Exhibit b.2
AMENDED AND RESTATED
BYLAWS
OF
PIMCO CORPORATE INCOME FUND
(Amended and Restated as of February 13, 2002)
ARTICLE 1
AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE
1.1 Principal Office of the Trust. A principal office of the Trust
shall be located in New York, New York. The Trust may have other principal
offices within or without Massachusetts as the Trustees may determine or as they
may authorize.
1.2 Agreement and Declaration of Trust. These Amended and Restated
Bylaws (the "Bylaws") shall be subject to the Agreement and Declaration of
Trust, as amended or restated from time to time (the "Declaration of Trust"), of
PIMCO Corporate Income Fund, the Massachusetts business trust established by the
Declaration of Trust (the "Trust"). Capitalized terms used in these Bylaws and
not otherwise defined herein shall have the meanings given to such terms in the
Declaration of Trust.
ARTICLE 2
MEETINGS OF TRUSTEES
2.1 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice immediately after and
at the same place as the annual meeting of the Shareholders (as defined in the
Declaration of Trust).
2.2 Special Meetings. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Trustees, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer or the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to the Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram, telex
or telecopy or other electronic facsimile transmission method at least
twenty-four hours before the meeting addressed to the Trustee at his or her
usual or last known business or residence address or to give notice to him or
her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her, before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
ARTICLE 3
OFFICERS
3.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Secretary, and such other officers including a
Chairman of the Trustees, if any, as the Trustees from time to time may in their
discretion elect. The Trust may also have such agents as the Trustees from time
to time may in their discretion appoint. The Chairman of the Trustees, if one is
elected, shall be a Trustee and may but need not be a Shareholder; and any other
officer may but does not need to be a Trustee or a Shareholder. Any two or more
offices may be held by the same person.
3.2 Election. The President, the Treasurer, and the Secretary shall be
elected annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at said meeting or at any other time. Vacancies in any
office may be filled at any time.
3.3 Tenure. The Chairman of the Trustees, if one is elected, the
President, the Treasurer and the Secretary shall hold office until their
respective successors are chosen and qualified, or in each case until he or she
sooner dies, resigns, is removed with or without cause or becomes disqualified.
Each other officer shall hold office and each agent of the Trust shall retain
authority at the pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these Bylaws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 Chairman; President; Vice President. Unless the Trustees otherwise
provide, the Chairman of the Trustees or, if there is none or in the absence of
the Chairman, the President shall preside at all meetings of the Shareholders
and of the Trustees. The President shall be the chief executive officer. Any
Vice President shall have such duties and powers as may be designated from time
to time by the Trustees or the President.
-2-
3.6 Treasurer; Assistant Treasurer. The Treasurer shall be the chief
financial and accounting officer of the Trust, and shall, subject to the
provisions of the Declaration of Trust and to any arrangement made by the
Trustees with a custodian, investment adviser, sub-adviser or manager, or
transfer, shareholder servicing or similar agent, be in charge of the valuable
papers, books of account and accounting records of the Trust, and shall have
such other duties and powers as may be designated from time to time by the
Trustees or by the President. Any Assistant Treasurer shall have such duties and
powers as may be designated from time to time by the Trustees or the President.
3.7 Secretary; Assistant Secretary. The Secretary shall record all
proceedings of the Shareholders and the Trustees in books to be kept therefor,
which books or a copy thereof shall be kept at the principal office of the
Trust. In the absence of the Secretary from any meeting of the Shareholders or
Trustees, an Assistant Secretary, or if there be none or if he or she is absent,
a temporary secretary chosen at such meeting shall record the proceedings
thereof in the aforesaid books. Any Assistant Secretary shall have such duties
and powers as may be designated from time to time by the Trustees or the
President.
3.8 Resignations. Any officer may resign at any time by written
instrument signed by him or her and delivered to the Chairman, the President or
the Secretary, or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time.
Except to the extent expressly provided in a written agreement with the Trust,
no officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
ARTICLE 4
COMMITTEES
4.1 Quorum; Voting. Except as provided below or as otherwise
specifically provided in the resolutions constituting a Committee of the
Trustees and providing for the conduct of its meetings, a majority of the
members of any Committee of the Trustees shall constitute a quorum for the
transaction of business, and any action of such a Committee may be taken at a
meeting by a vote of a majority of the members present (a quorum being present)
or evidenced by one or more writings signed by such a majority. Members of a
Committee may participate in a meeting of such Committee by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.
With respect to a Valuation Committee of the Trustees, one or more of
the Committee members shall constitute a quorum for the transaction of business.
Except as specifically provided in the resolutions constituting a
Committee of the Trustees and providing for the conduct of its meetings, Article
2, Section 2.2 of these Bylaws relating to special meetings shall govern the
notice requirements for Committee meetings, except
-3-
that it shall be sufficient notice to a Valuation Committee of the Trustees to
send notice by telegram, telex or telecopy or other electronic means (including
by telephone voice-message or e-mail) at least fifteen minutes before the
meeting.
ARTICLE 5
REPORTS
5.1 General. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
FISCAL YEAR
6.1 General. Except as from time to time otherwise provided by the
Trustees, the initial fiscal year of the Trust shall end on such date as is
determined in advance or in arrears by the Treasurer, and the subsequent fiscal
years shall end on such date in subsequent years.
ARTICLE 7
SEAL
7.1 General. The seal of the Trust shall, subject to alteration by the
Trustees, consist of a flat-faced die with the word "Massachusetts," together
with the name of the Trust and the year of its organization cut or engraved
thereon; provided, however, that unless otherwise required by the Trustees, the
seal shall not be necessary to be placed on, and its absence shall not impair
the validity of, any document, instrument or other paper executed and delivered
by or on behalf of the Trust.
ARTICLE 8
EXECUTION OF PAPERS
8.1 General. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts and other obligations made,
accepted or endorsed by the Trust shall be executed by the President, any Vice
President, the Treasurer or by whomever else shall be designated for that
purpose by vote of the Trustees, and need not bear the seal of the Trust.
ARTICLE 9
ISSUANCE OF SHARE CERTIFICATES
9.1 Share Certificates. Except as provided in Article 11 hereof, each
Shareholder shall be entitled to a certificate stating the number of Shares (as
defined in the Declaration of Trust) owned by him or her, in such form as shall
be prescribed from time to time by the Trustees. Such certificates shall be
signed by the President or any Vice President and by the
-4-
Treasurer or any Assistant Treasurer. Such signatures may be by facsimile if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed or
whose facsimile signature has been placed on such certificate shall cease to be
such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he or she were such officer at the time of its
issuance.
Notwithstanding the foregoing, in lieu of issuing certificates for
Shares, the Trustees or the transfer agent may either issue receipts therefor or
may keep accounts upon the books of the Trust for the record holders of such
Shares, who shall in either case be deemed, for all purposes hereunder, to be
the holders of certificates for such Shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
9.2 Loss of Certificates. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 Issuance of New Certificates to Pledgee. A pledgee of Shares
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificate shall express on its face that it is
held as collateral security, and the name of pledgor shall be stated thereon,
who alone shall be liable as a Shareholder and entitled to vote thereon.
9.4 Discontinuance of Issuance of Certificates. Notwithstanding
anything to the contrary in this Article 9, the Trustees may at any time
discontinue the issuance of share certificates and may, by written notice to
each Shareholder, require the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not effect the ownership of
Shares in the Trust.
ARTICLE 10
SHAREHOLDERS' VOTING POWERS AND MEETINGS
10.1 Voting Powers. The Shareholders shall have power to vote only (i)
for the election or removal of Trustees as provided in Article IV, Sections 1
and 3 of the Declaration of Trust and Article 11 hereto, (ii) with respect to
any Manager or sub-adviser as provided in Article IV, Section 8 of the
Declaration of Trust to the extent required by the 1940 Act, (iii) with respect
to certain transactions and other matters to the extent and as provided in
Article V, Sections 2 and 3 of the Declaration of Trust and Article 11 hereto,
(iv) with respect to any termination of this Trust to the extent and as provided
in Article IX, Section 4 of the Declaration of Trust and Article 11 hereto (for
the avoidance of any doubt, Shareholders shall have no separate right to vote
with respect to the termination of the Trust or a series or class of Shares if
the Trustees (including the Continuing Trustees) exercise their right to
terminate the Trust or such series or class pursuant to clauses (ii) and (y) of
Article IX, Section 4 of the Declaration of Trust), (v) with respect to any
amendment of the Declaration of Trust to the extent and as provided in Article
IX, Section 7 of the Declaration of Trust and Article 11 hereto, (vi) to the
-5-
same extent as the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vii) with respect to such additional matters relating
to the Trust as may be required by law, the Declaration of Trust, these Bylaws
or any registration of the Trust with the Securities and Exchange Commission (or
any successor agency) or any state, or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote, except as otherwise provided in the Declaration
of Trust, these Bylaws, or required by applicable law. Except as otherwise
provided in the Declaration of Trust or these Bylaws or required by applicable
law, all Shares of the Trust then entitled to vote shall be voted in the
aggregate as a single class without regard to classes or series of Shares. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy. A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. The placing of a Shareholder's name on a proxy
pursuant to telephonic or electronically transmitted instructions obtained
pursuant to procedures reasonably designed to verify that such instructions have
been authorized by such Shareholder shall constitute execution of such proxy by
or on behalf of such Shareholder. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
Until Shares of a particular class or series are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law, the
Declaration of Trust or these Bylaws to be taken by Shareholders as to such
class or series.
10.2 Voting Power and Meetings. Except as provided in the next
sentence, regular meetings of the Shareholders for the election of Trustees and
the transaction of such other business as may properly come before the meeting
shall be held, so long as Shares are listed for trading on the New York Stock
Exchange, on at least an annual basis, on such day and at such place as shall be
designated by the Trustees. In the event that such a meeting is not held in any
annual period if so required, whether the omission be by oversight or otherwise,
a subsequent special meeting may be called by the Trustees and held in lieu of
such meeting with the same effect as if held within such annual period. Special
meetings of the Shareholders or any or all classes or series of Shares may also
be called by the Trustees from time to time for such other purposes as may be
prescribed by law, by the Declaration of Trust or by these Bylaws, or for the
purpose of taking action upon any other matter deemed by the Trustees to be
necessary or desirable. A special meeting of Shareholders may be held at any
such time, day and place as is designated by the Trustees. Written notice of any
meeting of Shareholders, stating the time, place and purpose of the meeting,
shall be given or caused to be given by the Trustees at least seven days before
such meeting to each Shareholder entitled to vote thereat by leaving such notice
with the Shareholder at his or her residence or usual place of business or by
mailing such notice, postage prepaid, to the Shareholder's address as it appears
on the records of the Trust. Such notice may be given by the Secretary or an
Assistant Secretary or by any other officer designated for such purpose by the
Trustees. Whenever notice of a meeting is required to be
-6-
given to a Shareholder under the Declaration of Trust or these Bylaws, a written
waiver thereof, executed before or after the meeting by such Shareholder or his
or her attorney thereunto authorized and filed with the records of the meeting,
shall be deemed equivalent to such notice. Notice of a meeting need not be given
to any Shareholder who attends the meeting without protesting prior thereto or
at its commencement the lack of notice to such Shareholder. No ballot shall be
required for any election unless required by a Shareholder present or
represented at the meeting and entitled to vote in such election.
10.3 Quorum and Required Vote. Except when a larger quorum is required
by any provision of law or the Declaration of Trust or these Bylaws, thirty
percent (30%) of the Shares entitled to vote on a particular matter shall
constitute a quorum for the transaction of business at a Shareholders' meeting,
except that where any provision of law or the Declaration of Trust or these
Bylaws permits or requires that holders of any class or series of Shares shall
vote as an individual class or series, then thirty percent (30%) (unless a
larger quorum is required as specified above) of Shares of that class or series
entitled to vote shall be necessary to constitute a quorum for the transaction
of business by that class or series. Any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held, within a reasonable
time after the date set for the original meeting, without the necessity of
further notice. Except when a different vote is required by any provision of law
or the Declaration of Trust or these Bylaws, a plurality of the quorum of Shares
necessary for the transaction of business at a Shareholders' meeting shall
decide any questions and a plurality of Shares voted shall elect a Trustee,
provided that where any provision of law or of the Declaration of Trust or these
Bylaws permits or requires that the holders of any class or series of Shares
shall vote as an individual class or series, then a plurality of the quorum of
Shares of that class or series necessary for the transaction of business by that
class or series at a Shareholders' meeting shall decide that matter insofar as
that class or series is concerned.
10.4 Action by Written Consent. Any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders entitled to vote on the
matter (or such larger proportion thereof as shall be required by any express
provision of law or the Declaration of Trust or these Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
10.5 Record Dates. For the purpose of determining the Shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, or who
are entitled to receive payment of any dividend or of any other distribution,
the Trustees may from time to time fix a time, which shall be not more than 90
days before the date of any meeting of Shareholders or the date for the payment
of any dividend or of any other distribution, as the record date for determining
the Shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof or the right to receive such dividend or distribution,
and in such case only Shareholders of record on such record date shall have the
right notwithstanding any transfer of Shares on the books of the Trust after the
record date; or without fixing such record date the Trustees may for any of such
purposes close the register or transfer books for all or any part of such
period.
-7-
ARTICLE 11
STATEMENT CREATING FIVE SERIES OF AUCTION RATE CUMULATIVE PREFERRED SHARES
Auction Rate Cumulative Preferred Shares, Series M: 2,400 preferred
shares of beneficial interest, par value $0.00001 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 Rate Cumulative Preferred Shares, Series M." Each share of Auction Rate
Cumulative Preferred Shares, Series M (sometimes referred to herein as "Series M
Preferred Shares") may be issued on a date to be determined by the Board of
Trustees of the Trust 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 Trustees of the Trust 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 Bylaws. The Series M Preferred Shares shall
constitute a separate series of preferred shares of beneficial interest of the
Trust, and each share of Series M Preferred Shares shall be identical.
Auction Rate Cumulative Preferred Shares, Series T: 2,400 preferred
shares of beneficial interest, par value $0.00001 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 Rate Cumulative Preferred Shares, Series T." Each share of Auction Rate
Cumulative Preferred Shares, Series T (sometimes referred to herein as "Series T
Preferred Shares") may be issued on a date to be determined by the Board of
Trustees of the Trust 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 Trustees of the Trust 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 Bylaws. The Series T Preferred Shares shall
constitute a separate series of preferred shares of beneficial interest of the
Trust, and each share of Series T Preferred Shares shall be identical.
Auction Rate Cumulative Preferred Shares, Series W: 2,400 preferred
shares of beneficial interest, par value $0.00001 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 Rate Cumulative Preferred Shares, Series W." Each share of Auction Rate
Cumulative Preferred Shares, Series W (sometimes referred to herein as "Series W
Preferred Shares") may be issued on a date to be determined by the Board of
Trustees of the Trust 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 Trustees of the Trust 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 Bylaws. The Series W Preferred Shares shall
constitute a separate series of preferred shares of beneficial interest of the
Trust, and each share of Series W Preferred Shares shall be identical.
-8-
Auction Rate Cumulative Preferred Shares, Series Th: 2,400 preferred
shares of beneficial interest, par value $0.00001 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 Rate Cumulative Preferred Shares, Series Th." Each share of Auction
Rate Cumulative Preferred Shares, Series Th (sometimes referred to herein as
"Series Th Preferred Shares") may be issued on a date to be determined by the
Board of Trustees of the Trust 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 Trustees of the
Trust 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 Bylaws. The Series Th
Preferred Shares shall constitute a separate series of preferred shares of
beneficial interest of the Trust, and each share of Series Th Preferred Shares
shall be identical.
Auction Rate Cumulative Preferred Shares, Series F: 2,400 preferred
shares of beneficial interest, par value $0.00001 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 Rate Cumulative Preferred Shares, Series F." Each share of Auction Rate
Cumulative Preferred Shares, Series F (sometimes referred to herein as "Series F
Preferred Shares") may be issued on a date to be determined by the Board of
Trustees of the Trust 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 Trustees of the Trust 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 Bylaws. The Series F Preferred Shares shall
constitute a separate series of preferred shares of beneficial interest of the
Trust, and each share of Series F Preferred Shares shall be identical.
