preceding Valuation Date, the aggregate Discounted
Value of Moody's Eligible Assets exceeded the AMPS Basic Maintenance Amount
by five percent or less, the Adviser will not alter the composition of the
Corporation's portfolio in a manner reasonably expected to reduce the
aggregate Discounted Value of Moody's Eligible Assets unless the Corporation
shall have confirmed that, after giving effect to such alteration, the
aggregate Discounted Value of Moody's Eligible Assets would exceed the AMPS
Basic Maintenance Amount.
8. Certain Other Restrictions and Requirements.
-------------------------------------------
a. For so long as any shares of AMPS are rated by S&P, the Corporation
will not purchase or sell futures contracts, write, purchase or sell options
on futures contracts or write put options (except covered put options) or
call options (except covered call options) on portfolio securities unless it
receives written confirmation from S&P that engaging in such transactions
will not impair the ratings then assigned to the shares of AMPS by S&P,
except that the Corporation may purchase or sell futures contracts based on
the Bond Buyer Municipal Bond Index (the "Municipal Index") or United States
Treasury Bonds or Notes ("Treasury Bonds") and write, purchase or sell put
and call options on such contracts (collectively, "S&P Hedging
Transactions"), subject to the following limitations:
(1) the Corporation will not engage in any S&P Hedging Transaction
based on the Municipal Index (other than transactions which terminate a
futures contract or option held by the Corporation by the Corporation's
taking an opposite position thereto ("Closing Transactions")), which
would cause the Corporation at the time of such transaction to own or
have sold the least of (A) more than 1,000 outstanding futures contracts
based on the Municipal Index, (B) outstanding futures contracts based on
the Municipal Index exceeding in number 25% of the quotient of the
Market Value of the Corporation's total assets divided by $100,000 or
(C) outstanding futures contracts based on the Municipal Index exceeding
in number 10% of the average number of daily traded futures contracts
based on the Municipal Index in the 30 days preceding the time of
effecting such transaction as reported by The Wall Street Journal;
-----------------------
(2) the Corporation will not engage in any S&P Hedging Transaction
based on Treasury Bonds (other than Closing Transactions) which would
cause the Corporation at the time of such transaction to own or have
sold the lesser of (A) outstanding futures contracts based on Treasury
Bonds and on the Municipal Index exceeding in number 25% of the quotient
of the Market Value of the Corporation's total assets divided by
$100,000 or (B) outstanding futures contracts based on Treasury Bonds
exceeding in number 10% of the average number of daily traded futures
contracts based on Treasury Bonds in the 30 days preceding the time of
effecting such transaction as reported by The Wall Street Journal;
-----------------------
(3) the Corporation will engage in Closing Transactions to close
out any outstanding futures contract which the Corporation owns or has
sold or any outstanding option thereon owned by the Corporation in the
event (A) the Corporation does not have S&P Eligible Assets with an
aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount on two consecutive Valuation Dates and (B) the
Corporation is required to pay Variation Margin on the second such
Valuation Date;
(4) the Corporation will engage in a Closing Transaction to close
out any outstanding futures contract or option thereon in the month
prior to the delivery month under the terms of such futures contract or
option thereon unless the Corporation holds the securities deliverable
under such terms; and
(5) when the Corporation writes a futures contract or option
thereon, it will either maintain an amount of cash, cash equivalents or
short-term, fixed-income securities in a segregated account with the
Corporation's custodian, so that the amount so segregated plus the
amount of Initial Margin and Variation Margin held in the account of or
on behalf of the Corporation's broker with respect to such futures
contract or option equals the Market Value of the futures contract or
option, or, in the event the Corporation writes a futures contract or
option thereon which requires delivery of an underlying security, it
shall hold such underlying security in its portfolio.
For purposes of determining whether the Corporation has S&P Eligible
Assets with a Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of cash or securities held for the
payment of Initial Margin or Variation Margin shall be zero and the aggregate
Discounted Value of S&P Eligible Assets shall be reduced by an amount equal
to (i) 30% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on the Municipal Index which are owned by
the Corporation plus (ii) 25% of the aggregate settlement value, as marked to
market, of any outstanding futures contracts based on Treasury Bonds which
contracts are owned by the Corporation.
