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: March 9,
2001.
On January 12, 2001, Merrill Lynch Municipal Strategy Fund, Inc.
(the "Fund") will commence a tender offer for 3,000,000 shares of
its common stock (the "Tender Offer"). The Tender Offer will
terminate on February 12, 2001, 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 February 14, 2001. On such date the Fund will
deposit with IBJ Whitehall 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 March 9, 2001.
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.
<PAGE>
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 12th day of January,
2001.
MERRILL LYNCH MUNICIPAL
STRATEGY FUND, INC.
By: /s/Terry K. Glenn
---------------------------
Name: Terry K. Glenn
Title: President
<PAGE>
Exhibit A
MERRILL LYNCH MUNICIPAL STRATEGY FUND, INC.
Articles Supplementary creating five series of
Auction Market Preferred StockR
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:
------------------
R Registered trademark of Merrill Lynch & Co., Inc.
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
undistributed 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>
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>
------------
* 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 $10,000,000. In addition,
Municipal Bonds in the Corporation's portfolio must be within the following
diversification requirements in order to be included within Moody's Eligible
Assets:
<TABLE>
<CAPTION>
Rating Minimum Maximum Maximum State
------
Issue Size Underlying or Territory
($ Millions) Obligor (%) (1) Concentration
------------ ---------------
(%) (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>
-------------
(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:
<PAGE>
% Change in
Marginal Tax Moody's Volatility
Rate Factor
----------- ------------------
a5% 292%
>5% but a10% 313%
>10% but a15% 338%
>15% but a20% 364%
>20% but a25% 396%
>25% but a30% 432%
>30% but a35% 472%
>35% but a40% 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:
<TABLE>
<CAPTION>
Rating Category
S&P Exposure Period AAA* AA* A* BBB*
------------------- ---- --- -- ----
<S> <C> <C> <C> <C>
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
</TABLE>
------------
* 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 rating 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 payable
(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 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 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> <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.
<PAGE>
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:/s/ Vincent R. Giordano
-----------------------
Vincent R. Giordano
Senior Vice President
Attest:
/s/ Mark B. Goldfus
--------------------
Mark B. Goldfus
Secretary