11.1 Definitions. (a) Unless the context or use indicates another or
different meaning or intent, in Article 11 of these Bylaws the following terms
have the following meanings, whether used in the singular or plural:
"'AA' Financial Composite Commercial Paper Rate" on any date means (i)
(A) the Interest Equivalent of the 7-day rate (in the case of a Dividend Period
which is a 7-Day Dividend Period or shorter), the 30-day rate (for Dividend
Periods greater than 7 days but fewer than or equal to 31 days), the 60-day rate
(for Dividend Periods greater than 31 days but fewer than or equal to 61 days)
and the 90-day rate (for Dividend Periods greater than 61 days but fewer than or
equal to 91 days) on commercial paper on behalf of issuers whose corporate bonds
are rated AA by S&P, or the equivalent of such rating by another Rating Agency,
as announced by the Federal Reserve Bank of New York for the close of business
on the Business Day immediately preceding such date; and (B) for Dividend
Periods greater than 91 days but fewer than 184 days, the rate described in
clause (ii) below; or (ii) if the Federal Reserve Bank of New York does not make
available such a rate, or with respect to Dividend Periods greater than 91 days
but fewer than 184 days, then the arithmetic average of the Interest Equivalent
of such rates on commercial
-9-
paper placed on behalf of such issuers, as quoted on a discount basis or
otherwise by the Commercial Paper Dealers to the Auction Agent for the close of
business on the Business Day immediately preceding such date (rounded to the
next highest one-thousandth (0.001) of 1%). If any Commercial Paper Dealer does
not quote a rate required to determine the "AA" Financial Composite Commercial
Paper Rate, such rate shall be determined on the basis of the quotations (or
quotation) furnished by the remaining Commercial Paper Dealers (or Dealer), if
any, or, if there are no such Commercial Paper Dealers, by the Auction Agent.
For purposes of this definition, (A) "Commercial Paper Dealers" shall mean (1)
Xxxxxxx Xxxxx Xxxxxx Inc., Xxxxxx Brothers Inc., Xxxxxxx Lynch, Pierce, Xxxxxx &
Xxxxx Incorporated and Xxxxxxx Sachs & Co.; (2) in lieu of any thereof, its
respective affiliate or successor; and (3) in the event that any of the
foregoing shall cease to quote rates for commercial paper of issuers of the sort
described above, in substitution therefor, a nationally recognized dealer in
commercial paper of such issuers then making such quotations selected by the
Trust, and (B) "Interest Equivalent" of a rate stated on a discount basis for
commercial paper of a given number of days' maturity shall mean a number equal
to the quotient (rounded upward to the next higher one-thousandth(0.001) of 1%)
of (1) such rate expressed as a decimal, divided by (2) the difference between
(x) 1.00 and (y) a fraction, the numerator of which shall be the product of such
rate expressed as a decimal, multiplied by the number of days in which such
commercial paper shall mature and the denominator of which shall be 360.
"Accountant's Confirmation" has the meaning set forth in Section
11.7(c) of these Bylaws.
"Adviser" means the Trust's investment adviser which initially shall be
PIMCO Advisors, a division of Allianz Dresdner Asset Management of America L.P.
"Affiliate" means any Person known to the Auction Agent to be
controlled by, in control of, or under common control with, the Trust.
"Agent Member" means a member of the Securities Depository that will
act on behalf of a Beneficial Owner of one or more Preferred Shares or on behalf
of a Potential Beneficial Owner.
"Applicable Rate" means the rate per annum at which cash dividends are
payable on the Preferred Shares for any Dividend Period.
"Applicable Percentage" has the meaning set forth in Section
11.10(a)(vi) of these Bylaws.
"Approved Foreign Nations" has the meaning set forth in the definition
of "Fitch Eligible Assets."
"Approved Price" means the "fair value" as determined by the Trust in
accordance with the valuation procedures adopted from time to time by the Board
of Trustees of the Trust and for
-10-
which the Trust receives a xxxx-to-market price (which, for the purpose of
clarity, shall not mean Market Value) from an independent source at least
semi-annually.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means Bankers Trust Company unless and until another
commercial bank, trust company or other financial institution appointed by a
resolution of the Board of Trustees of the Trust or a duly authorized committee
thereof enters into an agreement with the Trust 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 Preferred
Shares.
"Auction Date" has the meaning set forth in Section 11.10(a)(i) of
these Bylaws.
"Auction Procedures" means the procedures for conducting Auctions set
forth in Section 11.10 of these Bylaws.
"Bank Loans" means direct purchases of, assignments of, participations
in and other interests in (a) any bank loan or (b) any loan made by an
investment bank, investment fund or other financial institution, provided that
such loan under this clause (b) is similar to those typically made, syndicated,
purchased or participated by a commercial bank or institutional loan investor in
the ordinary course of business.
"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 Preferred Shares or a Broker-Dealer that holds Preferred Shares 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 pursuant to Section
11.10 of these Bylaws, that has been selected by the Trust 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 Section 11.10 of these Bylaws.
"Business Day" means a day on which the New York Stock Exchange is open
for trading and which is not a Saturday, Sunday or other day on which banks in
New York City are authorized or obligated by law to close.
"Canadian Bonds" has the meaning set forth in the definition of "Fitch
Eligible Assets."
"Closing Transactions" has the meaning set forth in Section 11.8(a)(i)
of these Bylaws.
"Code" means the Internal Revenue Code of 1986, as amended.
-11-
"Commercial Paper Dealers" has the meaning set forth in the definition
of "'AA' Financial Composite Commercial Paper Rate."
"Common Shares" means the shares of beneficial interest designated as
common shares, par value $0.00001 per share, of the Trust.
"Cure Date" has the meaning set forth in Section 11.4(a)(ii) of these
Bylaws.
"Date of Original Issue" means, with respect to any Preferred Share,
the date on which the Trust first issues such share.
"Debt Securities" has the meaning set forth in paragraph (iv) of the
definition of "Fitch Eligible Assets."
"Declaration of Trust" means the Amended and Restated Agreement and
Declaration of Trust of the Trust dated November 12, 2001, as from time to time
amended and supplemented.
"Deposit Securities" means cash and portfolio securities rated at least
A2 (having a remaining maturity of 12 months or less), X-0, XXXX-0 xx XXX-0 by
Moody's or A (having a remaining maturity of 12 months or less), A-1+ or SP-1+
by S&P.
"Discount Factor" means a Fitch Discount Factor or a Moody's Discount
Factor, as applicable.
"Discounted Value" of any asset of the Trust means the quotient of the
Market Value of an Eligible Asset divided by the applicable Discount Factor,
provided that with respect to an Eligible Asset that is currently callable, the
Discounted Value will be equal to the quotient as calculated above or the call
price, whichever is lower, and that with respect to an Eligible Asset that is
prepayable, the Discounted Value will be equal to the quotient as calculated
above or the par value, whichever is lower.
"Dividend Payment Date," with respect to Preferred Shares, has the
meaning set forth in Section 11.2(b)(i) of these Bylaws.
"Dividend Period" means the Initial Dividend Period, any 7-Day Dividend
Period and any Special Dividend Period.
"Eligible Asset" means a Fitch Eligible Asset (if Fitch is then rating
the Preferred Shares), a Moody's Eligible Asset (if Xxxxx'x is then rating the
Preferred Shares) and/or any asset included in the calculations used by any
Rating Agency then rating the Preferred Shares for purposes of determining such
Rating Agency's rating on the Preferred Shares, as applicable.
"Existing Holder" means a Broker-Dealer, or any such other Person that
may be permitted by the Trust, that is listed as the holder of record of
Preferred Shares in the Share Books.
-12-
"Extension Period" has the meaning set forth in Section 11.2(c)(iii) of
these Bylaws.
"FHLB, FNMA and FFCB Debentures" has the meaning set forth in paragraph
(viii) of the definition of "Moody's Eligible Assets."
"Fitch" means Fitch, Inc. or its successors.
"Fitch Discount Factor" means, for purposes of determining the
Discounted Value of any Fitch Eligible Asset, the percentage determined as
follows. The Fitch Discount Factor for any Fitch Eligible Asset other than the
securities set forth below will be the percentage provided in writing by Fitch.
(i) Debt Securities: The percentage determined by reference to the
rating of the Debt Security in accordance with the table set forth
below.
Fitch Rating Category
AAA AA A BBB BB B CCC Unrated(1)
--- --- --- --- --- --- --- -------
123% 125% 128% 131% 157% 196% 202% 225%
------------
(1) If a security is not rated by Fitch but is rated by two other
Rating Agencies, then the lower of the ratings on the security
from the two other Rating Agencies will be used to determine the
Fitch Discount Factor (e.g., where the S&P rating is A- and the
Xxxxx'x rating is Baa1, a Fitch rating of BBB+ will be used). If
a security is not rated by Fitch but is rated by only one other
Rating Agency, then the rating on the security from the other
Rating Agency will be used to determine the Fitch Discount Factor
(e.g., where the only rating on a security is an S&P rating of
AAA-, a Fitch rating of AAA- will be used, and where the only
rating on a security is a Xxxxx'x rating of Ba3, a Fitch rating of
BB- will be used). If a security is not rated by any Rating
Agency, the Trust will use the percentage set forth under
"Unrated" in this table.
The Fitch Discount Factors presented in the immediately preceding
table apply to Debt Securities that are Performing and have a Market
Price determined by a Pricing Service or an Approved Price. The Fitch
Discount Factor noted in the table above for a Debt Security rated B by
Fitch shall apply to any non-Performing Debt Security with a price
equal to or greater than $0.90. The Fitch Discount Factor noted in the
table above for a Debt Security rated CCC by Fitch shall apply to any
non-Performing Debt Security with a price less than $0.90 but equal to
or greater than $0.20. If a Debt Security does not have a Market Value
determined by a Pricing Source or an Approved Price, a rating one
rating category below the actual rating on the Debt Security will be
used (e.g., where the actual rating is A-, the rating for Debt
Securities rated BBB- will be used). The Fitch Discount Factor for a
Debt Security issued by a limited partnership shall be the Discount
Factor determined in accordance with the table set forth above
multiplied by 105%.
The Fitch Discount Factors presented in the immediately preceding
table will also apply to (i) interest rate swaps and caps, whereby the
rating of the counterparty to the swap or cap will be the rating used
to determine the Fitch Discount Factor in the table; and (ii) TRACERs,
whereby the ratings in the table will be applied to the underlying
securities and the Market Value of each underlying security will be its
proportionate
-13-
amount of the Market Value of the TRACER. The Fitch Discount Factors
presented in the immediately preceding table will also apply to corporate
obligations backed by a guaranty, a letter of credit or insurance issued
by a third party. If the third-party credit rating is the basis for the
rating on the obligation, then the rating on the third party will be used
to determine the Fitch Discount Factor in the table. The Fitch Discount
Factors presented in the immediately preceding table will also apply to
preferred trust certificates, the rating on which will by determined by
the underlying debt instruments in the trust, unless such preferred trust
certificates are determined by Fitch to qualify for a traditional equity
discount factor, in which case the Fitch Discount Factor shall be 370%.
(ii) Short-term instruments: The Fitch Discount Factor applied to
short-term portfolio securities, including without limitation Debt
Securities, Short Term Money Market Instruments and municipal debt
obligations, will be (A) 100%, so long as such portfolio securities
mature or have a demand feature at par exercisable within the Fitch
Exposure Period; (B) 115%, so long as such portfolio securities mature
or have a demand feature at par not exercisable within the Fitch
Exposure Period; and (C) 125%, so long as such portfolio securities
neither mature nor have a demand feature at par exercisable within the
Fitch Exposure Period. A Fitch Discount factor of 100% will be applied
to cash.
(iii) U.S. Government Securities and U.S. Treasury Strips:
Time Remaining to Maturity Discount Factor
-------------------------- ---------------
1 year or less 100%
2 years or less (but longer than 1 year) 103
3 years or less (but longer than 2 years) 105
4 years or less (but longer than 3 years) 107
5 years or less (but longer than 4 years) 109
7 years or less (but longer than 5 years) 112
10 years or less (but longer than 7 years) 114
Greater than 10 years 122
(iv) Rule 144A Securities: The Fitch Discount Factor applied to
Rule 144A Securities will be 110% of the Fitch Discount Factor which
would apply were the securities registered under the Securities Act.
(v) Asset-backed and mortgage-backed securities: The percentage
determined by reference to the asset type in accordance with the table
set forth below.
Asset Type (with time remaining to maturity, if applicable) Discount Factor
---------- ---------------
U.S. Treasury/agency securities (10 years or less)........................ 118%
U.S. Treasury/agency securities (greater than 10 years)................... 127%
U.S. agency sequentials (10 years or less)................................ 120%
U.S. agency sequentials (greater than 10 years)........................... 142%
U.S. agency principal only securities..................................... 236%
U.S. agency interest only securities
(with Market Value greater than $0.40)............................... 696%
-14-
Asset Type (with time remaining to maturity, if applicable) Discount Factor
---------- ---------------
U.S. agency interest only securities
(with Market Value less than or equal to $0.40)...................... 271%
AAA LockOut securities, interest only..................................... 236%
U.S. agency planned amortization class bonds (10 years or less)........... 115%
U.S. agency planned amortization class bonds (greater than 10 years)...... 136%
AAA sequentials (10 years or less)........................................ 118%
AAA sequentials (greater than 10 years)................................... 135%
AAA planned amortization class bonds (10 years or less)................... 115%
AAA planned amortization class bonds (greater than 10 years).............. 140%
Jumbo mortgages rated AAA(1).............................................. 123%
Jumbo mortgages rated AA(1)............................................... 130%
Jumbo mortgages rated A(1)................................................ 136%
Jumbo mortgages rated BBB(1).............................................. 159%
Commercial mortgage-backed securities rated AAA........................... 131%
Commercial mortgage-backed securities rated AA............................ 139%
Commercial mortgage-backed securities rated A............................. 148%
Commercial mortgage-backed securities rated BBB........................... 177%
Commercial mortgage-backed securities rated BB............................ 283%
Commercial mortgage-backed securities rated B............................. 379%
Commercial mortgage-backed securities rated CCC or not rated.............. 950%
------------
(1) Applies to jumbo mortgages, credit cards, auto loans, home equity
loans, manufactured housing and prime mortgage-backed securities not
issued by a U.S. agency or instrumentality.
(vi) Bank Loans: The percentage determined by reference to the Fitch
Loan Category in accordance with the table set forth below.
Fitch Loan Category Discount Factor
------------------- ---------------
A ...................... 126%
B ...................... 157
C ...................... 184
D ...................... 433
The Fitch Discount Factors presented in the immediately preceding table
will also apply to interest rate swaps and caps, and the rating of the
counterparty to the swap or cap will be the rating used to determine the
Fitch Discount Factor in the table.
(vii) Municipal debt obligations: The Fitch Discount Factor applied to
municipal debt obligations will be the percentage determined by reference
to the table set forth below:
-15-
Fitch Rating Category
Fitch Exposure Period AAA(1) AA(1) A(1) BBB(1) F1(2) Unrated(3)
--------------------- --- -- - --- -- -------
7 weeks................. 151% 159% 166% 173% 136% 225%
8 weeks or less but
greater than 7 weeks.... 154 161 168 176 137 231
9 weeks or less but
greater than 8 weeks.... 158 163 170 177 138 240
------------
(1) Fitch rating.
(2) Municipal debt obligations rated by Fitch which do not mature or
have a demand feature at par exercisable in 30 days and which do not
have a long-term rating.
(3) If a security is not rated by Fitch but is rated by two other
Rating Agencies, then the lower of the ratings on the security from the
two other Rating Agencies will be used to determine the Fitch Discount
Factor (e.g., where the S&P rating is A- and the Xxxxx'x rating is
Baa1, a Fitch rating of BBB+ will be used). If a security is not rated
by Fitch but is rated by only one other Rating Agency, then the rating
on the security from the other Rating Agency will be used to determine
the Fitch Discount Factor (e.g., where the only rating on a security is
an S&P rating of AAA-, a Fitch rating of AAA- will be used, and where
the only rating on a security is a Xxxxx'x rating of Ba3, a Fitch
rating of BB- will be used). If a security is not rated by any Rating
Agency, the Trust will use the percentage set forth under "Unrated" in
this table.
The Fitch Discount Factors presented in the immediately preceding
table will also apply to interest rate swaps and caps, and the rating
of the counterparty to the swap or cap will be the rating used to
determine the Fitch Discount Factor in the table. The Fitch Discount
Factors presented in the immediately preceding table will also apply to
municipal debt obligations backed by a guaranty, a letter of credit or
insurance issued by a third party. If the third-party credit rating is
the basis for the rating on the securities, then the rating on the
third party will be used to determine the Fitch Discount Factor in the
table.
(viii) Foreign Bonds: The Fitch Discount Factor (A) for a Foreign Bond
the principal of which (if not denominated in U.S. dollars) is subject to
a currency hedging transaction will be the Fitch Discount Factor that
would otherwise apply to such Foreign Bonds in accordance with this
definition and (B) for (1) a Foreign Bond the principal of which (if not
denominated in U.S. dollars) is not subject to a currency hedging
transaction and (2) a bond issued in a currency other than U.S. dollars by
a corporation, limited liability company or limited partnership domiciled
in, or the government or any agency, instrumentality or political
subdivision of, a nation other than an Approved Foreign Nation, will be
370%.
(ix) Structured Notes: The Fitch Discount Factor applied to Structured
Notes will be (A) in the case of a corporate issuer, the Fitch Discount
Factor determined in accordance with paragraph (i) under this definition,
whereby the rating on the issuer of the Structured Note will be the rating
on the Structured Note for purposes of determining the Fitch Discount
Factor in the table in paragraph (i); and (B) in the case of an issuer
that is the U.S. government or an agency or instrumentality thereof, the
Fitch Discount Factor determined in accordance with paragraph (iii) under
this definition.