b. For so long as any shares of AMPS are rated by Moody's, the
Corporation will not buy or sell futures contracts, write, purchase or sell
call options on futures contracts or purchase put options on futures
contracts or write call options (except covered call options) on portfolio
securities unless it receives written confirmation from Moody's that engaging
in such transactions would not impair the ratings then assigned to the shares
of AMPS by Moody's, except that the Corporation may purchase or sell
exchange-traded futures contracts based on the Municipal Index or Treasury
Bonds and purchase, write or sell exchange-traded put options on such futures
contracts and purchase, write or sell exchange-traded call options on such
futures contracts (collectively, "Moody's Hedging Transactions"), subject to
the following limitations:
(1) the Corporation will not engage in any Moody's Hedging
Transaction based on the Municipal Index (other than Closing
Transactions) which would cause the Corporation at the time of such
transaction to own or have sold (A) outstanding futures contracts based
on the Municipal Index exceeding in number 10% of the average number of
daily traded futures contracts based on the Municipal Index in the 30
days preceding the time of effecting such transaction as reported by The
---
Wall Street Journal or (B) outstanding futures contracts based on the
-------------------
Municipal Index having a Market Value exceeding the Market Value
of all Municipal Bonds constituting Moody's Eligible Assets owned by the
Corporation (other than Moody's Eligible Assets already subject to a
Moody's Hedging Transaction);
(2) the Corporation will not engage in any Moody's Hedging
Transaction based on Treasury Bonds (other than Closing Transactions)
which would cause the Corporation at the time of such transaction to own
or have sold (A) outstanding futures contracts based on Treasury Bonds
having an aggregate Market Value exceeding 40% of the aggregate Market
Value of Moody's Eligible Assets owned by the Corporation and rated Aa
by Moody's (or, if not rated by Moody's but rated by S&P, rated AAA by
S&P) or (B) outstanding futures contracts based on Treasury Bonds having
an aggregate Market Value exceeding 80% of the aggregate Market Value of
all Municipal Bonds constituting Moody's Eligible Assets owned by the
Corporation (other than Moody's Eligible Assets already subject to a
Moody's Hedging Transaction) and rated Baa or A by Moody's (or, if not
rated by Moody's but rated by S&P, rated A or AA by S&P) (for purposes
of the foregoing clauses (i) and (ii), the Corporation shall be deemed
to own the number of futures contracts that underlie any outstanding
options written by the Corporation);
(3) the Corporation will engage in Closing Transactions to close
out any outstanding futures contract based on the Municipal Index if the
amount of open interest in the Municipal Index as reported by The Wall
--------
Street Journal is less than 5,000;
--------------
(4) the Corporation will engage in a Closing Transaction to close
out any outstanding futures contract by no later than the fifth Business
Day of the month in which such contract expires and will engage in a
Closing Transaction to close out any outstanding option on a futures
contract by no later than the first Business Day of the month in which
such option expires;
(5) the Corporation will engage in Moody's Hedging Transactions
only with respect to futures contracts or options thereon having the
next settlement date or the settlement date immediately thereafter;
(6) the Corporation will not engage in options and futures
transactions for leveraging or speculative purposes and will not write
any call options or sell any futures contracts for the purpose of
hedging the anticipated purchase of an asset prior to completion of such
purchase; and
(7) the Corporation will not enter into an option or futures
transaction unless, after giving effect thereto, the Corporation would
continue to have Moody's Eligible Assets with an aggregate Discounted
Value equal to or greater than the AMPS Basic Maintenance Amount.
For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the Discounted Value of Moody's Eligible Assets
which the Corporation is obligated to deliver or receive pursuant to an
outstanding futures contract or option shall be as follows: (i) assets
subject to call options written by the Corporation which are either exchange-
traded and "readily reversible" or which expire within 49 days after the date
as of which such valuation is made shall be valued at the lesser of
(a) Discounted Value and (b) the exercise price of the call option written by
the Corporation; (ii) assets subject to call options written by the
Corporation not meeting the requirements of clause (i) of this sentence shall
have no value; (iii) assets subject to put options written by the Corporation
shall be valued at the lesser of (A) the exercise price and (B) the
Discounted Value of the subject security; (iv) futures contracts shall be
valued at the lesser of (A) settlement price and (B) the Discounted Value of
the subject security, provided that, if a contract matures within 49 days
after the date as of which such valuation is made, where the Corporation is
the seller the contract may be valued at the settlement price and where the
Corporation is the buyer the contract may be valued at the Discounted Value
of the subject securities and (v) where delivery may be made to the
Corporation with any security of a class of securities, the Corporation shall
assume that it will take delivery of the security with the lowest Discounted
Value.