-16-
"Fitch Eligible Assets" means
(i) cash (including interest and dividends due on assets rated (A) BBB
or higher by Fitch or the equivalent by another Rating Agency if the
payment date is within five Business Days of the Valuation Date, (B) A or
higher by Fitch or the equivalent by another Rating Agency if the payment
date is within thirty days of the Valuation Date, and (C) A+ or higher by
Fitch or the equivalent by another Rating Agency if the payment date is
within the Fitch Exposure Period) and receivables for Fitch Eligible
Assets sold if the receivable is due within five Business Days of the
Valuation Date, and if the trades which generated such receivables are (A)
settled through clearing house firms with respect to which the Trust has
received prior written authorization from Fitch or (B) (1) with
counterparties having a long-term debt rating of at least BBB- from Fitch
or the equivalent from another Rating Agency or (2) with counterparties
having a Short Term Money Market Instrument rating of at least F1+ by
Fitch or the equivalent by another Rating Agency;
(ii) Short Term Money Market Instruments so long as (A) such securities
are rated at least F1+ by Fitch or the equivalent by another Rating
Agency, (B) in the case of demand deposits, time deposits and overnight
funds, the supporting entity is rated at least A by Fitch or the
equivalent by another Rating Agency, or (C) in all other cases, the
supporting entity (1) is rated at least A by Fitch or the equivalent by
another Rating Agency and the security matures within one month, (2) is
rated at least A by Fitch or the equivalent by another Rating Agency and
the security matures within three months or (3) is rated at least AA by
Fitch or the equivalent by another Rating Agency and the security matures
within six months;
(iii) U.S. Government Securities and U.S. Treasury Strips;
(iv) debt securities if (A) such securities do not provide for
conversion or exchange into equity capital at any time over their lives;
(B) such securities have been registered under the Securities Act or are
restricted as to resale under federal securities laws but are eligible for
resale pursuant to Rule 144A under the Securities Act as determined by the
Trust's investment manager or portfolio manager acting pursuant to
procedures approved by the Board of Trustees of the Trust; and (C) such
securities are issued by (1) a U.S. corporation, limited liability company
or limited partnership, (2) a corporation, limited liability company or
limited partnership domiciled in Argentina, Australia, Brazil, Xxxxx,
Xxxxxx, Xxxxxxx, Xxxxx, Xxxxx, Xxxxx, Xxxxxx, Xxxxx or the United Kingdom
(the "Approved Foreign Nations"), (3) the government of any Approved
Foreign Nation or any of its agencies, instrumentalities or political
subdivisions (the debt securities of Approved Foreign Nation issuers being
referred to collectively as "Foreign Bonds"), (4) a corporation, limited
liability company or limited partnership domiciled in Canada or (5) the
Canadian government or any of its agencies, instrumentalities or political
subdivisions (the debt securities of Canadian issuers being referred to
collectively as "Canadian Bonds"). Foreign Bonds held by the Trust will
qualify as Fitch Eligible
-17-
Assets only up to a maximum of 20% of the aggregate Market Value of all
assets constituting Fitch Eligible Assets. Similarly, Canadian Bonds held
by the Trust will qualify as Fitch Eligible Assets only up to a maximum of
20% of the aggregate Market Value of all assets constituting Fitch
Eligible Assets. Notwithstanding the limitations in the two preceding
sentences, Foreign Bonds and Canadian Bonds held by the Trust will qualify
as Fitch Eligible Assets only up to a maximum of 30% of the aggregate
Market Value of all assets constituting Fitch Eligible Assets. In
addition, bonds which are issued in connection with a reorganization under
U.S. federal bankruptcy law ("Reorganization Bonds") will be considered
debt securities constituting Fitch Eligible Assets if (a) they provide for
periodic payment of interest in cash in U.S. dollars or euros; (b) they do
not provide for conversion or exchange into equity capital at any time
over their lives; (c) they have been registered under the Securities Act
or are restricted as to resale under federal securities laws but are
eligible for trading under Rule 144A promulgated pursuant to the
Securities Act as determined by the Trust's investment manager or
portfolio manager acting pursuant to procedures approved by the Board of
Trustees of the Trust; (d) they were issued by a U.S. corporation, limited
liability company or limited partnership; and (e) at the time of purchase
at least one year had elapsed since the issuer's reorganization.
Reorganization Bonds may also be considered debt securities constituting
Fitch Eligible Assets if they have been approved by Fitch, which approval
shall not be unreasonably withheld. All debt securities satisfying the
foregoing requirements and restrictions of this paragraph (iv) are herein
referred to as "Debt Securities."
(v) asset-backed and mortgage-backed securities;
(vi) preferred stocks;
(vii) Rule 144A Securities;
(viii) Bank Loans;
(ix) municipal debt obligations; and
(x) TRACERs and Structured Notes.
Financial contracts, as such term is defined in Section 3(c)(2)(B)(ii) of
the 1940 Act, not otherwise provided for in this definition may be included in
Fitch Eligible Assets, but, with respect to any financial contract, only upon
receipt by the Trust of a writing from Fitch specifying any conditions on
including such financial contract in Fitch Eligible Assets and assuring the
Trust that including such financial contract in the manner so specified would
not affect the credit rating assigned by Fitch to the Preferred Shares.
Where the Trust sells an asset and agrees to repurchase such asset in the
future, the Discounted Value of such asset will constitute a Fitch Eligible
Asset and the amount the Trust is required to pay upon repurchase of such asset
will count as a liability for the purposes of the
-18-
Preferred Shares Basic Maintenance Amount. Where the Trust purchases an asset
and agrees to sell it to a third party in the future, cash receivable by the
Trust thereby will constitute a Fitch Eligible Asset if the long-term debt of
such other party is rated at least A- by Fitch or the equivalent by another
Rating Agency and such agreement has a term of 30 days or less; otherwise the
Discounted Value of such purchased asset will constitute a Fitch Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a Fitch
Eligible Asset to the extent that it has been irrevocably deposited for the
payment of (i)(A) through (i)(E) under the definition of Preferred Shares Basic
Maintenance Amount or to the extent it is subject to any Liens, except for (A)
Liens which are being contested in good faith by appropriate proceedings and
which Fitch has indicated to the Trust will not affect the status of such asset
as a Fitch Eligible Asset, (B) Liens for taxes that are not then due and payable
or that can be paid thereafter without penalty, (C) Liens to secure payment for
services rendered or cash advanced to the Trust by its investment manager or
portfolio manager, the Trust's custodian, transfer agent or registrar or the
Auction Agent and (D) Liens arising by virtue of any repurchase agreement.
"Fitch Exposure Period" means the period commencing on (and including) a
given Valuation Date and ending 49 days thereafter.
"Fitch Hedging Transactions" has the meaning set forth in Section 11.8(f)
of these Bylaws.
"Fitch Industry Classifications" means, for the purposes of determining
Fitch Eligible Assets, each of the following industry classifications:
Aerospace & Defense
Automobiles
Banking, Finance & Insurance
Building & Materials
Chemicals
Computers & Electronics
Consumer Products
Energy
Environmental Services
Farming & Agriculture
Food, Beverage & Tobacco
Healthcare & Pharmaceuticals
Industrial Machinery
Media, Leisure & Entertainment
Metals & Mining
Miscellaneous
Paper & Forest Products
Retail
Sovereigns
-19-
Textiles & Furniture
Transportation
Utilities
The Trust shall use its discretion in determining which industry
classification is applicable to a particular investment.
"Fitch Loan Category" means the following four categories (and, for
purposes of this categorization, the Market Value of a Fitch Eligible Asset
trading at par is equal to $1.00):
(i) "Fitch Loan Category A" means Performing Bank Loans which have a
Market Value or an Approved Price greater than or equal to $0.90.
(ii) "Fitch Loan Category B" means: (A) Performing Bank Loans which
have a Market Value or an Approved Price of greater than or equal to $0.80
but less than $0.90; and (B) non-Performing Bank Loans which have a Market
Value or an Approved Price greater than or equal to $0.85.
(iii) "Fitch Loan Category C" means: (A) Performing Bank Loans which
have a Market Value or an Approved Price of greater than or equal to $0.70
but less than $0.80; (B) non-Performing Bank Loans which have a Market
Value or an Approved Price of greater than or equal to $0.75 but less than
$0.85; and (C) Performing Bank Loans without an Approved Price rated BB-
or higher by Fitch. If a security is not rated by Fitch but is rated by
two other Rating Agencies, then the lower of the ratings on the security
from the two other Rating Agencies will be used to determine the Fitch
Discount Factor (e.g., where the S&P rating is A- and the Xxxxx'x rating
is Baa1, a Fitch rating of BBB+ will be used). If a security is not rated
by Fitch but is rated by only one other Rating Agency, then the rating on
the security from the other Rating Agency will be used to determine the
Fitch Discount Factor (e.g., where the only rating on a security is an S&P
rating of AAA-, a Fitch rating of AAA- will be used, and where the only
rating on a security is a Xxxxx'x rating of Ba3, a Fitch rating of BB-
will be used).
(iv) "Fitch Loan Category D" means Bank Loans not described in any of
the foregoing categories.
Notwithstanding any other provision contained above, for purposes of
determining whether a Fitch Eligible Asset falls within a specific Fitch Loan
Category, to the extent that any Fitch Eligible Asset would fall within more
than one of the Fitch Loan Categories, such Fitch Eligible Asset shall be deemed
to fall into the Fitch Loan Category with the lowest applicable Fitch Discount
Factor.
"Foreign Bonds" has the meaning set forth in the definition of "Fitch
Eligible Assets."
"Forward Commitment" has the meaning set forth in Section 11.8(d) of these
Bylaws.
-20-
"Holder" means a Person identified as a holder of record of Preferred
Shares in the Share Register.
"Independent Accountant" means a nationally recognized accountant, or firm
of accountants, that is, with respect to the Trust, an independent public
accountant or firm of independent public accountants under the Securities Act
and serving as such for the Trust.
"Initial Dividend Payment Date" means, with respect to a series of
Preferred Shares, the Initial Dividend Payment Date as determined by the Board
of Trustees of the Trust or pursuant to their delegated authority with respect
to such series.
"Initial Dividend Period" has the meaning set forth in Section
11.2(c)(i) of these Bylaws.
"Initial Dividend Rate" means, with respect to a series of Preferred
Shares, the rate per annum applicable to the Initial Dividend Period for such
series of Preferred Shares.
"Interest Equivalent" has the meaning set forth in the definition of "'AA'
Financial Composite Commercial Paper Rate."
"Lien" means any material lien, mortgage, pledge, security interest or
security agreement of any kind.
"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 Preferred Share plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption.
"Market Value" of any asset of the Trust shall be the market value thereof
determined by a Pricing Service. Market Value of any asset shall include any
interest accrued thereon. A 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 a Pricing Service using methods which include consideration of: yields or
prices of securities of comparable quality, type of issue, coupon, maturity and
rating; indications as to value from dealers; and general market conditions. A
Pricing Service may employ electronic data processing techniques and/or a matrix
system to determine valuations. In the event a Pricing Service is unable to
value a security, the security shall be valued at the lower of two dealer bids
obtained by the Trust 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 Trustees of the Trust.
-21-
"Maximum Applicable Rate," with respect to Preferred Shares, has the
meaning set forth in Section 11.10(a)(vi) of these Bylaws.
"Moody's" means Xxxxx'x Investors Service, Inc. or its successors.
"Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined as
follows. The Moody's Discount Factor for any Moody's Eligible Asset other
than the securities set forth below will be the percentage provided in
writing by Moody's.
(i) Corporate debt securities: The percentage determined by reference
to the rating on such asset with reference to the remaining term to
maturity of such asset, in accordance with the table set forth below.
Xxxxx'x Rating Category
Term to Maturity of
Corporate Debt Security Aaa Aa A Baa Ba B Caa Unrated(1)
----------------------- --- -- - --- -- - --- -------
1 year or less.................................. 109% 112% 115% 118% 119% 125% 205% 225%
2 years or less (but longer than 1 year)........ 115 118 122 125 127 133 205 225
3 years or less (but longer than 2 years)....... 120 123 127 131 133 140 205 225
4 years or less (but longer than 3 years)....... 126 129 133 138 140 147 205 225
5 years or less (but longer than 4 years)....... 132 135 139 144 146 154 205 225
7 years or less (but longer than 5 years)....... 139 143 147 152 156 164 205 225
10 years or less (but longer than 7 years)...... 145 150 155 160 164 173 205 225
15 years or less (but longer than 10 years)..... 150 155 160 165 170 180 205 225
20 years or less (but longer than 15 years)..... 150 155 160 165 170 190 205 225
30 years or less (but longer than 20 years)..... 150 155 160 165 170 191 205 225
Greater than 30 years........................... 165 173 181 189 205 221 221 225
------------
(1) Unrated corporate debt securities, which are corporate debt securities
rated by neither Moody's nor S&P, are limited to 10% of discounted Moody's
Eligible Assets. If a corporate debt security is unrated by Moody's but is
rated by S&P, a rating two numeric ratings below the S&P rating will be
used (e.g., where the S&P rating is AAA, a Xxxxx'x rating of Aa1 will be
used; where the S&P rating is AA+, a Xxxxx'x rating of Aa3 will be used).
If a corporate debt security is unrated by both Moody's and S&P, the Trust
will use the percentage set forth under "Unrated" in this table.
The Moody's Discount Factors presented in the immediately preceding
table will also apply to Moody's Eligible Assets that are FHLB, FNMA
and FFCB Debentures and to rated TRACERs, whereby the ratings in the
table will be applied to the underlying securities and the Market Value
of each underlying security will be its proportionate amount of the
Market Value of the TRACER. The Moody's Discount Factors presented in
the immediately preceding table will also apply to corporate debt
securities that do not pay interest in U.S. dollars or euros, provided
that the Moody's Discount Factor determined from the table shall be
multiplied by a factor of 110% for purposes of calculating the
Discounted Value of such securities.
-22-
(ii) Preferred stock: The Moody's Discount Factor for preferred stock
shall be (A) for preferred stocks issued by a utility, 155%; (B) for
preferred stocks of industrial and financial issuers, 209%; and (C) for
auction rate preferred stocks, 350%.
(iii) Short-term instruments: The Moody's Discount Factor applied to
short-term portfolio securities, including without limitation corporate
debt securities, Short Term Money Market Instruments and municipal debt
obligations, will be (A) 100%, so long as such portfolio securities mature
or have a demand feature at par exercisable within the Moody's Exposure
Period; (B) 115%, so long as such portfolio securities mature or have a
demand feature at par not exercisable within the Moody's Exposure Period;
and (C) 125%, if such securities are not rated by Moody's, so long as such
portfolio securities are rated at least A-1+/AA or SP-1+/AA by S&P and
mature or have a demand feature at par exercisable within the Moody's
Exposure Period. A Moody's Discount Factor of 100% will be applied to
cash.
(iv) U.S. Government Securities and U.S. Treasury Strips:
U.S. Government Securities U.S. Treasury Strips
Remaining Term to Maturity Discount Factor Discount Factor
-------------------------- --------------- ---------------
1 year or less 107% 107%
2 years or less (but longer than 1 year) 113 115
3 years or less (but longer than 2 years) 118 121
4 years or less (but longer than 3 years) 123 128
5 years or less (but longer than 4 years) 128 135
7 years or less (but longer than 5 years) 135 147
10 years or less (but longer than 7 years) 141 163
15 years or less (but longer than 10 years) 146 191
20 years or less (but longer than 15 years) 154 218
30 years or less (but longer than 20 years) 154 244
(v) Rule 144A Securities: The Moody's Discount Factor applied to
Rule 144A Securities for Rule 144A Securities whose terms include
rights to registration under the Securities Act within one year and
Rule 144A Securities which do not have registration rights within one
year will be 120% and 130%, respectively, of the Moody's Discount
Factor which would apply were the securities registered under the
Securities Act.
(vi) Bank Loans: The Moody's Discount Factor applied to senior Bank
Loans ("Senior Loans") shall be the percentage specified in the table
below opposite such Moody's Loan Category:
Moody's Loan Category Discount Factor
--------------------- ---------------
A 118%
B 137%
C 161%
D 222%
E 222%
-23-
(vii) Asset-backed securities: The Moody's Discount Factor applied to
asset-backed securities shall be 131%. Mortgage-backed securities: The
Moody's Discount Factor applied to collateralized mortgage obligations,
planned amortization class bonds and targeted amortization class bonds
shall be determined by reference to the weighted average life of the
security and whether cash flow is retained (i.e., controlled by a trustee)
or excluded (i.e., not controlled by a trustee), in accordance with the
table set forth below.
Remaining Term to Maturity Cash Flow Retained Cash Flow Excluded
-------------------------- ------------------ ------------------
3 years or less 133% 141%
7 years or less (but longer than 3 years) 142 151
10 years or less (but longer than 7 years) 158 168
20 years or less (but longer than 10 years) 174 185
The Moody's Discount Factor applied to residential mortgage
pass-throughs (including private-placement mortgage pass-throughs) shall
be determined by reference to the coupon paid by such security and whether
cash flow is retained (i.e., controlled by a trustee) or excluded (i.e.,
not controlled by a trustee), in accordance with the table set forth
below.
Coupon Cash Flow Retained Cash Flow Excluded
------ ------------------ ------------------
5% 166% 173%
6% 162 169
7% 158 165
8% 154 161
9% 151 157
10% 148 154
11% 144 154
12% 142 151
13% 139 148
adjustable 165 172
The Moody's Discount Factor applied to fixed-rate pass-throughs that
are not rated by Moody's and are serviced by a servicer approved by
Moody's shall be determined by reference to the table in the following
paragraph.
The Moody's Discount Factor applied to whole loans shall be determined
by reference to the coupon paid by such security and whether cash flow is
retained (i.e., controlled by a trustee) or excluded (i.e., not controlled
by a trustee), in accordance with the table set forth below.
-24-
Coupon Cash Flow Retained Cash Flow Excluded
------ ------------------ ------------------
5% 172% 179%
6% 167 174
7% 163 170
8% 159 165
9% 155 161
10% 151 158
11% 148 157
12% 145 154
13% 142 151
adjustable 170 177
(viii) Municipal debt obligations: The Moody's Discount Factor applied
to municipal debt obligations shall be the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set
forth opposite such rating that is the same length as or is longer than
the Moody's Exposure Period, in accordance with the table set forth below
(provided that any municipal obligation (excluding any short-term
municipal obligation) not rated by Moody's but rated by S&P shall be
deemed to have a Xxxxx'x rating which is one full rating category lower
than its S&P rating):
Exposure Period Aaa(1) Aa(1) A(1) Baa(1) Other(2) (V)MIG-1(3) SP-1+(4) Unrated(5)
--------------- --- -- - --- ----- -------- ----- -------
7 weeks 151% 159% 166% 173% 187% 136% 148% 225%
8 weeks or less but 154 161 168 176 190 137 149 231
greater than seven weeks
9 weeks or less but 158 163 170 177 192 138 150 240
greater than eight weeks
------------
(1) Xxxxx'x rating.
(2) Municipal debt obligations not rated by Moody's but rated BBB by S&P.
(3) Municipal debt obligations rated MIG-1 or VMIG-1, which do not mature
or have a demand feature at par exercisable in 30 days and which do not
have a long-term rating.
(4) Municipal debt obligations not rated by Moody's but rated SP-1+ by
S&P, which do not mature or have a demand feature at par exercisable in 30
days and which do not have a long-term rating.
(5) Municipal debt obligations rated less than Baa3 or not rated by
Moody's and less than BBB or not rated by S&P, not to exceed 10% of
Moody's Eligible Assets.
(ix) Structured Notes: The Moody's Discount Factor applied to
Structured Notes will be (A) in the case of a corporate issuer, the
Moody's Discount Factor determined in accordance with paragraph (i)
under this definition, whereby the rating on the issuer of the
Structured Note will be the rating on the Structured Note for purposes
of determining the Moody's Discount Factor in the table in paragraph
(i); and (B) in the case of an issuer that is the U.S. government or an
agency or instrumentality thereof, the Moody's Discount Factor
determined in accordance with paragraph (iii) under this definition.
-25-
"Moody's Eligible Assets" means
(i) cash (including interest and dividends due on assets rated (A)
Baa3 or higher by Moody's if the payment date is within five Business
Days of the Valuation Date, (B) A2 or higher if the payment date is
within thirty days of the Valuation Date, and (C) A1 or higher if the
payment date is within the Moody's Exposure Period) and receivables for
Moody's Eligible Assets sold if the receivable is due within five
Business Days of the Valuation Date, and if the trades which generated
such receivables are (A) settled through clearing house firms with
respect to which the Trust has received prior written authorization
from Moody's or (B) (1) with counterparties having a Moody's long-term
debt rating of at least Baa3 or (2) with counterparties having a
Moody's Short Term Money Market Instrument rating of at least P-1;
(ii) Short Term Money Market Instruments so long as (A) such
securities are rated at least P-1, (B) in the case of demand deposits,
time deposits and overnight funds, the supporting entity is rated at
least A2, or (C) in all other cases, the supporting entity (1) is rated
A2 and the security matures within one month, (2) is rated A1 and the
security matures within three months or (3) is rated at least Aa3 and
the security matures within six months; provided, however, that for
purposes of this definition, such instruments (other than commercial
paper rated by S&P and not rated by Moody's) need not meet any
otherwise applicable S&P rating criteria;
(iii) U.S. Government Securities and U.S. Treasury Strips;
(iv) Rule 144A Securities;
(v) Senior Loans and other Bank Loans approved by Moody's;
(vi) Corporate debt securities if (A) such securities are rated Caa
or higher by Moody's; (B) such securities provide for the periodic
payment of interest in cash in U.S. dollars or euros, except that such
securities that do not pay interest in U.S. dollars or euros shall be
considered Moody's Eligible Assets if they are rated by Moody's or S&P;
(C) for securities which provide for conversion or exchange into equity
capital at some time over their lives, the issuer must be rated at
least B3 by Moody's and the discount factor will be 250%; (D) for debt
securities rated Ba1 and below, no more than 10% of the original amount
of such issue may constitute Moody's Eligible Assets; (E) such
securities have been registered under the Securities Act or are
restricted as to resale under federal securities laws but are eligible
for resale pursuant to Rule 144A under the Securities Act as determined
by the Fund's investment manager or portfolio manager acting pursuant
to procedures approved by the Board of Trustees, except that such
securities that are not subject to U.S. federal securities laws shall
be considered Moody's Eligible Assets if they are publicly traded; and
(F) such securities are not subject to extended settlement.
-26-
Notwithstanding the foregoing limitations, (x) corporate debt
securities not rated at least Caa by Moody's or not rated by Moody's
shall be considered to be Moody's Eligible Assets only to the extent
the Market Value of such corporate debt securities does not exceed 10%
of the aggregate Market Value of all Moody's Eligible Assets; provided,
however, that if the Market Value of such corporate debt securities
exceeds 10% of the aggregate Market Value of all Moody's Eligible
Assets, a portion of such corporate debt securities (selected by the
Trust) shall not be considered Moody's Eligible Assets, so that the
Market Value of such corporate debt securities (excluding such portion)
does not exceed 10% of the aggregate Market Value of all Moody's
Eligible Assets; and (y) corporate debt securities rated by neither
Moody's nor S&P shall be considered to be Moody's Eligible Assets only
to the extent such securities are issued by entities which (i) have not
filed for bankruptcy within the past three years, (ii) are current on
all principal and interest in their fixed income obligations, (iii) are
current on all preferred stock dividends, and (iv) possess a current,
unqualified auditor's report without qualified, explanatory language.
(vii) Preferred stocks if (A) dividends on such preferred stock
are cumulative, (B) such securities provide for the periodic payment of
dividends thereon in cash in U.S. dollars or euros and do not provide
for conversion or exchange into, or have warrants attached entitling
the holder to receive, equity capital at any time over the respective
lives of such securities, (C) the issuer of such a preferred stock has
common stock listed on either the New York Stock Exchange or the
American Stock Exchange, (D) the issuer of such a preferred stock has a
senior debt rating from Moody's of Baa1 or higher or a preferred stock
rating from Moody's of Baa3 or higher and (E) such preferred stock has
paid consistent cash dividends in U.S. dollars or euros over the last
three years or has a minimum rating of A1 (if the issuer of such
preferred stock has other preferred issues outstanding that have been
paying dividends consistently for the last three years, then a
preferred stock without such a dividend history would also be
eligible). In addition, the preferred stocks must have the following
diversification requirements: (X) the preferred stock issue must be
greater than $50 million and (Y) the minimum holding by the Trust of
each issue of preferred stock is $500,000 and the maximum holding of
preferred stock of each issue is $5 million. In addition, preferred
stocks issued by transportation companies will not be considered
Moody's Eligible Assets;
(viii) Asset-backed and mortgage-backed securities:
(A) Asset-backed securities if (1) such securities are rated at
least Aa3 by Moody's or at least AA by S&P, (2) the securities are
part of an issue that is $250 million or greater, or the issuer of
such securities has a total of $500 million or greater of
asset-backed securities outstanding at the time of purchase of the
securities by the Trust and (3) the expected average life of the
securities is not greater than 4 years;
(B) Collateralized mortgage obligations ("CMOs"), including CMOs
with interest rates that float at a multiple of the change in the
underlying index according to a pre-
-27-
set formula, provided that any CMO held by the Trust (1) has been rated
Aaa by Moody's or AAA by S&P, (2) does not have a coupon which floats
inversely, (3) is not portioned as an interest-only or principal-only
strip and (4) is part of an issuance that had an original issue size of
at least $100 million;
(C) Planned amortization class bonds ("PACs") and targeted
amortization class bonds ("TACs") provided that such PACs or TACs are
(1) backed by certificates of either the Federal National Mortgage
Association ("FNMA"), the Government National Mortgage Association
("GNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC")
representing ownership in single-family first lien mortgage loans with
original terms of 30 years, (2) part of an issuance that had an
original issue size of at least $10 million, (3) part of PAC or TAC
classes that have payment priority over other PAC or TAC classes, (4)
if TACs, TACs that do not support PAC classes, and (5) if TACs, not
considered reverse TACs (i.e., do not protect against extension risk);
(D) Consolidated senior debt obligations of Federal Home Loan Banks
("FHLBs"), senior long-term debt of the FNMA, and consolidated
systemwide bonds and FCS Financial Assistance Corporation Bonds of
Federal Farm Credit Banks ("FFCBs") (collectively, "FHLB, FNMA and FFCB
Debentures"), provided that such FHLB, FNMA and FFCB Debentures are (1)
direct issuance corporate debt rated Aaa by Moody's, (2) senior debt
obligations backed by the FHLBs, FFCBs or FNMA, (3) part of an issue
entirely denominated in U.S. dollars and (4) not callable or
exchangeable debt issues;
(E) Mortgage pass-throughs rated at least Aa by Moody's and
pass-throughs issued prior to 1987 (if rated AA by S&P and based on
fixed-rate mortgage loans) by Travelers Mortgage Services, Citicorp
Homeowners, Citibank, N.A., Sears Mortgage Security or RFC - Salomon
Brothers Mortgage Securities, Inc., provided that (1) certificates must
evidence a proportional, undivided interest in specified pools of fixed
or adjustable rate mortgage loans, secured by a valid first lien, on
one- to four-family residential properties and (2) the securities are
publicly registered (not issued by FNMA, GNMA or FHLMC);
(F) Private-placement mortgage pass-throughs provided that (1)
certificates represent a proportional undivided interest in specified
pools of fixed-rate mortgage loans, secured by a valid first lien, on
one- to four-family residential properties, (2) documentation is held
by a trustee or independent custodian, (3) pools of mortgage loans are
serviced by servicers that have been approved by FNMA or FHLMC and
funds shall be advanced to meet deficiencies to the extent provided in
the pooling and servicing agreements creating such certificates, and
(4) pools have been rated Aa or better by Moody's; and
-28-
(G) Whole loans (e.g., direct investments in mortgages) provided
that (1) at least 65% of such loans (a) have seasoning of no less than
6 months, (b) are secured by single-family detached residences, (c) are
owner-occupied primary residences, (d) are secured by a first-lien,
fully-documented mortgage, (e) are neither currently delinquent (30
days or more) nor delinquent during the preceding year, (f) have
loan-to-value ratios of 80% or below, (g) carry normal hazard insurance
and title insurance, as well as special hazard insurance, if
applicable, (h) have original terms to maturity not greater than 30
years, with at least one year remaining to maturity, (i) have a minimum
of $10,000 remaining principal balance, (j) for loans underwritten
after January 1, 1978, FNMA and/or FHLMC forms are used for fixed-rate
loans, and (k) such loans are whole loans and not participations; (2)
for loans that do not satisfy the requirements set forth in the
foregoing clause (1), (a) non-owner occupied properties represent no
greater than 15% of the aggregate of either the adjustable-rate pool or
the fixed-rate pool, (b) multi-family properties (those with five or
more units) represent no greater than 15% of the aggregate of either
the adjustable-rate pool or the fixed-rate pool, (c) condominiums
represent no greater than 10% of the aggregate of either the
adjustable-rate pool or the fixed-rate pool, and any condominium
project must be 80% occupied at the time the loan is originated, (d)
properties with loan-to-value ratios exceeding 80% represent no greater
than 25% of the aggregate of either the adjustable-rate pool or the
fixed-rate pool and the portion of the mortgage on any such property
that exceeds a loan-to-value ratio of 80% is insured with Primary
Mortgage Insurance from an insurer rated at least Baa3 by Moody's and
(e) loan balances in excess of the current FHLMC limit plus $75,000
represent no greater than 25% of the aggregate of either the
adjustable-rate pool or the fixed-rate pool, loan balances in excess of
$350,000 represent no greater than 10% of the aggregate of either the
adjustable-rate pool or the fixed-rate pool, and loan balances in
excess of $1,000,000 represent no greater than 5% of the aggregate of
either the adjustable-rate pool or the fixed-rate pool; (3) no greater
than 5% of the pool of loans is concentrated in any one zip code; (4)
the pool of loans contains at least 100 loans or $2 million in loans
per servicer; (5) for adjustable-rate mortgages ("ARMs"), (a) any ARM
is indexed to the National Cost of Funds index, the 11th District Cost
of Funds index, the 1-year Treasury or the 6-month Treasury, (b) the
margin over the given index is between 0.15% and 0.25% for either
cost-of-funds index and between 0.175% and 0.325% for Treasuries, (c)
the maximum yearly interest rate increase is 2%, (d) the maximum
life-time interest rate increase is 6.25% and (e) ARMs may include
Federal Housing Administration and Department of Veterans Affairs
loans; (6) for "teaser" loans, (a) the initial discount from the
current ARM market rate is no greater than 2%, (b) the loan is
underwritten at the market rate for ARMs, not the "teaser" rate, and
(c) the loan is seasoned six months beyond the "teaser" period.
(ix) Any municipal debt obligation that (A) pays interest in cash,
(B) does not have a Xxxxx'x rating, as applicable, suspended by
Moody's, and (C) is part of an issue of municipal debt obligations of
at least $5,000,000, except for municipal debt obligations rated below
A by Moody's, in which case the minimum issue size is $10,000,000;
-29-
(x) Structured Notes and rated TRACERs; and
(xi) Financial contracts, as such term is defined in Section
3(c)(2)(B)(ii) of the 1940 Act, not otherwise provided for in this
definition but only upon receipt by the Trust of a letter from Xxxxx'x
specifying any conditions on including such financial contract in
Xxxxx'x Eligible Assets and assuring the Trust that including such
financial contract in the manner so specified would not affect the
credit rating assigned by Xxxxx'x to the Preferred Shares.
In addition, portfolio holdings as described below must be within the
following diversification and issue size requirements in order to be included
in Xxxxx'x Eligible Assets:
Maximum Single Maximum Single Minimum Issue Size
Ratings(1) Issuer(2),(3) Industry(3),(4) ($ in million)(5)
------- ------ -------- --------------
Aaa 100% 100% $100
Aa 20 60 100
A 10 40 100
Baa 6 20 100
Ba 4 12 50(6)
B1-B2 3 8 50(6)
B3 or below 2 5 50(6)
------------
(1) Refers to the preferred stock and senior debt rating of the portfolio
holding.
(2) Companies subject to common ownership of 25% or more are considered as
one issuer.
(3) Percentages represent a portion of the aggregate Market Value of
corporate debt securities.
(4) Industries are determined according to Xxxxx'x Industry
Classifications, as defined herein.
(5) Except for preferred stock, which has a minimum issue size of $50
million.
(6) Portfolio holdings from issues ranging from $50 million to $100
million are limited to 20% of the Fund's total assets.
Where the Trust sells an asset and agrees to repurchase such asset in
the future, the Discounted Value of such asset will constitute a Xxxxx'x
Eligible Asset and the amount the Trust is required to pay upon repurchase of
such asset will count as a liability for the purposes of the Preferred Shares
Basic Maintenance Amount. Where the Trust purchases an asset and agrees to
sell it to a third party in the future, cash receivable by the Trust thereby
will constitute a Xxxxx'x Eligible Asset if the long-term debt of such other
party is rated at least A2 by Xxxxx'x and such agreement has a term of 30
days or less; otherwise the Discounted Value of such purchased asset will
constitute a Xxxxx'x Eligible Asset. For the purposes of calculation of
Xxxxx'x Eligible Assets, portfolio securities which have been called for
redemption by the issuer thereof shall be valued at the lower of Market Value
or the call price of such portfolio securities.
Notwithstanding the foregoing, an asset will not be considered a
Xxxxx'x Eligible Asset to the extent that it has been irrevocably deposited
for the payment of (i)(A) through (i)(E) under the definition of Preferred
Shares Basic Maintenance Amount or to the extent it is subject to any Liens,
except for (A) Liens which are being contested in good faith by appropriate
proceedings and which Xxxxx'x has indicated to the Trust will not affect the
status of such asset as a Xxxxx'x Eligible Asset, (B) Liens for taxes that
are not then due and payable or that can be paid thereafter
-30-
without penalty, (C) Liens to secure payment for services rendered or cash
advanced to the Trust by its investment manager or portfolio manager, the
Trust's custodian, transfer agent or registrar or the Auction Agent and (D)
Liens arising by virtue of any repurchase agreement.