For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the following amounts shall be subtracted from the
aggregate Discounted Value of the Moody's Eligible Assets held by the
Corporation: (i) 10% of the exercise price of a written call option; (ii)
the exercise price of any written put option; (iii) where the Corporation is
the seller under a futures contract, 10% of the settlement price of the
futures contract; (iv) where the Corporation is the purchaser under a futures
contract, the settlement price of assets purchased under such futures
contract; (v) the settlement price of the underlying futures contract if the
Corporation writes put options on a futures contract; and (vi) 105% of the
Market Value of the underlying futures contracts if the Corporation writes
call options on a futures contract and does not own the underlying contract.
c. For so long as any shares of AMPS are rated by Moody's, the
Corporation will not enter into any contract to purchase securities for a
fixed price at a future date beyond customary settlement time (other than
such contracts that constitute Moody's Hedging Transactions that are
permitted under paragraph 8(b) of these Articles Supplementary), except that
the Corporation may enter into such contracts to purchase newly-issued
securities on the date such securities are issued ("Forward Commitments"),
subject to the following limitations:
(1) the Corporation will maintain in a segregated account with its
custodian cash, cash equivalents or short-term, fixed-income securities
rated P-1, MIG-1 or VMIG-1 by Moody's and maturing prior to the date of
the Forward Commitment with a Market Value that equals or exceeds the
amount of the Corporation's obligations under any Forward Commitments to
which it is from time to time a party or long-term fixed income
securities with a Discounted Value that equals or exceeds the amount of
the Corporation's obligations under any Forward Commitment to which it
is from time to time a party; and
(2) the Corporation will not enter into a Forward Commitment
unless, after giving effect thereto the Corporation would continue to
have Moody's Eligible Assets with an aggregate Discounted Value equal to
or greater than the AMPS Basic Maintenance Amount.
For purposes of determining whether the Corporation has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the AMPS
Basic Maintenance Amount, the Discounted Value of all Forward Commitments to
which the Corporation is a party and of all securities deliverable to the
Corporation pursuant to such Forward Commitments shall be zero.
d. For so long as shares of AMPS are rated by S&P or Moody's, the
Corporation will not, unless it has received written confirmation from S&P
and/or Moody's, as the case may be, that such action would not impair the
ratings then assigned to shares of AMPS by S&P and/or Moody's, as the case
may be, (i) borrow money except for the purpose of clearing transactions in
portfolio securities (which borrowings shall under any circumstances be
limited to the lesser of $10 million and an amount equal to 5% of the Market
Value of the Corporation's assets at the time of such borrowings and which
borrowings shall be repaid within 60 days and not be extended or renewed and
shall not cause the aggregate Discounted Value of Moody's Eligible Assets and
S&P Eligible Assets to be less than the AMPS Basic Maintenance Amount), (ii)
engage in short sales of securities, (iii) lend any securities, (iv) issue
any class or series of stock ranking prior to or on a parity with the AMPS
with respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Corporation, (v) reissue any
AMPS previously purchased or redeemed by the Corporation, (vi) merge or
consolidate into or with any other corporation or entity, (vii) change the
Pricing Service or (viii) engage in reverse repurchase agreements.
Furthermore, for so long as the shares of AMPS are rated by S&P and Moody's,
at the time the Corporation accepts shares of Common Stock for repurchase in
a tender offer, it shall have Deposit Securities maturing, or the irrevocable
sale of which are due for settlement with a counterparty rated A-1 or better
in the case of S&P and P-1 or better in the case of Moody's, within three
Business Days of such date of acceptance in an amount at least equal to the
shares of Common Stock accepted for repurchase in such tender offer;
otherwise the Corporation will not accept such shares for repurchase. Also,
for so long as the shares of AMPS are rated by S&P and Moody's, the
Corporation will provide, within five Business Days after the end of each
calendar month, a report to S&P and Moody's as to the number and dollar
amount of shares of Common Stock sold including shares sold pursuant to
reinvestment of dividends and the number, dollar amount and repurchase price
of shares of Common Stock repurchased pursuant to a tender offer. Such
report also shall provide the names of any counterparties to which Deposit
Securities were sold in conjunction with the satisfaction of the requirement
of having Deposit Securities when the Corporation accepts shares of Common
Stock in a tender offer as set forth above. For so long as the shares of
AMPS are rated by S&P and Moody's, the Corporation will provide notice to S&P
and Moody's of the cancellation of any tender offers for its Common Stock
within three Business Days of such cancellation.
9. Notice. All notices or communications, unless otherwise specified
------
in the By-Laws of the Corporation or these Articles Supplementary, shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the
earlier of the date received or the date seven days after which such notice
is mailed.
10. Auction Procedures. a. Certain definitions. As used in this
------------------ -------------------
paragraph 10, the following terms shall have the following meanings, unless
the context otherwise requires:
(1) "AMPS" means the shares of AMPS being auctioned pursuant to
this paragraph 10.
(2) "Auction Date" means the first Business Day preceding the
first day of a Dividend Period.