"Xxxxx'x Exposure Period" means the period commencing on a given Valuation
Date and ending 49 days thereafter.
"Xxxxx'x Hedging Transactions" has the meaning set forth in Section
11.8(a) of these Bylaws.
"Xxxxx'x Industry Classification" means, for the purposes of determining
Xxxxx'x Eligible Assets, each of the following industry classifications (or such
other classifications as Xxxxx'x may from time to time approve for application
to the Preferred Shares):
1. Aerospace and Defense: Major Contractor, Subsystems, Research, Aircraft
Manufacturing, Arms, Ammunition
2. Automobile: Automobile Equipment, Auto-Manufacturing, Auto Parts
Manufacturing, Personal Use Trailers, Motor Homes, Dealers
3. Banking: Bank Holding, Savings and Loans, Consumer Credit, Small Loan,
Agency, Factoring, Receivables
4. Beverage, Food and Tobacco: Beer and Ale, Distillers, Wines and
Liquors, Distributors, Soft Drink Syrup, Bottlers, Bakery, Mill Sugar,
Canned Foods, Corn Refiners, Dairy Products, Meat Products, Poultry
Products, Snacks, Packaged Foods, Candy, Gum, Seafood, Frozen Food,
Cigarettes, Cigars, Leaf/Snuff, Vegetable Oil
5. Buildings and Real Estate: Brick, Cement, Climate Controls,
Contracting, Engineering, Construction, Hardware, Forest Products
(building-related only), Plumbing, Roofing, Wallboard, Real Estate,
Real Estate Development, REITs, Land Development
6. Chemicals, Plastics and Rubber: Chemicals (non-agricultural),
Industrial Gases, Sulfur, Plastics, Plastic Products, Abrasives,
Coatings, Paints, Varnish, Fabricating
7. Containers, Packaging and Glass: Glass, Fiberglass, Containers made of:
Glass, Metal, Paper, Plastic, Wood or Fiberglass
8. Personal and Non-Durable Consumer Products (Manufacturing Only): Soaps,
Perfumes, Cosmetics, Toiletries, Cleaning Supplies, School Supplies
9. Diversified/Conglomerate Manufacturing
-31-
10. Diversified/Conglomerate Service
11. Diversified Natural Resources, Precious Metals and Minerals:
Fabricating, Distribution
12. Ecological: Pollution Control, Waste Removal, Waste Treatment and
Waste Disposal
13. Electronics: Computer Hardware, Electric Equipment, Components,
Controllers, Motors, Household Appliances, Information Service
Communicating Systems, Radios, TVs, Tape Machines, Speakers, Printers,
Drivers, Technology
14. Finance: Investment Brokerage, Leasing, Syndication, Securities
15. Farming and Agriculture: Livestock, Grains, Produce, Agriculture
Chemicals, Agricultural Equipment, Fertilizers
16. Grocery: Grocery Stores, Convenience Food Stores
17. Healthcare, Education and Childcare: Ethical Drugs, Proprietary Drugs,
Research, Health Care Centers, Nursing Homes, HMOs, Hospitals,
Hospital Supplies, Medical Equipment
18. Home and Office Furnishings, Housewares, and Durable Consumer
Products: Carpets, Floor Coverings, Furniture, Cooking, Ranges
19. Hotels, Motels, Inns and Gaming
20. Insurance: Life, Property and Casualty, Broker, Agent, Surety
21. Leisure, Amusement, Motion Pictures, Entertainment: Boating, Bowling,
Billiards, Musical Instruments, Fishing, Photo Equipment, Records,
Tapes, Sports, Outdoor Equipment (Camping), Tourism, Resorts, Games,
Toy Manufacturing, Motion Picture Production Theaters, Motion Picture
Distribution
22. Machinery (Non-Agricultural, Non-Construction, Non-Electronic):
Industrial, Machine Tools, Steam Generators
23. Mining, Steel, Iron and Non-Precious Metals: Coal, Copper, Lead,
Uranium, Zinc, Aluminum, Stainless Steel, Integrated Steel, Ore
Production, Refractories, Steel Mill Machinery, Mini-Xxxxx,
Fabricating, Distribution and Sales of the foregoing
24. Oil and Gas: Crude Producer, Retailer, Well Supply, Service and
Drilling
-32-
25. Printing, Publishing, and Broadcasting: Graphic Arts, Paper, Paper
Products, Business Forms, Magazines, Books, Periodicals, Newspapers,
Textbooks, Radio, T.V., Cable Broadcasting Equipment
26. Cargo Transport: Rail, Shipping, Railroads, Rail-car Builders, Ship
Builders, Containers, Container Builders, Parts, Overnight Mail,
Trucking, Truck Manufacturing, Trailer Manufacturing, Air Cargo,
Transport
27. Retail Stores: Apparel, Toy, Variety, Drugs, Department, Mail Order
Catalog, Showroom
28. Telecommunications: Local, Long Distance, Independent, Telephone,
Telegraph, Satellite, Equipment, Research, Cellular
29. Textiles and Leather: Producer, Synthetic Fiber, Apparel Manufacturer,
Leather Shoes
30. Personal Transportation: Air, Bus, Rail, Car Rental
31. Utilities: Electric, Water, Hydro Power, Gas
32. Diversified Sovereigns: Semi-sovereigns, Canadian Provinces,
Supra-national Agencies
The Trust will use its discretion in determining which industry
classification is applicable to a particular investment in consultation with the
Independent Accountant and Xxxxx'x, to the extent the Trust considers necessary.
"Xxxxx'x Loan Category" means the following five categories (and, for
purposes of this categorization, the Market Value of a Xxxxx'x Eligible Asset
trading at par is equal to $1.00):
(i) "Xxxxx'x Loan Category A" means Performing Senior Loans which
have a Market Value or an Approved Price greater than or equal to $0.90.
(ii) "Xxxxx'x Loan Category B" means: (A) Performing Senior Loans
which have a Market Value or an Approved Price of greater than or equal
to $0.80 but less than $0.90; and (B) non-Performing Senior Loans which
have a Market Value or an Approved Price greater than or equal to $0.85.
(iii) "Xxxxx'x Loan Category C" means: (A) Performing Senior
Loans which have a Market Value or an Approved Price of greater than or
equal to $0.70 but less than $0.80; and (B) non-Performing Senior Loans
which have a Market Value or an Approved Price of greater than or equal
to $0.75 but less than $0.85.
-33-
(iv) "Xxxxx'x Loan Category D" means Senior Loans which have a
Market Value or an Approved Price less than $0.75.
(v) "Xxxxx'x Loan Category E" means non-Senior Loans which have a
Market Value or an Approved Price.
Notwithstanding any other provision contained above, for purposes of
determining whether a Xxxxx'x Eligible Asset falls within a specific Xxxxx'x
Loan Category, to the extent that any Xxxxx'x Eligible Asset would fall in more
than one of the Xxxxx'x Loan Categories, such Xxxxx'x Eligible Asset shall be
deemed to fall into the Xxxxx'x Loan Category with the lowest applicable Xxxxx'x
Discount Factor.
"1940 Act" means the Investment Company Act of 1940, as amended from time
to time.
"1940 Act Cure Date," with respect to the failure by the Trust to maintain
the 1940 Act Preferred Shares Asset Coverage (as required by these Bylaws) as of
the last Business Day of each month, means the last Business Day of the
following month.
"1940 Act Preferred Shares 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 Trust which are shares of beneficial
interest, including Preferred Shares (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 shares of beneficial interest of a closed-end
investment company as a condition of paying dividends on its common shares).
"Non-Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions."
"Non-Payment Period" means a period commencing on and including a Dividend
Payment Date or redemption date for which the Trust shall fail to (i) declare,
prior to the close of business on the second Business Day preceding such
Dividend Payment Date, for payment on or (to the extent permitted by Section
11.2(c)(i) of these Bylaws) 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 Preferred Shares payable on such Dividend Payment Date, provided,
however, that if the Trust is not able to make such declaration in compliance
with the foregoing because an unforeseen event or unforeseen events causes or
cause a day that otherwise would have been a Business Day not to be a Business
Day, then the Trust may make such declaration on the Business Day immediately
preceding the Dividend Payment Date, if possible, or, if not possible, on the
Dividend Payment Date, and in such case the Trust shall not be deemed to have
failed to declare a dividend otherwise required to be declared, 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 such redemption date for any Preferred Shares called for
redemption, the
-34-
Mandatory Redemption Price per share of such Preferred Shares 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 Trust 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 Share Books) and the Securities Depository.
Notwithstanding the foregoing, the failure by the Trust 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 Section 11.2(c)(i) of these Bylaws, shall not
constitute a "Non-Payment Period."
"Non-Payment Period Rate" means, initially, 300% of the applicable
Reference Rate, provided that the Board of Trustees of the Trust shall have the
authority to adjust, modify, alter or change from time to time the initial
Non-Payment Period Rate if the Board of Trustees of the Trust determines and
each of Fitch and Xxxxx'x (and any Substitute Rating Agency in lieu of Fitch or
Xxxxx'x in the event Fitch or Xxxxx'x shall not rate the Preferred Shares)
advises the Trust in writing that such adjustment, modification, alteration or
change will not adversely affect its then current ratings on the Preferred
Shares.
"Normal Dividend Payment Date" has the meaning set forth in Section
11.2(b)(i) of these Bylaws.
"Notice of Redemption" means any notice with respect to the redemption of
Preferred Shares pursuant to Section 11.4 of these Bylaws.
"Notice of Revocation" has the meaning set forth in Section 11.2(c)(iii)
of these Bylaws.
"Notice of Special Dividend Period" has the meaning set forth in Section
11.2(c)(iii) of these Bylaws.
"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 plus any applicable redemption premium attributable to
the designation of a Premium Call Period.
"Outstanding" means, as of any date (i) with respect to Preferred Shares,
Preferred Shares theretofore issued by the Trust except, without duplication,
(A) any Preferred Shares theretofore canceled or delivered to the Auction Agent
for cancellation, or redeemed by the Trust, 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 Trust pursuant to Section 11.4(c) hereto
and (B) any Preferred Shares as to which the Trust or any Affiliate (other than
an Affiliate that is a Broker-Dealer) thereof shall be a Beneficial Owner,
provided that Preferred Shares held by an Affiliate shall be deemed outstanding
for purposes of calculating the Preferred Shares Basic Maintenance
-35-
Amount and (ii) with respect to other preferred shares of beneficial interest of
the Trust, the meaning equivalent to that for Preferred Shares as set forth in
clause (i).
"Parity Shares" means the Preferred Shares and each other outstanding
series of preferred shares of beneficial interest of the Trust the holders of
which, together with the holders of the Preferred Shares, 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.
"Performing" means with respect to any asset that is a Bank Loan or other
debt, the issuer of such investment is not in default of any payment obligations
in respect thereof.
"Person" means and includes an individual, a partnership, 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 Preferred Shares but that wishes
to purchase such shares, or that is a Beneficial Owner that wishes to purchase
additional Preferred Shares.
"Potential Holder" means any Broker-Dealer or any such other Person as may
be permitted by the Trust, including any Existing Holder, who may be interested
in acquiring Preferred Shares (or, in the case of an Existing Holder, additional
Preferred Shares).
"Preferred Shares" means the Series M Preferred Shares, the Series T
Preferred Shares, the Series W Preferred Shares, the Series Th Preferred Shares
and the Series F Preferred Shares.
"Preferred Shares Basic Maintenance Amount," as of any Valuation Date,
means the dollar amount equal to the sum of (i)(A) the product of the number of
Preferred Shares Outstanding on such date multiplied by $25,000, plus any
redemption premium applicable to Preferred Shares then subject to redemption;
(B) the aggregate amount of dividends that will have accumulated at the
respective Applicable Rates (whether or not earned or declared) to (but not
including) the first respective Dividend Payment Dates for each series of
Preferred Shares Outstanding that follow such Valuation Date; (C) the aggregate
amount of dividends that would accumulate on shares of each series of Preferred
Shares Outstanding from such first respective Dividend Payment Date therefor
through the 49th day after such Valuation Date, at the Maximum Applicable Rate
(calculated as if such Valuation Date were the Auction Date for the Dividend
Period commencing on such Dividend Payment Date) for a 7-Day Dividend Period of
shares of such series to commence on such Dividend Payment Date, multiplied by
the Volatility Factor (except that (1) if such Valuation Date occurs during a
Non-Payment Period, the dividend for purposes of calculation would accumulate at
the then current Non-Payment Period Rate and (2) for those days during the
period described in this clause (C) in respect of which the Applicable Rate in
effect immediately prior to such Dividend Payment Date will remain in effect,
the dividend for purposes of calculation would accumulate at such Applicable
Rate in respect of those days); (D) the amount of anticipated expenses of the
Trust for the 90 days
-36-
subsequent to such Valuation Date; and (E) any current liabilities as of such
Valuation Date to the extent not reflected in any of (i)(A) through (i)(D)
(including, without limitation, any payables for portfolio securities of the
Trust purchased as of such Valuation Date and any liabilities incurred for the
purpose of clearing securities transactions) less (ii) the value (i.e., the face
value of cash, short-term securities rated XXX-0, XXXX-0 xx X-0, and short-term
securities that are the direct obligation of the U.S. government, provided in
each case that such securities mature on or prior to the date upon which any of
(i)(A) through (i)(E) become payable, otherwise the Discounted Value) of any of
the Trust's assets irrevocably deposited by the Trust for the payment of any of
(i)(A) through (i)(E).
"Preferred Shares Basic Maintenance Cure Date," with respect to the
failure by the Trust to satisfy the Preferred Shares Basic Maintenance Amount
(as required by Section 11.7(a) of these Bylaws) as of a given Valuation Date,
means the sixth Business Day following such Valuation Date.
"Preferred Shares Basic Maintenance Report" means a report signed by any
of the President, Treasurer, any Senior Vice President or any Vice President of
the Trust which sets forth, as of the related Valuation Date, the assets of the
Trust, the Market Value and the Discounted Value thereof (seriatim and in
aggregate), and the Preferred Shares Basic Maintenance Amount.
"Premium Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions."
"Pricing Service" means any pricing service designated by the Board of
Trustees of the Trust and approved by Fitch or Xxxxx'x, as applicable, for
purposes of determining whether the Trust has Eligible Assets with an
aggregate Discounted Value that equals or exceeds the Preferred Shares Basic
Maintenance Amount.
"Quarterly Valuation Date" means the last Business Day of the last month
of each fiscal quarter of the Trust in each fiscal year of the Trust, commencing
April 30, 2002.
"Rating Agency" means a nationally recognized statistical rating
organization.
"Reference Rate" means the applicable "AA" Financial Composite Commercial
Paper Rate (for a Dividend Period of fewer than 184 days) or the applicable
Treasury Index Rate (for a Dividend Period of 184 days or more).
"Reorganization Bonds" has the meaning set forth under the definition of
"Fitch Eligible Assets."
"Request for Special Dividend Period" has the meaning set forth in Section
11.2(c)(iii) of these Bylaws.
"Response" has the meaning set forth in Section 11.2(c)(iii) of these
Bylaws.
-37-
"Rule 144A Securities" means securities which are restricted as to resale
under federal securities laws but are eligible for resale pursuant to Rule 144A
under the Securities Act as determined by the Trust's investment manager or
portfolio manager acting pursuant to procedures approved by the Board of
Trustees of the Trust.
"S&P" means Standard & Poor's, a division of The XxXxxx-Xxxx Companies,
Inc., or its successors.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securities Depository" means The Depository Trust Company and its
successors and assigns or any successor securities depository selected by the
Trust as securities depository for the Preferred Shares that agrees to follow
the procedures required to be followed by such securities depository in
connection with the Preferred Shares.
"Senior Loans" has the meaning set forth under the definition of "Xxxxx'x
Discount Factor."
"Series F Preferred Shares" means the Auction Rate Cumulative Preferred
Shares, Series F.
"Series M Preferred Shares" means the Auction Rate Cumulative Preferred
Shares, Series M.
"Series T Preferred Shares" means the Auction Rate Cumulative Preferred
Shares, Series T.
"Series Th Preferred Shares" means the Auction Rate Cumulative Preferred
Shares, Series Th.
"Series F Preferred Shares" means the Auction Rate Cumulative Preferred
Shares, Series F.
"7-Day Dividend Period" means a Dividend Period consisting of seven days.
"Share 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 Preferred Shares.
"Share Register" means the register of Holders maintained on behalf of the
Trust by the Auction Agent in its capacity as transfer agent and registrar for
the Preferred Shares.
"Short Term Dividend Period" means a Special Dividend Period consisting of
a specified number of days, evenly divisible by seven and not fewer than
fourteen nor more than 364.
-38-
"Short Term Money Market Instruments" means the following types of
instruments if, on the date of purchase or other acquisition thereof by the
Trust, the remaining term to maturity thereof is not in excess of 180 days (or
270 days for instruments rated at least Aaa for purposes of determining Xxxxx'x
Eligible Assets):
(i) commercial paper rated either F1 by Fitch or A-1 by S&P if such
commercial paper matures in 30 days or P-1 by Xxxxx'x and either F1+ by
Fitch or A-1+ by S&P if such commercial paper matures in over 30 days;
(ii) demand or time deposits in, and banker's acceptances and
certificates of deposit of (A) a depository institution or trust company
incorporated under the laws of the United States of America or any state
thereof or the District of Columbia or (B) a United States branch office
or agency of a foreign depository institution (provided that such branch
office or agency is subject to banking regulation under the laws of the
United States, any state thereof or the District of Columbia);
(iii) overnight funds;
(iv) U.S. Government Securities; and
(v) Eurodollar demand or time deposits in, or certificates of deposit
of, the head office or the London branch office of a depository
institution or trust company if the certificates of deposit, if any, and
the long-term unsecured debt obligations (other than such obligations the
ratings of which are based on the credit of a person or entity other than
such depository institution or trust company) of such depository
institution or trust company that have (1) credit ratings on each
Valuation Date of at least P-1 from Xxxxx'x and either F1+ from Fitch or
A-1+ from S&P, in the case of commercial paper or certificates of deposit,
and (2) credit ratings on each Valuation Date of at least Aa3 from Xxxxx'x
and either AA- from Fitch or AA- from S&P, in the case of long-term
unsecured debt obligations; provided, however, that in the case of any
such investment that matures in no more than one Business Day from the
date of purchase or other acquisition by the Trust, all of the foregoing
requirements shall be applicable except that the required long-term
unsecured debt credit rating of such depository institution or trust
company from Xxxxx'x, Fitch and S&P shall be at least A2, A and A,
respectively; and provided further, however, that the foregoing credit
rating requirements shall be deemed to be met with respect to a depository
institution or trust company if (1) such depository institution or trust
company is the principal depository institution in a holding company
system, (2) the certificates of deposit, if any, of such depository
institution or trust company are not rated on any Valuation Date below P-1
by Xxxxx'x, F1+ by Fitch or A-1+ by S&P and there is no long-term rating,
and (3) the holding company shall meet all of the foregoing credit rating
requirements (including the preceding proviso in the case of investments
that mature in no more than one Business Day from the date of purchase or
other acquisition by the Trust); and provided further, that the interest
receivable by the Trust shall not be subject to any withholding or similar
taxes.
-39-
"Special Dividend Period" means a Short Term Dividend Period or a Long
Term Dividend Period.
"Specific Redemption Provisions" means, with respect to a Special Dividend
Period either, or both of, (i) a period (a "Non-Call Period") determined by the
Board of Trustees of the Trust, after consultation with the Auction Agent and
the Broker-Dealers, during which the Preferred Shares subject to such Dividend
Period shall not be subject to redemption at the option of the Trust and (ii) a
period (a "Premium Call Period"), consisting of a number of whole years and
determined by the Board of Trustees of the Trust, after consultation with the
Auction Agent and the Broker-Dealers, during each year of which the Preferred
Shares subject to such Dividend Period shall be redeemable at the Trust'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
Trustees of the Trust after consultation with the Auction Agent and the
Broker-Dealers.
"Structured Notes" means privately negotiated debt obligations where the
principal and/or interest is determined by reference to the performance of a
benchmark asset or market (an "embedded index"), such as selected securities or
an index of securities, or the differential performance of two assets or
markets, such as indices reflecting bonds.
"Subsequent Dividend Period" has the meaning set forth in Section
11.2(c)(i) of these Bylaws.
"Substitute Commercial Paper Dealers" means such substitute commercial
paper dealer or dealers as the Trust may from time to time appoint or, in lieu
of any thereof, their respective affiliates or successors.
"Substitute Rating Agency" means a Rating Agency selected by Xxxxxxx Xxxxx
Xxxxxx Inc. or its affiliates and successors, after consultation with the Trust,
to act as the substitute Rating Agency to determine the credit ratings of the
Preferred Shares.
"Sufficient Clearing Bids" has the meaning set forth in Section
11.10(a)(xv) of these Bylaws.
"TRACERs" means traded custody receipts representing direct ownership in a
portfolio of underlying securities.
"Treasury Xxxx" means a direct obligation of the U.S. government having a
maturity at the time of issuance of 364 days or less.
"Treasury Bonds" means United States Treasury Bonds or Notes.
"Treasury Index Rate" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities having the same
number of 30-day periods to maturity as the length of the applicable Dividend
Period, determined, to the extent necessary, by linear
-40-
interpolation based upon the yield for such securities having the next shorter
and next longer number of 30-day periods to maturity treating all Dividend
Periods with a length greater than the longest maturity for such securities as
having a length equal to such longest maturity, in all cases based upon data set
forth in the most recent weekly statistical release published by the Board of
Governors of the Federal Reserve System (currently in H.15 (519)); provided,
however, if the most recent such statistical release shall not have been
published during the 15 days preceding the date of computation, the foregoing
computations shall be based upon the average of comparable data as quoted to the
Trust by at least three recognized dealers in U.S. government securities
selected by the Trust.
"U.S. Government Securities" means direct obligations of the United States
or of its agencies or instrumentalities that are entitled to the full faith and
credit of the United States and that, other than Treasury Bills, provide for the
periodic payment of interest and the full payment of principal at maturity or
call for redemption.
"U.S. Treasury Securities" means direct obligations of the United States
Treasury that are entitled to the full faith and credit of the United States.
"U.S. Treasury Strips" means securities based on U.S. Treasury Securities
created through the Separate Trading of Registered Interest and Principal of
Securities program.
"Valuation Date" means, for purposes of determining whether the Trust is
maintaining the Preferred Shares Basic Maintenance Amount, the last Business Day
of each week commencing with the Date of Original Issue.
"Volatility Factor" means 1.89.
"Voting Period" has the meaning set forth in Section 11.5(b) of these
Bylaws.
(b) The foregoing definitions of Accountant's Confirmation, Closing
Transactions, Debt Securities, Deposit Securities, Discounted Value, Fitch
Discount Factor, Fitch Eligible Assets, Fitch Exposure Period, Fitch Hedging
Transactions, Fitch Industry Classifications, Forward Commitment, Independent
Accountant, Market Value, Maximum Applicable Rate, Xxxxx'x Advance Rate, Xxxxx'x
Discount Factor, Xxxxx'x Eligible Assets, Xxxxx'x Exposure Period, Xxxxx'x
Hedging Transactions, Xxxxx'x Industry Classification, Xxxxx'x Loan Category,
1940 Act Cure Date, 1940 Act Preferred Shares Asset Coverage, Preferred Shares
Basic Maintenance Amount, Preferred Shares Basic Maintenance Cure Date,
Preferred Shares Basic Maintenance Report, Short Term Money Market Instruments,
Treasury Bonds, Valuation Date and Volatility Factor (and any terms defined
within such definitions) have been determined by the Board of Trustees of the
Trust in order to obtain a rating of "AAA" from Fitch and a rating of "Aaa" from
Xxxxx'x on the Preferred Shares on their Date of Original Issue; and the Board
of Trustees of the Trust shall have the authority, without shareholder approval,
to amend, alter or repeal from time to time the foregoing definitions (and any
terms defined within such definitions) and the restrictions and guidelines set
forth thereunder if Fitch, Xxxxx'x or any Substitute Rating
-41-
Agency advises the Trust in writing that such amendment, alteration or repeal
will not adversely affect its then current rating on the Preferred Shares.
11.2 Dividends. (a) The Holders of a particular series of Preferred Shares
shall be entitled to receive, when, as and if declared by the Board of Trustees
of the Trust, out of funds legally available therefor, cumulative dividends each
consisting of cash at the Applicable Rate and no more, payable on the respective
dates set forth below. Dividends on the shares of each series of Preferred
Shares so declared and payable shall be paid in preference to and in priority
over any dividends declared and payable on the Common Shares.
(b) (i) Cash dividends on shares of each series of Preferred Shares shall
accumulate from the Date of Original Issue and shall be payable, when, as and if
declared by the Board of Trustees of the Trust, out of funds legally available
therefor, commencing on the Initial Dividend Payment Date. Following the Initial
Dividend Payment Date for a series of Preferred Shares, dividends on that series
of Preferred Shares will be payable, at the option of the Trust, either (i) with
respect to any 7-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 the Dividend Payment Date shall be the first Business Day
next succeeding such Normal Dividend Payment Date. 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 Period for a series of Preferred
Shares is scheduled to begin on the same day and end on the same day as a
Dividend Period for another series of Preferred Shares, then the last day of
such Dividend Period for such other series of Preferred Shares shall be the
second Business Day next succeeding such scheduled day unless the Trust obtains
the opinion of tax counsel referred to in this paragraph. Subject to the
limitation in the next sentence, if for any reason a Dividend Payment Date
cannot be fixed as described above, then the Board of Trustees of the Trust
shall fix the Dividend Payment Date. However, no Dividend Period of any series
of Preferred Shares shall be co-extensive with any Dividend Period of any other
series of Preferred Shares unless the Trust has received an opinion of tax
counsel that having such co-extensive periods will not affect the deductibility,
for federal income tax purposes, of dividends paid on the different series of
Preferred Shares. The Board of Trustees of the Trust before authorizing a
dividend may change a Dividend Payment Date if such change does not adversely
affect the contract rights of the Holders of Preferred Shares set forth in the
Declaration of Trust or the Bylaws. The Initial Dividend Period, 7-Day Dividend
Periods and Special Dividend Periods with respect to a series of Preferred
Shares 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."
-42-
(ii) 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 Trustees of the Trust.
(c) (i) During the period from and including the Date of Original Issue to
but excluding the Initial Dividend Payment Date for a series of Preferred Shares
(the "Initial Dividend Period"), the Applicable Rate for such series of
Preferred Shares shall be the Initial Dividend Rate. Commencing on the Initial
Dividend Payment Date for a series of Preferred Shares, the Applicable Rate on
that series 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.
For a series of Preferred Shares, the Applicable Rate for such series 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, but not after the end of, a Non-Payment Period shall be
a 7-Day Dividend Period. Except in the case of the willful failure of the Trust
to pay a dividend on a Dividend Payment Date or to redeem any Preferred Shares
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 Trust has declared such dividend
payable on such Dividend Payment Date to the Holders of such Preferred Shares 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 Preferred Shares 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 (excluding any days that
would have been Business Days but for the occurrence of any unforeseen event or
unforeseen events that caused such days not to be Business Days) divided by 365,
and in such case such period shall not constitute a Non-Payment Period;
provided, however, that the Trust shall not be required to pay any late charge
if it declares a dividend on the Dividend Payment Date or the Business Day
immediately preceding such Dividend Payment Date in accordance with clause (i)
of the definition of "Non-Payment Period" and deposits payment for such dividend
as contemplated by clause (ii)(A) of the definition of "Non-Payment Period" on
or before the second Business Day succeeding the day on which the dividend was
declared. In the case of a willful failure of the Trust to pay a dividend on a
Dividend Payment Date or to redeem any Preferred Shares on the date set for such
redemption, the preceding sentence shall not apply and the Applicable Rate for
the Dividend
-43-
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.
(ii) The amount of cash dividends per share of any series of Preferred
Shares payable (if declared) on the Initial Dividend Payment Date, each 7-Day
Dividend Period and each Dividend Payment Date of 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 a series
of Preferred Shares 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.
(iii) The Trust 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 Preferred Shares be a number
of days (other than seven), evenly divisible by seven and not fewer than
fourteen 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 Trust may not
give a Request for Special Dividend Period for a 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 and
any amounts due with respect to redemptions 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 Preferred
Shares 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 a series of Preferred Shares. Upon receiving such Request
for Special Dividend Period, the Broker-Dealer(s) shall jointly determine the
Optional Redemption Price of the Preferred Shares during such Special
Dividend Period and the Specific Redemption Provisions and shall give the
Trust 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
-44-
curves for short-term and long-term securities comparable to the Preferred
Shares, (4) industry and financial conditions which may affect the Preferred
Shares, (5) the investment objectives of the Trust, and (6) the Dividend Periods
and dividend rates at which current and potential beneficial holders of the
Preferred Shares would remain or become beneficial holders. After providing the
Request for Special Dividend Period to the Auction Agent and each Broker-Dealer
as set forth above, the Trust 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 Trust
also shall provide a copy of such Notice of Special Dividend Period to Fitch,
Xxxxx'x and any Substitute Rating Agency. The Trust shall not give a Notice of
Special Dividend Period and, if the Trust has given a Notice of Special Dividend
Period, the Trust 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 Preferred Shares Asset Coverage
is not satisfied or the Trust shall fail to maintain Fitch Eligible Assets and
Xxxxx'x Eligible Assets each with an aggregate Discounted Value at least equal
to the Preferred Shares Basic Maintenance Amount, 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 Trust is an approximately equal rate for securities similar to the Preferred
Shares with an equal dividend period) or (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 Auction Date immediately preceding such
Dividend Payment Date. The Trust also shall provide a copy of such Notice of
Revocation to Fitch, Xxxxx'x and any Substitute Rating Agency. If the Trust is
prohibited from giving a Notice of Special Dividend Period as a result of any of
the factors enumerated in clause (x) or (y) above or if the Trust gives a Notice
of Revocation with respect to a Notice of Special Dividend Period for any series
of Preferred Shares, the next succeeding Dividend Period will be a 7-Day
Dividend Period. In addition, in the event Sufficient Clearing Bids are not made
in an Auction, or if an Auction is not held for any reason, such next succeeding
Dividend Period will be a 7-Day Dividend Period and the Trust may not again give
a Notice of Special Dividend Period for the Preferred Shares (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. If an Auction
is not held because an unforeseen event or unforeseen events cause a day that
otherwise would have been a Dividend Payment Date or an Auction Date not to be a
Business Day, then the length of the Dividend Period relating to such Dividend
Payment Date shall be extended by seven days (or a multiple thereof if necessary
because of such unforeseen event or events) (an "Extension Period"), the
Applicable Rate for such Extension Period shall be the Applicable Rate for the
Dividend Period so extended and the Dividend Payment Date for such Dividend
Period shall be the first Business Day next succeeding the end of such Extension
Period.
-45-
(d) (i) Holders shall not be entitled to any dividends, whether payable in
cash, property or Preferred Shares, in excess of full cumulative dividends as
herein provided. Except for the late charge payable pursuant to Section
11.2(c)(i) hereof, no interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment on the Preferred Shares that may be
in arrears.
(ii) For so long as any Preferred Share is Outstanding, the Trust 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 Shares or other shares of
beneficial interest, if any, ranking junior to the Preferred Shares as to
dividends or upon liquidation) in respect of the Common Shares or any other
shares of beneficial interest of the Trust ranking junior to or on a parity with
the Preferred Shares as to dividends or upon liquidation, or call for
redemption, redeem, purchase or otherwise acquire for consideration any Common
Shares or any other such junior shares (except by conversion into or exchange
for shares of the Trust ranking junior to the Preferred Shares as to dividends
and upon liquidation) or any other such Parity Shares (except by conversion into
or exchange for stock of the Trust ranking junior to or on a parity with the
Preferred Shares as to dividends and upon liquidation), unless (A) immediately
after such transaction, the Trust shall have Fitch Eligible Assets and Xxxxx'x
Eligible Assets each with an aggregate Discounted Value equal to or greater than
the Preferred Shares Basic Maintenance Amount and the Trust shall maintain the
1940 Act Preferred Shares Asset Coverage, (B) full cumulative dividends on
Preferred Shares 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 and (C) the Trust has redeemed
the full number of Preferred Shares required to be redeemed by any provision for
mandatory redemption contained herein.
(e) Each dividend shall consist of cash at the Applicable Rate.
(f) No fractional Preferred Shares shall be issued.
(g) Solely for purposes of the proviso in clause (i) under the definition
of "Non-Payment Period," the second parenthetical in the second sentence of the
second paragraph of Section 11.2(c)(i) of these Bylaws and the last sentence of
Section 11.2(c)(iii) of these Bylaws, any day on which banks in New York City
generally are closed, for any reason, while the New York Stock Exchange remains
open for trading and any day which otherwise would be a Business Day as defined
in these Bylaws on which the Auction Agent is closed for business, for any
reason, shall be considered a day which is not a Business Day.
11.3 Liquidation Rights. Upon any liquidation, dissolution or winding up
of the Trust, whether voluntary or involuntary, the Holders shall be entitled to
receive, out of the assets of the Trust available for distribution to
shareholders, before any distribution or payment is made upon any Common Shares
or any other shares of beneficial interest ranking junior in right of payment
upon liquidation to the Preferred Shares, the sum of $25,000 per share plus
accumulated but unpaid dividends (whether or not earned or declared) thereon to
the date of distribution, and after
-46-
such payment the Holders will be entitled to no other payments. If upon any
liquidation, dissolution or winding up of the Trust, the amounts payable with
respect to the Preferred Shares and any other Outstanding class or series of
preferred shares of beneficial interest of the Trust ranking on a parity with
the Preferred Shares 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 Trust. A
consolidation, merger or statutory share exchange of the Trust with or into any
other Trust 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
Trust shall not be deemed or construed to be a liquidation, dissolution or
winding up of the Trust.