(3) "Available AMPS" has the meaning specified in paragraph 10(d)(i)
below.
(4) "Bid" has the meaning specified in paragraph 10(b)(i) below.
(5) "Bidder" has the meaning specified in paragraph 10(b)(i)
below.
(6) "Hold Order" has the meaning specified in paragraph 10(b)(i)
below.
(7) "Maximum Applicable Rate" for any Dividend Period will be the
Applicable Percentage of the Reference Rate. The Applicable Percentage
will be determined based on (i) the lower of the credit rating or
ratings assigned on such date to such shares by Moody's and S&P (or if
Moody's or S&P or both shall not make such rating available, the
equivalent of either or both of such ratings by a Substitute Rating
Agency or two Substitute Rating Agencies or, in the event that only one
such rating shall be available, such rating) and (ii) whether the
Corporation has provided notification to the Auction Agent prior to the
Auction establishing the Applicable Rate for any dividend pursuant to
paragraph 2(f) hereof that net capital gains or other taxable income
will be included in such dividend on shares of AMPS as follows:
<TABLE>
<CAPTION>
Credit Ratings Applicable Applicable
Percentage of Percentage of
Reference Rate - Reference
Moody's S&P No Notification Notification
<S> <C> <C>
"aa3" or higher AA- or higher 110% 150%
"a3" to "a1" A- to A+ 125% 160%
"baa3" to "baa1" BBB- to BBB+ 150% 250%
Below "baa3" Below BBB- 200% 275%
</TABLE>
The Corporation shall take all reasonable action necessary to enable S&P
and Moody's to provide a rating for each series of AMPS. If either S&P or
Moody's shall not make such a rating available, or neither S&P nor Moody's
shall make such a rating available, Merrill Lynch, Pierce, Fenner & Smith
Incorporated or its affiliates and successors, after consultation with the
Corporation, shall select a nationally recognized statistical rating
organization or two nationally recognized statistical rating organizations to
act as a Substitute Rating Agency or Substitute Rating Agencies, as the case
may be.
(8) "Order" has the meaning specified in paragraph 10(b)(i) below.
(9) "Sell Order" has the meaning specified in paragraph 10(b)(i)
below.
(10) "Submission Deadline" means 1:00 P.M., New York City time, on any
Auction Date or such other time on any Auction Date as may be specified
by the Auction Agent from time to time as the time by which each
Broker-Dealer must submit to the Auction Agent in writing all orders
obtained by it for the Auction to be conducted on such Auction Date.
(11) "Submitted Bid" has the meaning specified in paragraph
10(d)(i) below.
(12) "Submitted Hold Order" has the meaning specified in paragraph
10(d)(i) below.
(13) "Submitted Order" has the meaning specified in paragraph
10(d)(i) below.
(14) "Submitted Sell Order" has the meaning specified in paragraph
10(d)(i) below.
(15) "Sufficient Clearing Bids" has the meaning specified in
paragraph 10(d)(i) below.
(16) "Winning Bid Rate" has the meaning specified in paragraph
10(d)(i) below.
b. Orders by Beneficial Owners, Potential Beneficial Owners, Existing
------------------------------------------------------------------
Holders and Potential Holders.
- -----------------------------
(1) Unless otherwise permitted by the Corporation, Beneficial
Owners and Potential Beneficial Owners may only participate in Auctions
through their Broker-Dealers. Broker-Dealers will submit the Orders of their
respective customers who are Beneficial Owners and Potential Beneficial
Owners to the Auction Agent, designating themselves as Existing Holders in
respect of shares subject to Orders submitted or deemed submitted to them by
Beneficial Owners and as Potential Holders in respect of shares subject to
Orders submitted to them by Potential Beneficial Owners. A Broker-Dealer may
also hold shares of AMPS in its own account as a Beneficial Owner. A Broker-
Dealer may thus submit Orders to the Auction Agent as a Beneficial Owner or a
Potential Beneficial Owner and therefore participate in an Auction as an
Existing Holder or Potential Holder on behalf of both itself and its
customers. On or prior to the Submission Deadline on each Auction Date:
(i) each Beneficial Owner may submit to its Broker-Dealer
information as to:
i. the number of Outstanding shares, if any, of AMPS held by
such Beneficial Owner which such Beneficial Owner desires to
continue to hold without regard to the Applicable Rate for the next
succeeding Dividend Period;
ii. the number of Outstanding shares, if any, of AMPS held by
such Beneficial Owner which such Beneficial Owner desires to
continue to hold, provided that the Applicable Rate for the next
succeeding Dividend Period shall not be less than the rate per
annum specified by such Beneficial Owner; and/or
iii. the number of Outstanding shares, if any, of AMPS held by
such Beneficial Owner which such Beneficial Owner offers to sell
without regard to the Applicable Rate for the next succeeding
Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Beneficial
Owners that shall be maintained in good faith for the purpose of
conducting a competitive Auction, shall contact Potential Beneficial
Owners, including Persons that are not Beneficial Owners, on such list
to determine the number of Outstanding shares, if any, of AMPS which
each such Potential Beneficial Owner offers to purchase, provided that
the Applicable Rate for the next succeeding Dividend Period shall not be
less than the rate per annum specified by such Potential Beneficial
Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this paragraph 10(b)(i) is hereinafter
referred to as an "Order" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order, including a Broker-Dealer acting in such
capacity for its own account, is hereinafter referred to as a "Bidder"; an
Order containing the information referred to in clause (A)(1) of this
paragraph 10(b)(i) is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (A)(2) or (B) of this
paragraph 10(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this paragraph
10(b)(i) is hereinafter referred to as a "Sell Order". Inasmuch as a Broker-
Dealer participates in an Auction as an Existing Holder or a Potential Holder
only to represent the interests of a Beneficial Owner or Potential Beneficial
Owner, whether it be its customers or itself, all discussion herein relating
to the consequences of an Auction for Existing Holders and Potential Holders
also applies to the underlying beneficial ownership interests represented
thereby.