11.4 Redemption. (a) Preferred Shares shall be redeemable by the Trust as
provided below:
(i) To the extent permitted under the 1940 Act and Massachusetts law, upon
giving a Notice of Redemption, the Trust at its option may redeem shares of any
series of Preferred Shares, 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 Preferred Share may be redeemed at the option of the
Trust during (A) the Initial Dividend Period with respect to a series of shares
or (B) a Non-Call Period to which such share is subject.
(ii) The Trust shall redeem, out of funds legally available therefor,
at the Mandatory Redemption Price per share, Preferred Shares to the extent
permitted under the 1940 Act and Massachusetts law, on a date fixed by the
Board of Trustees of the Trust, if the Trust fails to maintain Fitch Eligible
Assets and Xxxxx'x Eligible Assets each with an aggregate Discounted Value
equal to or greater than the Preferred Shares Basic Maintenance Amount as
provided in Section 11.7(a) or to satisfy the 1940 Act Preferred Shares Asset
Coverage as provided in Section 11.6 and such failure is not cured on or
before the Preferred Shares Basic Maintenance Cure Date or the 1940 Act Cure
Date (herein collectively referred to as a "Cure Date"), as the case may be.
The number of Preferred Shares to be redeemed shall be equal to the lesser of
(i) the minimum number of Preferred Shares the redemption of which, if deemed
to have occurred immediately prior to the opening of business on the Cure
Date, together with all other preferred shares of beneficial interest of the
Trust subject to redemption or retirement, would result in the Trust having
Fitch Eligible Assets and Xxxxx'x Eligible Assets each with an aggregate
Discounted Value equal to or greater than the Preferred Shares Basic
Maintenance Amount or satisfaction of the 1940 Act Preferred Shares Asset
Coverage, as the case may be, on such Cure Date (provided that, if there is
no such minimum number of Preferred Shares and other preferred shares of
beneficial interest of the Trust the redemption of which would have such
result, all Preferred Shares and other preferred shares of beneficial
interest of the Trust then Outstanding shall be redeemed), and (ii) the
maximum number of Preferred Shares, together with all other preferred shares
of beneficial interest of the Trust subject to redemption or retirement, that
can be redeemed out of funds expected to be legally available therefor on
such redemption date. In
-47-
determining the number of Preferred Shares required to be redeemed in accordance
with the foregoing, the Trust shall allocate the number required to be redeemed
which would result in the Trust having Fitch Eligible Assets and Xxxxx'x
Eligible Assets each with an aggregate Discounted Value equal to or greater than
the Preferred Shares Basic Maintenance Amount or satisfaction of the 1940 Act
Preferred Shares Asset Coverage, as the case may be, pro rata among Preferred
Shares of all series and other preferred shares of beneficial interest of the
Trust subject to redemption pursuant to provisions similar to those contained in
this Section 11.4(a)(ii); provided that Preferred Shares which may not be
redeemed at the option of the Trust 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 Trust shall effect
such redemption on a Business Day which is not later than 35 days after such
Cure Date, except that if the Trust does not have funds legally available for
the redemption of all of the required number of Preferred Shares and other
preferred shares of beneficial interest of the Trust which are subject to
mandatory redemption or the Trust otherwise is unable to effect such redemption
on or prior to 35 days after such Cure Date, the Trust shall redeem those
Preferred Shares 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 Section 11.4, no Preferred
Shares may be redeemed pursuant to Section 11.4(a)(i) of these Bylaws (i) unless
all dividends in arrears on all remaining outstanding Parity Shares shall have
been or are being contemporaneously paid or declared and set apart for payment
and (ii) if redemption thereof would result in the Trust's failure to maintain
Fitch Eligible Assets or Xxxxx'x Eligible Assets with an aggregate Discounted
Value equal to or greater than the Preferred Shares Basic Maintenance Amount. In
the event that less than all the outstanding shares of a series of Preferred
Shares are to be redeemed and there is more than one Holder, the shares of that
series of Preferred Shares to be redeemed shall be selected by lot or such other
method as the Trust shall deem fair and equitable.
(c) Whenever Preferred Shares are to be redeemed, the Trust, 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 Preferred Shares to be redeemed and to the Auction Agent. The Notice
of Redemption shall set forth (i) the redemption date, (ii) the amount of the
redemption price, (iii) the aggregate number of Preferred Shares of such series
to be redeemed, (iv) the place or places where Preferred Shares 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 and (vi) the provision of these Bylaws 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.
-48-
If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Trust shall have deposited in trust with the
Auction Agent, or segregated in an account at the Trust's custodian bank for
the benefit of the Auction Agent, Deposit Securities (with a right of
substitution) having an aggregate Discounted Value equal to the redemption
payment for the Preferred Shares 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 Trust shall default in making the redemption payment), all rights
(including without limitation voting rights) of the Holders of such shares as
shareholders of the Trust by reason of the ownership of such shares will
cease and terminate (except their right to receive the redemption price in
respect thereof, but without interest), and such shares shall no longer be
deemed Outstanding. The Trust 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 Trust 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 Trust for the redemption payment.
11.5 Voting Rights. (a) General. Except as otherwise provided in the
Declaration of Trust or Bylaws, each Holder of Preferred Shares shall be
entitled to one vote for each share held on each matter submitted to a vote of
shareholders of the Trust, and the holders of preferred shares of beneficial
interest of the Trust, including Preferred Shares, and of Common Shares shall
vote together as a single class; provided that, at any meeting of the
shareholders of the Trust held for the election of trustees, the holders of
preferred shares of beneficial interest of the Trust, including Preferred
Shares, shall be entitled, as a class, to the exclusion of the holders of all
other securities and classes of shares of beneficial interest of the Trust, to
elect two trustees of the Trust. Subject to Section 11.5(b) hereof, the holders
of shares of beneficial interest of the Trust, including the holders of
preferred shares of beneficial interest of the Trust, including Preferred
Shares, voting as a single class, shall elect the balance of the trustees.
(b) Right to Elect Majority of Board of Trustees. 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 trustees
constituting the Board of Trustees of the Trust shall be automatically increased
by the smallest number that, when added to the two trustees elected exclusively
by the holders of preferred shares of beneficial interest of the Trust, would
constitute a majority of the Board of Trustees of the Trust as so increased by
such smallest number; and the holders of preferred shares of beneficial interest
of the Trust shall be entitled, voting separately as one class (to the exclusion
of the holders of all other securities and classes of shares of beneficial
interest of the Trust), to elect such smallest number of additional trustees,
together with the two trustees that such holders are in any event entitled to
elect.
-49-
A Voting Period shall commence:
(i) 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 Preferred Shares 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
(ii) if at any time holders of any preferred shares of beneficial
interest of the Trust, including the holders of Preferred Shares, are
entitled to elect a majority of the trustees of the Trust under the 1940 Act.
Upon the termination of a Voting Period, the voting rights described in
this Section 11.5(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 Section 11.5(b).
(c) Right to Vote with Respect to Certain Other Matters. So long as
any Preferred Shares are outstanding, the Trust shall not, without the
affirmative vote of the holders of a majority of the Preferred Shares
Outstanding at the time, voting separately as one class: (i) authorize,
create or issue any class or series of shares of beneficial interest ranking
prior to the Preferred Shares or any other series of preferred shares of
beneficial interest of the Trust with respect to payment of dividends or the
distribution of assets on liquidation; provided, however, that no vote is
required to authorize the issuance of another series of Preferred Shares or
another class of preferred shares of beneficial interest of the Trust that is
substantially identical in all respects to the Preferred Shares, or (ii)
amend, alter or repeal the provisions of the Declaration of Trust or Bylaws,
whether by merger, consolidation or otherwise, so as to adversely affect any
of the contract rights expressly set forth in the Declaration of Trust or
Bylaws of holders of Preferred Shares or any other preferred shares of
beneficial interest of the Trust. To the extent permitted under the 1940
Act, in the event shares of more than one series of Preferred Shares are
outstanding, the Trust 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 Declaration of Trust or Bylaws of a Holder of a series of
Preferred Shares differently than those of a Holder of any other series of
Preferred Shares without the affirmative vote of the holders of at least a
majority of the Preferred Shares of each series adversely affected and
Outstanding at such time (each such adversely affected series voting
separately as a class). Unless a higher percentage is provided for under the
Declaration of Trust or these Bylaws, the affirmative vote of the holders of
a majority of the outstanding preferred shares of beneficial interest of the
Trust, including Preferred Shares, 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. To the extent
permitted under the 1940 Act, in the event shares of more than one series of
Preferred Shares are outstanding, with respect to any action requiring
Shareholder approval pursuant to the operation of Section 2 or Section 3 of
Article V of the Declaration of Trust, the affirmative vote of at least
seventy-five percent of the Preferred Shares of each series Outstanding at
such time (each such series voting separately
-50-
as a class) shall also be required. The class (and, where applicable, series)
vote of holders of preferred shares of beneficial interest of the Trust,
including Preferred Shares, described above will in each case be in addition to
a separate vote of the requisite percentage of Common Shares and preferred
shares of beneficial interest of the Trust, including Preferred Shares, voting
together as a single class necessary to authorize the action in question.
(d) Voting Procedures.
-----------------
(i) As soon as practicable after the accrual of any right of the
holders of preferred shares of beneficial interest of the Trust to elect
additional trustees as described in Section 11.5(b) above, the Trust shall
call a special meeting of such holders and instruct the Auction Agent and any
other registrar for preferred shares of beneficial interest of the Trust
other than Preferred Shares 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 Trust fails to send such notice
to the Auction Agent and any other applicable registrar, or if the Trust 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 shares of beneficial interest of the Trust),
shall be entitled to elect the number of directors prescribed in Section
11.5(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.
(ii) Except as otherwise required by applicable law, 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 Bylaws, by the other provisions of the Declaration of Trust, by statute
or otherwise, a Preferred Share which is not Outstanding shall not be counted.
(iii) The terms of office of all persons who are trustees of the Trust
at the time of a special meeting of Holders and holders of other preferred
shares of beneficial interest of the Trust to elect trustees shall continue,
notwithstanding the election at such meeting by the Holders and such other
holders of the number of trustees that they are entitled to elect, and the
persons so elected by the Holders and such other holders, together with the
two incumbent trustees elected by the Holders and such other holders of
preferred shares of beneficial interest of the Trust and the remaining
incumbent trustees elected by the holders of the Common Shares and preferred
shares of beneficial interest of the Trust, shall constitute the duly elected
trustees of the Trust.
(iv) Simultaneously with the expiration of a Voting Period, the terms
of office of the additional trustees elected by the Holders and holders of
other preferred shares of beneficial interest of the Trust pursuant to
Section 11.5(b) above shall terminate, the remaining trustees
-51-
shall constitute the trustees of the Trust and the voting rights of the Holders
and such other holders to elect additional trustees pursuant to Section 11.5(b)
above shall cease, subject to the provisions of the last sentence of Section
11.5(b).
(e) Exclusive Remedy. Unless otherwise required by law, the Holders shall
not have any rights or preferences other than those specifically set forth
herein. The Holders shall have no preemptive rights or rights to cumulative
voting. In the event that the Trust fails to pay any dividends on the Preferred
Shares, the exclusive remedy of the Holders shall be the right to vote for
trustees pursuant to the provisions of this Section 11.5.
11.6 1940 Act Preferred Shares Asset Coverage. The Trust shall maintain,
as of the last Business Day of each month in which any Preferred Shares are
outstanding, the 1940 Act Preferred Shares Asset Coverage.
11.7 Preferred Shares Basic Maintenance Amount. (a) The Trust shall
maintain, on each Valuation Date, and shall verify to its satisfaction that it
is maintaining on such Valuation Date, Fitch Eligible Assets and Moody's
Eligible Assets each having an aggregate Discounted Value equal to or greater
than the Preferred Shares Basic Maintenance Amount. Upon any failure to maintain
the required Discounted Value, the Trust will use its best efforts to alter the
composition of its portfolio to retain a Discounted Value of both Fitch Eligible
Assets and Moody's Eligible Assets at least equal to the Preferred Shares Basic
Maintenance Amount on or prior to the Preferred Shares 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 Trust fails to satisfy the Preferred Shares
Basic Maintenance Amount, the Trust shall complete and deliver to (i) the
Auction Agent and (ii) Fitch, Moody's and/or any Rating Agency then rating the
Preferred Shares the Discounted Value of whose Eligible Assets fails to satisfy
the Preferred Shares Basic Maintenance Amount, as applicable, a complete
Preferred Shares Basic Maintenance Report as of the date of such failure, which
will be deemed to have been delivered to such recipient if the recipient
receives a copy or telecopy, telex or other electronic transcription thereof and
on the same day the Trust mails to the recipient for delivery on the next
Business Day the complete Preferred Shares Basic Maintenance Report. The Trust
will deliver a Preferred Shares Basic Maintenance Report to each applicable
Rating Agency on or before 5:00 p.m., New York City time, on the third Business
Day after a Valuation Date on which the Trust cures its failure to maintain
Eligible Assets of each applicable Rating Agency with an aggregate Discounted
Value equal to or greater than the Preferred Shares Basic Maintenance Amount or
on which the Trust fails to maintain Eligible Assets of each applicable Rating
Agency with an aggregate Discounted Value which exceeds the Preferred Shares
Basic Maintenance Amount by 5% or more. The Trust will also deliver a Preferred
Shares Basic Maintenance Report to the Auction Agent, Fitch and Xxxxx'x 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 Trust will
deliver a Preferred Shares Basic Maintenance Report to the Auction Agent, Fitch
-52-
and Moody's. The Trust shall also provide Fitch or Moody's with a Preferred
Shares Basic Maintenance Report when specifically requested by Fitch or Moody's,
respectively.
(c) Within ten Business Days after the date of delivery of a Preferred
Shares Basic Maintenance Report in accordance with Section 11.7(b) above
relating to a Quarterly Valuation Date, the Independent Accountant will confirm
in writing to the Auction Agent, Fitch and Xxxxx'x, (i) the mathematical
accuracy of the calculations reflected in such Report (and in any other
Preferred Shares Basic Maintenance Report, randomly selected by the Independent
Accountant, that was delivered by the Trust during the quarter ending on such
Quarterly Valuation Date), (ii) that, in such Report (and in such randomly
selected Report), the Trust correctly determined the assets of the Trust which
constitute Fitch Eligible Assets and Moody's Eligible Assets at such Quarterly
Valuation Date in accordance with these Bylaws, (iii) that, in such Report (and
in such randomly selected Report), the Trust determined whether the Trust had,
at such Quarterly Valuation Date (and at the Valuation Date addressed in such
randomly selected Report) in accordance with these Bylaws, Fitch Eligible Assets
and Moody's Eligible Assets each with an aggregate Discounted Value at least
equal to the Preferred Shares Basic Maintenance Amount, (iv) with respect to the
S&P ratings on portfolio securities of the Trust, the issuer name, issue size
and coupon rate, if any, 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 Fitch ratings on portfolio securities of the Trust, the issuer name, issue
size and coupon rate, if any, listed in such Report, that such information has
been verified by Fitch (in the event such information is not verified by Fitch,
the Independent Accountant will inquire of Fitch what such information is, and
provide a listing in its letter of any differences), (vi) with respect to the
Moody's ratings on portfolio securities of the Trust, the issuer name, issue
size and coupon rate, if any, 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) and
(vii) 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
Trust's assets to the Trust for purposes of valuing securities in the Trust'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 Trust 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) (such confirmation is herein called the "Accountant's
Confirmation").
(d) Within ten Business Days after the date of delivery to the Auction
Agent and any applicable Rating Agency of a Preferred Shares Basic Maintenance
Report in accordance with Section 11.7(b) above relating to any Valuation Date
on which the Trust failed to maintain Eligible Assets of such applicable Rating
Agency with an aggregate Discounted Value equal to or greater than the Preferred
Shares Basic Maintenance Amount, and relating to the Preferred Shares Basic
Maintenance Cure Date with respect to such failure, the Independent Accountant
will provide to the Auction Agent and each applicable Rating Agency an
Accountant's Confirmation as to such Preferred Shares Basic Maintenance Report.
-53-
(e) If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this Section 11.7 shows that an error was made in the Preferred
Shares Basic Maintenance Report for a particular Valuation Date for which such
Accountant's Confirmation was required to be delivered, or shows that a lower
aggregate Discounted Value for the aggregate of all Fitch Eligible Assets or
Moody's Eligible Assets of the Trust 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 Trust, and the Trust
shall accordingly amend and deliver the Preferred Shares Basic Maintenance
Report to the Auction Agent and each applicable Rating Agency promptly following
receipt by the Trust 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 Preferred Shares, the Trust will
complete and deliver to Fitch and Xxxxx'x a Preferred Shares 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 Fitch and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the aggregate Discounted
Value of Fitch Eligible Assets and Moody's Eligible Assets reflected thereon
equals or exceeds the Preferred Shares Basic Maintenance Amount reflected
thereon. Also, on or before 5:00 p.m., New York City time, on the first Business
Day after Common Shares are repurchased by the Trust, the Trust will complete
and deliver to Fitch and Xxxxx'x a Preferred Shares Basic Maintenance Report as
of the close of business on such date that Common Shares are repurchased.