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of Outstanding shares of AMPS specified in such Bid
if the Applicable Rate determined on such Auction Date shall be less
than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding shares of AMPS
to be determined as set forth in paragraph 10(e)(i)(D) if the Applicable
Rate determined on such Auction Date shall be equal to the rate per
annum specified therein; or
(3) a lesser number of Outstanding shares of AMPS to be determined
as set forth in paragraph 10(e)(ii)(C) if such specified rate per annum
shall be higher than the Maximum Applicable Rate and Sufficient Clearing
Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of Outstanding shares of AMPS specified in such
Sell Order; or
(2) such number or a lesser number of Outstanding shares of AMPS
to be determined as set forth in paragraph 10(e)(ii)(C) if Sufficient
Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Outstanding shares of AMPS specified
in such Bid if the Applicable Rate determined on such Auction
Date shall be higher than the rate per annum specified in such
Bid; or
(2) such number or a lesser number of Outstanding shares
of AMPS to be determined as set forth in paragraph 10(e)(i)(E)
if the Applicable Rate determined on such Auction Date shall
be equal to the rate per annum specified therein.
(c) Submission of Orders by Broker-Dealers to Auction Agent.
-------------------------------------------------------
(i) Each Broker-Dealer shall submit in writing or through the Auction
Agent's Auction Processing System to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the
Corporation) as an Existing Holder in respect of shares subject to Orders
submitted or deemed submitted to it by Beneficial Owners and as a Potential
Holder in respect of shares subject to Orders submitted to it by Potential
Beneficial Owners, and specifying with respect to each Order:
(A) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Corporation);
(B) the aggregate number of Outstanding shares of AMPS that are the
subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding shares, if any, of AMPS subject
to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares, if any, of AMPS subject
to any Bid placed by such Existing Holder and the rate per annum
specified in such Bid; and
(3) the number of Outstanding shares, if any, of AMPS subject
to any Sell Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate per annum
specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid contains more than
three figures to the right of the decimal point, the Auction Agent shall
round such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering all of the Outstanding shares of
AMPS held by an Existing Holder are not submitted to the Auction Agent prior
to the Submission Deadline, the Auction Agent shall deem a Hold Order (in the
case of an Auction relating to a Dividend Period which is not a Special
Dividend Period) and a Sell Order (in the case of an Auction relating to a
Special Dividend Period) to have been submitted on behalf of such Existing
Holder covering the number of Outstanding shares of AMPS held by such
Existing Holder and not subject to Orders submitted to the Auction Agent.
(iv) If one or more Orders on behalf of an Existing Holder covering in
the aggregate more than the number of Outstanding shares of AMPS held by such
Existing Holder are submitted to the Auction Agent, such Order shall be
considered valid as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder
shall be considered valid up to and including the number of Outstanding
shares of AMPS held by such Existing Holder; provided that if more than
one Hold Order is submitted on behalf of such Existing Holder and the
number of shares of AMPS subject to such Hold Orders exceeds the number
of Outstanding shares of AMPS held by such Existing Holder, the number
of shares of AMPS subject to each of such Hold Orders shall be reduced
pro rata so that such Hold Orders, in the aggregate, will cover exactly
the number of Outstanding shares of AMPS held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder shall be
considered valid, in the ascending order of their respective rates per
annum if more than one Bid is submitted on behalf of such Existing
Holder, up to and including the excess of the number of Outstanding
shares of AMPS held by such Existing Holder over the number of shares of
AMPS subject to any Hold Order referred to in paragraph 10(c)(iv)(A)
above (and if more than one Bid submitted on behalf of such Existing
Holder specifies the same rate per annum and together they cover more
than the remaining number of shares that can be the subject of valid
Bids after application of paragraph 10(c)(iv)(A) above and of the
foregoing portion of this paragraph 10(c)(iv)(B) to any Bid or Bids
specifying a lower rate or rates per annum, the number of shares subject
to each of such Bids shall be reduced pro rata so that such Bids, in the
aggregate, cover exactly such remaining number of shares); and the
number of shares, if any, subject to Bids not valid under this paragraph
10(c)(iv)(B) shall be treated as the subject of a Bid by a Potential
Holder; and
(C) any Sell Order shall be considered valid up to and including
the excess of the number of Outstanding shares of AMPS held by such
Existing Holder over the number of shares of AMPS subject to Hold Orders
referred to in paragraph 10(c)(iv)(A) and Bids referred to in paragraph
10(c)(iv)(B); provided that if more than one Sell Order is submitted on
behalf of any Existing Holder and the number of shares of AMPS subject
to such Sell Orders is greater than such excess, the number of shares of
AMPS subject to each of such Sell Orders shall be reduced pro rata so
that such Sell Orders, in the aggregate, cover exactly the number of
shares of AMPS equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate per annum
and number of shares of AMPS specified.
(vi) Any Order submitted by a Beneficial Owner as a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior
to the Submission Deadline on any Auction Date shall be irrevocable.
(d) Determination of Sufficient Clearing Bids, Winning Bid
------------------------------------------------------
Rate and Applicable Rate.
- ------------------------
(i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it
by the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or
as a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding shares of AMPS
over the number of Outstanding shares of AMPS that are the subject of
Submitted Hold Orders (such excess being hereinafter referred to as the
"Available AMPS");
(B) from the Submitted Orders whether the number of Outstanding
shares of AMPS that are the subject of Submitted Bids by Potential
Holders specifying one or more rates per annum equal to or lower than
the Maximum Applicable Rate exceeds or is equal to the sum of:
(1) the number of Outstanding shares of AMPS that are the
subject of Submitted Bids by Existing Holders specifying one or
more rates per annum higher than the Maximum Applicable Rate, and
(2) the number of Outstanding shares of AMPS that are subject
to Submitted Sell Orders (if such excess or such equality exists
(other than because the number of Outstanding shares of AMPS in
clause (1) above and this clause (2) are each zero because all of
the Outstanding shares of AMPS are the subject of Submitted Hold
Orders), such Submitted Bids by Potential Holders being hereinafter
referred to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum
specified in the Submitted Bids (the "Winning Bid Rate") that if:
(1) each Submitted Bid from Existing Holders specifying the
Winning Bid Rate and all other Submitted Bids from Existing Holders
specifying lower rates per annum were rejected, thus entitling such
Existing Holders to continue to hold the shares of AMPS that are
the subject of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the
Winning Bid Rate and all other Submitted Bids from Potential
Holders specifying lower rates per annum were accepted, thus
entitling the Potential Holders to purchase the shares of AMPS that
are the subject of such Submitted Bids, would result in the number
of shares subject to all Submitted Bids specifying the Winning Bid
Rate or a lower rate per annum being at least equal to the
Available AMPS.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 10(d)(i), the Auction Agent shall advise the
Corporation of the Maximum Applicable Rate and, based on such determinations,
the Applicable Rate for the next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate
for the next succeeding Dividend Period shall be equal to the Winning
Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than because
all of the Outstanding shares of AMPS are the subject of Submitted Hold
Orders), that the Applicable Rate for the next succeeding Dividend
Period shall be equal to the Maximum Applicable Rate; or
(C) if all of the Outstanding shares of AMPS are the subject of
Submitted Hold Orders, that the Dividend Period next succeeding the
Auction shall automatically be the same length as the immediately
preceding Dividend Period and the Applicable Rate for the next
succeeding Dividend Period shall be equal to 40% of the Reference Rate
(or 60% of such rate if the Corporation has provided notification to the
Auction Agent prior to the Auction establishing the Applicable Rate for
any dividend pursuant to paragraph 2(f) hereof that net capital gains or
other taxable income will be included in such dividend on shares of
AMPS) on the date of the Auction.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell
-----------------------------------------------
Orders and Allocation of Shares. Based on the determinations made pursuant
to paragraph 10(d)(i), the Submitted Bids and Submitted Sell Orders shall be
accepted or rejected and the Auction Agent shall take such other action as
set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 10(e)(iii) and paragraph 10(e)(iv), Submitted Bids
and Submitted Sell Orders shall be accepted or rejected in the following
order of priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be
accepted and the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is higher than the Winning Bid Rate
shall be accepted, thus requiring each such Existing Holder to sell the
Outstanding shares of AMPS that are the subject of such Submitted Sell
Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying
any rate per annum that is lower than the Winning Bid Rate shall be
rejected, thus entitling each such Existing Holder to continue to hold
the Outstanding shares of AMPS that are the subject of such Submitted
Bid;
(C) the Submitted Bid of each of the Potential Holders specifying
any rate per annum that is lower than the Winning Bid Rate shall be
accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be rejected,
thus entitling each such Existing Holder to continue to hold the
Outstanding shares of AMPS that are the subject of such Submitted Bid,
unless the number of Outstanding shares of AMPS subject to all such
Submitted Bids shall be greater than the number of Outstanding shares of
AMPS ("Remaining Shares") equal to the excess of the Available AMPS over
the number of Outstanding shares of AMPS subject to Submitted Bids
described in paragraph 10(e)(i)(B) and paragraph 10(e)(i)(C), in which
event the Submitted Bids of each such Existing Holder shall be accepted,
and each such Existing Holder shall be required to sell Outstanding
shares of AMPS, but only in an amount equal to the difference between
(1) the number of Outstanding shares of AMPS then held by such Existing
Holder subject to such Submitted Bid and (2) the number of shares of
AMPS obtained by multiplying (x) the number of Remaining Shares by (y) a
fraction the numerator of which shall be the number of Outstanding
shares of AMPS held by such Existing Holder subject to such Submitted
Bid and the denominator of which shall be the sum of the number of
Outstanding shares of AMPS subject to such Submitted Bids made by all
such Existing Holders that specified a rate per annum equal to the
Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying
a rate per annum that is equal to the Winning Bid Rate shall be accepted
but only in an amount equal to the number of Outstanding shares of AMPS
obtained by multiplying (x) the difference between the Available AMPS
and the number of Outstanding shares of AMPS subject to Submitted Bids
described in paragraph 10(e)(i)(B), paragraph 10(e)(i)(C) and paragraph
10(e)(i)(D) by (y) a fraction the numerator of which shall be the number
of Outstanding shares of AMPS subject to such Submitted Bid and the
denominator of which shall be the sum of the number of Outstanding
shares of AMPS subject to such Submitted Bids made by all such Potential
Holders that specified rates per annum equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because
all of the Outstanding shares of AMPS are subject to Submitted Hold Orders),
subject to the provisions of paragraph 10(e)(iii), Submitted Orders shall be
accepted or rejected as follows in the following order of priority and all
other Submitted Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate
shall be rejected, thus entitling such Existing Holder to continue to
hold the Outstanding shares of AMPS that are the subject of such
Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate
shall be accepted, thus requiring such Potential Holder to purchase the
Outstanding shares of AMPS that are the subject of such Submitted Bid;
and
(C) the Submitted Bids of each Existing Holder specifying any rate
per annum that is higher than the Maximum Applicable Rate shall be
accepted and the Submitted Sell Orders of each Existing Holder shall be
accepted, in both cases only in an amount equal to the difference
between (1) the number of Outstanding shares of AMPS then held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order
and (2) the number of shares of AMPS obtained by multiplying (x) the
difference between the Available AMPS and the aggregate number of
Outstanding shares of AMPS subject to Submitted Bids described in
paragraph 10(e)(ii)(A) and paragraph 10(e)(ii)(B) by (y) a fraction the
numerator of which shall be the number of Outstanding shares of AMPS
held by such Existing Holder subject to such Submitted Bid or Submitted
Sell Order and the denominator of which shall be the number of Outstanding
shares of AMPS subject to all such Submitted Bids and Submitted Sell
Orders.
(iii) If, as a result of the procedures described in paragraph 10(e)(i)
or paragraph 10(e)(ii), any Existing Holder would be entitled or required to
sell, or any Potential Holder would be entitled or required to purchase, a
fraction of a share of AMPS on any Auction Date, the Auction Agent shall, in
such manner as in its sole discretion it shall determine, round up or down
the number of shares of AMPS to be purchased or sold by any Existing Holder
or Potential Holder on such Auction Date so that each Outstanding share of
AMPS purchased or sold by each Existing Holder or Potential Holder on such
Auction Date shall be a whole share of AMPS.
(iv) If, as a result of the procedures described in paragraph 10(e)(i),
any Potential Holder would be entitled or required to purchase less than a
whole share of AMPS on any Auction Date, the Auction Agent shall, in such
manner as in its sole discretion it shall determine, allocate shares of AMPS
for purchase among Potential Holders so that only whole shares of AMPS are
purchased on such Auction Date by any Potential Holder, even if such
allocation results in one or more of such Potential Holders not purchasing
any shares of AMPS on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell
Orders on behalf of Existing Holders or Potential Holders, the aggregate
number of Outstanding shares of AMPS to be purchased and the aggregate number
of the Outstanding shares of AMPS to be sold by such Potential Holders and
Existing Holders and, to the extent that such aggregate number of Outstanding
shares to be purchased and such aggregate number of Outstanding shares to be
sold differ, the Auction Agent shall determine to which other Broker-Dealer
or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall
deliver, or from which other Broker-Dealer or Broker-Dealers acting for one
or more sellers such Broker-Dealer shall receive, as the case may be,
Outstanding shares of AMPS.
(f) Miscellaneous. The Corporation may interpret the provisions of
-------------
this paragraph 10 to resolve any inconsistency or ambiguity, remedy any
formal defect or make any other change or modification that does not
substantially adversely affect the rights of Beneficial Owners of AMPS. A
Beneficial Owner or an Existing Holder (A) may sell, transfer or otherwise
dispose of shares of AMPS only pursuant to a Bid or Sell Order in accordance
with the procedures described in this paragraph 10 or to or through a
Broker-Dealer, provided that in the case of all transfers other than pursuant
to Auctions such Beneficial Owner or Existing Holder, its Broker-Dealer, if
applicable, or its Agent Member advises the Auction Agent of such transfer
and (B) except as otherwise required by law, shall have the ownership of the
shares of AMPS held by it maintained in book entry form by the Securities
Depository in the account of its Agent Member, which in turn will maintain
records of such Beneficial Owner's beneficial ownership. Neither the
Corporation nor any Affiliate shall submit an Order in any Auction. Any
Beneficial Owner that is an Affiliate shall not sell, transfer or otherwise
dispose of shares of AMPS to any Person other than the Corporation. All of
the Outstanding shares of AMPS of a series shall be represented by one or
more certificates registered in the name of the nominee of the Securities
Depository unless otherwise required by law or unless there is no Securities
Depository. If there is no Securities Depository, at the Corporation's
option and upon its receipt of such documents as it deems appropriate, any
shares of AMPS may be registered in the Stock Register in the name of the
Beneficial Owner thereof and such Beneficial Owner thereupon will be entitled
to receive certificates therefor and required to deliver certificates
therefor upon transfer or exchange thereof.
11. Securities Depository; Stock Certificates. (a) If there is a
-----------------------------------------
Securities Depository, one or more certificates for all of the shares of AMPS
of each series shall be issued to the Securities Depository and registered in
the name of the Securities Depository or its nominee. Additional
certificates may be issued as necessary to represent shares of AMPS. All
such certificates shall bear a legend to the effect that such certificates
are issued subject to the provisions restricting the transfer of shares of
AMPS contained in these Articles Supplementary. Unless the Corporation shall
have elected, during a Non-Payment Period, to waive this requirement, the
Corporation will also issue stop-transfer instructions to the Auction Agent
for the shares of AMPS. Except as provided in paragraph (b) below, the
Securities Depository or its nominee will be the Holder, and no Beneficial
Owner shall receive certificates representing its ownership interest in such
shares.
(b) If the Applicable Rate applicable to all shares of AMPS of a series
shall be the Non-Payment Period Rate or there is no Securities Depository,
the Corporation may at its option issue one or more new certificates with
respect to such shares (without the legend referred to in paragraph 11(a))
registered in the names of the Beneficial Owners or their nominees and
rescind the stop-transfer instructions referred to in paragraph 11(a) with
respect to such shares.
IN WITNESS WHEREOF, MERRILL LYNCH MUNICIPAL STRATEGY FUND, INC. has
caused these presents to be signed in its name and on its behalf by a duly
authorized officer, and its corporate seal to be hereunto affixed and
attested by its Secretary, and the said officers of the Corporation further
acknowledge said instrument to be the corporate act of the Corporation, and
state under the penalties of perjury that to the best of their knowledge,
information and belief the matters and facts herein set forth with respect to
approval are true in all material respects, all on February , 1996.
MERRILL LYNCH MUNICIPAL STRATEGY
FUND, INC.
By: ________________________
Vincent R. Giordano
Senior Vice President
Attest:
____________________
Mark B. Goldfus
Secretary