11.8 Certain Other Restrictions. (a) For so long as any Preferred Shares
are rated by Xxxxx'x, the Trust will not buy or sell financial futures
contracts, write, purchase or sell call options on financial futures contracts
or purchase put options on financial 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 Preferred Shares by Moody's, except that the
Trust may purchase or sell exchange-traded financial futures contracts based on
any index approved by Moody's or Treasury Bonds, and purchase, write or sell
exchange-traded put options on such financial futures contracts, any index
approved by Moody's or Treasury Bonds, and purchase, write or sell
exchange-traded call options on such financial futures contracts, any index
approved by Moody's or Treasury Bonds (collectively "Moody's Hedging
Transactions"), subject to the following limitations:
(i) the Trust will not engage in any Moody's Hedging Transaction based
on any index approved by Moody's (other than transactions that terminate a
futures contract or option held by the Trust by the Trust's taking the
opposite position thereto ("Closing Transactions")) that would cause the
Trust at the time of such transaction to own or have sold:
(A) outstanding financial futures contracts based on such index
exceeding in number 10% of the average number of daily traded
financial futures contracts
-54-
based on such index in the 30 days preceding the time of effecting
such transaction as reported by The Wall Street Journal; or
(B) outstanding financial futures contracts based on any index
approved by Moody's having a Market Value exceeding 50% of the
Market Value of all portfolio securities of the Trust constituting
Moody's Eligible Assets owned by the Trust (other than Moody's
Eligible Assets already subject to a Moody's Hedging Transaction);
(ii) the Trust will not engage in any Moody's Hedging Transaction based
on Treasury Bonds (other than Closing Transactions) that would cause the
Trust at the time of such transaction to own or have sold:
(A) outstanding financial futures contracts based on Treasury
Bonds with such contracts having an aggregate Market Value exceeding
20% of the aggregate Market Value of Moody's Eligible Assets owned
by the Trust 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 financial futures contracts based on Treasury
Bonds with such contracts having an aggregate Market Value exceeding
80% of the aggregate Market Value of all portfolio securities of the
Trust constituting Moody's Eligible Assets owned by the Trust (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 Trust shall be
deemed to own the number of financial futures contracts that underlie
any outstanding options written by the Trust);
(iii) the Trust will engage in Closing Transactions to close out any
outstanding financial futures contract based on any index approved by
Moody's if the amount of open interest in such index as reported by The
Wall Street Journal is less than an amount to be mutually determined by
Moody's and the Trust;
(iv) the Trust will engage in a Closing Transaction to close out any
outstanding financial 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 financial
futures contract by no later than the first Business Day of the month in
which such option expires;
(v) the Trust will engage in Moody's Hedging Transactions only with
respect to financial futures contracts or options thereon having the next
settlement date or the settlement date immediately thereafter;
-55-
(vi) the Trust (A) will not engage in options and futures transactions
for leveraging or speculative purposes, except that an option or futures
transaction shall not for these purposes be considered a leveraged
position or speculative so long as the combination of the Fund's
non-derivative positions, together with the relevant option or futures
transaction, produces a synthetic investment position, or the same
economic result, that could be achieved by an investment, consistent with
the Fund's investment objectives and policies, in a security that is not
an option or futures transaction, and (B) will not write any call options
or sell any financial futures contracts for the purpose of hedging the
anticipated purchase of an asset prior to completion of such purchase; and
(vii) the Trust will not enter into an option or futures transaction
unless, after giving effect thereto, the Trust would continue to have
Moody's Eligible Assets with an aggregate Discounted Value equal to or
greater than the Preferred Shares Basic Maintenance Amount.
(b) For purposes of determining whether the Trust has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the
Preferred Shares Basic Maintenance Amount, the Discounted Value of Moody's
Eligible Assets that the Trust 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 Trust that are either
exchange-traded and "readily reversible" or that 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 Trust;
(ii) assets subject to call options written by the Trust not meeting
the requirements of clause (i) of this sentence shall have no value;
(iii) assets subject to put options written by the Trust shall be
valued at the lesser of (A) the exercise price and (B) the Discounted
Value of the assets subject to the option;
(iv) futures contracts shall be valued at the lesser of (A) settlement
price and (B) the Discounted Value of the assets subject to the futures
contract, provided that, if a contract matures within 49 days after the
date as of which such valuation is made, where the Trust is the seller the
contract may be valued at the settlement price and where the Trust is the
buyer the contract may be valued at the Discounted Value of the assets
subject to the futures contract; and
(v) where delivery may be made to the Trust with any security of a
class of securities, the Trust shall assume that it will take delivery of
the security with the lowest Discounted Value.
(c) For purposes of determining whether the Trust has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the
Preferred Shares Basic Maintenance Amount, the following amounts shall be
subtracted from the aggregate Discounted Value of the
-56-
Moody's Eligible Assets held by the Trust to the extent the relevant asset is a
Moody's Eligible Asset:
(i) 10% of the exercise price of a written call option;
(ii) the exercise price of any written put option;
(iii) where the Trust is the seller under a financial futures contract,
10% of the settlement price of the financial futures contract;
(iv) where the Trust is the purchaser under a financial futures
contract, any amounts payable by the Trust under such financial futures
contract;
(v) the settlement price of the underlying financial futures contract
if the Trust writes put options on a financial futures contract; and
(vi) 105% of the Market Value of the underlying financial futures
contract if the Trust writes call options on a financial futures contract
and does not own the underlying contract.
(d) For so long as any Preferred Shares are rated by Moody's, the Trust
will not enter into any "Forward Commitment," herein defined as any contract to
purchase securities for a fixed price at a future date beyond customary
settlement time (other than such contracts that constitute Fitch Hedging
Transactions or Moody's Hedging Transactions, as applicable), except that the
Trust may enter into Forward Commitments subject to the following limitations:
(i) for each Forward Commitment, the Trust will maintain with its
custodian (A) cash, cash equivalents or short-term, fixed-income
securities rated X-0, XXX-0 xx XXXX-0 by Moody's or A-1 by S&P and
maturing in one year or less with a fair market value that equals or
exceeds the amount by which the Trust's obligations under any Forward
Commitments to which it is from time to time a party exceed obligations to
the Trust arising from securities sales by the Trust that are scheduled to
settle at a future date, or (B) long-term, fixed-income securities with a
then current market value that equals or exceeds the amount by which the
Trust's obligations under any Forward Commitments to which it is from time
to time a party exceed obligations to the Trust arising from securities
sales by the Trust that are scheduled to settle on a future date, or (C) a
combination of assets described in (A) and (B) above that in the aggregate
equals or exceeds the amount by which the Trust's obligations under any
Forward Commitments to which it is from time to time a party exceed
obligations to the Trust arising from securities sales by the Trust that
are scheduled to settle on a future date; and
(ii) the Trust will not enter into a Forward Commitment unless, after
giving effect thereto, the Trust would continue to have Moody's Eligible
Assets with an aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount.
-57-
For purposes of determining whether the Trust has Moody's Eligible Assets
with an aggregate Discounted Value that equals or exceeds the Preferred
Shares Basic Maintenance Amount, the Discounted Value of all Forward
Commitments to which the Trust is a party and of all securities deliverable
to the Trust pursuant to such Forward Commitments shall be zero.
(e) For so long as any Preferred Shares are Outstanding and Fitch or
Moody's or both is rating such shares, the Trust, unless it has received written
confirmation from Fitch or Moody's or both, as applicable, that such action
would not impair the rating then assigned to the Preferred Shares by Fitch or
Moody's or both, as applicable, will not:
(i) borrow money except for the purpose of clearing transactions in
portfolio securities (which borrowings under any circumstances shall be
limited to an amount equal to 5% of the Market Value of the Trust'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 Fitch Eligible Assets or Moody's Eligible Assets, as
applicable, to be less than the Preferred Shares Basic Maintenance
Amount);
(ii) engage in short sales of securities;
(iii) lend any securities;
(iv) issue any class or series of shares of beneficial interest ranking
prior to or on a parity with the Preferred Shares with respect to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the Trust;
(v) merge or consolidate into or with any other corporation or entity;
and
(vi) change any Pricing Service of the Trust.
(f) For so long as any Preferred Shares are rated by Fitch, the Trust will
not buy or sell financial futures contracts, write, purchase or sell call
options on financial futures contracts or purchase put options on financial
futures contracts or write call options (except covered call options) on
portfolio securities unless it receives written confirmation from Fitch that
engaging in such transactions would not impair the ratings then assigned to the
Preferred Shares by Fitch, except that the Trust may purchase or sell
exchange-traded financial futures contracts based on any index approved by Fitch
or Treasury Bonds, and purchase, write or sell exchange-traded put options on
such financial futures contracts, any index approved by Fitch or Treasury Bonds
and purchase, write or sell exchange-traded call options on such financial
futures contracts, any index approved by Fitch or Treasury Bonds (collectively
"Fitch Hedging Transactions"), subject to the following limitations:
(i) the Trust will not engage in any Fitch Hedging Transaction based on
any index approved by Fitch (other than Closing Transactions) that would
cause the Trust at the time of such transaction to own or have sold
outstanding financial futures contracts based
-58-
on such index exceeding in number 10% of the average number of daily
traded financial futures contracts based on such index in the 30 days
preceding the time of effecting such transaction as reported by The Wall
Street Journal;
(ii) the Trust will not engage in any Fitch Hedging Transaction based
on Treasury Bonds (other than Closing Transactions) that would cause the
Trust at the time of such transaction to own or have sold:
(A) outstanding financial futures contracts based on Treasury
Bonds with such contracts having an aggregate Market Value exceeding
20% of the aggregate Market Value of Fitch Eligible Assets owned by
the Trust and rated AA by Fitch (or, if not rated by Fitch, rated Aa
by Moody's; or, if not rated by Moody's, rated AAA by S&P); or
(B) outstanding financial futures contracts based on Treasury
Bonds with such contracts having an aggregate Market Value exceeding
40% of the aggregate Market Value of all Fitch Eligible Assets owned
by the Trust (other than Fitch Eligible Assets already subject to a
Fitch Hedging Transaction) and rated A or BBB by Fitch (or, if not
rated by Fitch, rated Baa by Xxxxx'x; or, if not rated by Xxxxx'x,
rated A or AA by S&P)
(for purposes of the foregoing clauses (i) and (ii), the Trust shall be
deemed to own futures contracts that underlie any outstanding options
written by the Trust);
(iii) the Trust will engage in Closing Transactions to close out any
outstanding financial futures contract based on any index approved by
Fitch if the amount of open interest in such index as reported by The Wall
Street Journal is less than an amount to be mutually determined by Fitch
and the Trust; and
(iv) the Trust will not enter into an option or futures transaction
unless, after giving effect thereto, the Trust would continue to have
Fitch Eligible Assets with an aggregate Discounted Value equal to or
greater than the Preferred Shares Basic Maintenance Amount.
(g) For purposes of determining whether the Trust has Fitch Eligible
Assets with an aggregate Discounted Value that equals or exceeds the Preferred
Shares Basic Maintenance Amount, the Discounted Value of Fitch Eligible Assets
that the Trust 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 Trust that are either
exchange-traded and "readily reversible" or that 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 Trust;
-59-
(ii) assets subject to call options written by the Trust not meeting
the requirements of clause (i) of this sentence shall have no value;
(iii) assets subject to put options written by the Trust shall be
valued at the lesser of (A) the exercise price and (B) the Discounted
Value of the assets subject to the option;
(iv) futures contracts shall be valued at the lesser of (A) settlement
price and (B) the Discounted Value of the assets subject to the futures
contract, provided that, if a contract matures within 49 days after the
date as of which such valuation is made, where the Trust is the seller the
contract may be valued at the settlement price and where the Trust is the
buyer the contract may be valued at the Discounted Value of the assets
subject to the futures contract; and
(v) where delivery may be made to the Trust with any security of a
class of securities, the Trust shall assume that it will take delivery of
the security with the lowest Discounted Value.
(h) For purposes of determining whether the Trust has Fitch Eligible
Assets with an aggregate Discounted Value that equals or exceeds the Preferred
Shares Basic Maintenance Amount, the following amounts shall be subtracted from
the aggregate Discounted Value of the Fitch Eligible Assets held by the Trust to
the extent the relevant asset is a Fitch Eligible Asset:
(i) 10% of the exercise price of a written call option;
(ii) the exercise price of any written put option;
(iii) where the Trust is the seller under a financial futures contract,
10% of the settlement price of the financial futures contract;
(iv) where the Trust is the purchaser under a financial futures
contract, the settlement price of assets purchased under such financial
futures contract;
(v) the settlement price of the underlying financial futures contract
if the Trust writes put options on a financial futures contract and does
not own the underlying contract; and
(vi) 105% of the Market Value of the underlying financial futures
contracts if the Trust writes call options on a financial futures contract
and does not own the underlying contract.
(i) For so long as any Preferred Shares are rated by Fitch, the Trust will
not enter into any Forward Commitments, except that the Trust may enter into
Forward Commitments subject to the following limitations:
-60-
(i) the Trust will maintain in a segregated account with its custodian
cash, cash equivalents or short-term, fixed-income securities rated F1 or
better by Fitch (or, if not rated by Fitch, rated P-1 by Xxxxx'x) and
maturing prior to the date of the Forward Commitment with a Market Value
that equals or exceeds the amount of the Trust'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 Trust's obligations under any Forward Commitment to which it
is from time to time a party; and
(ii) the Trust will not enter into a Forward Commitment unless, after
giving effect thereto, the Trust would continue to have Fitch Eligible
Assets with an aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount.
For purposes of determining whether the Trust has Fitch Eligible Assets with
an aggregate Discounted Value that equals or exceeds the Preferred Shares
Basic Maintenance Amount, the Discounted Value of all Forward Commitments to
which the Trust is a party and of all securities deliverable to the Trust
pursuant to such Forward Commitments shall be zero.
11.9 Notice. All notices or communications, unless otherwise specified in
these Bylaws, 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.
11.10 Auction Procedures. (a) Certain Definitions. As used in this Section
11.10, the following terms shall have the following meanings, unless the context
otherwise requires:
(i) "Auction Date" means the first Business Day preceding the first day
of a Dividend Period.
(ii) "Available Preferred Shares" has the meaning specified in Section
11.10(d)(i) below.
(iii) "Bid" has the meaning specified in Section 11.10(b)(i) below.
(iv) "Bidder" has the meaning specified in Section 11.10(b)(i) below.
(v) "Hold Order" has the meaning specified in Section 11.10(b)(i)
below.
(vi) "Maximum Applicable Rate" for any Dividend Period will be the
Applicable Percentage of the Reference Rate. The Auction Agent will round
each applicable Maximum Applicable Rate to the nearest one-thousandth
(0.001) of one percent per annum, with any such number ending in five
ten-thousandths of one percent being rounded upwards to the nearest
one-thousandth (0.001) of one percent. The Auction Agent will not round
the applicable Reference Rate as part of its calculation of the
-61-
Maximum Applicable Rate. The "Applicable Percentage" shall be the
percentage determined based on the lower of the credit ratings assigned on
such date by Xxxxx'x and Fitch as follows:
Xxxxx'x Fitch Applicable
Credit Rating Credit Rating Percentage
------------- ------------- ----------
Aa3 or above AA- or above 150%
A3 to A1 A- to A+ 160%
Baa3 to Baa1 BBB- to BBB+ 250%
Below Baa3 Below BBB- 275%
The Applicable Percentage as so determined shall be further subject
to upward but not downward adjustment in the discretion of the Board of
Trustees of the Trust after consultation with the Broker-Dealers,
provided that immediately following any such increase the Trust would
be in compliance with the Preferred Shares Basic Maintenance Amount.
The Trust shall take all reasonable action necessary to enable Xxxxx'x
and Fitch to provide a rating for each series of Preferred Shares. If
Xxxxx'x or Fitch shall not make such a rating available, Xxxxxxx Xxxxx
Barney Inc. or its affiliates and successors, after consultation with
the Trust, shall select another Rating Agency to act as a Substitute
Rating Agency.
(vii) "Order" has the meaning specified in Section 11.10(b)(i) below.
(viii) "Preferred Shares" means the Preferred Shares being auctioned
pursuant to this Section 11.10.
(ix) "Sell Order" has the meaning specified in Section 11.10(b)(i)
below.
(x) "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.
(xi) "Submitted Bid" has the meaning specified in Section 11.10(d)(i)
below.
(xii) "Submitted Hold Order" has the meaning specified in Section
11.10(d)(i) below.
(xiii) "Submitted Order" has the meaning specified in Section
11.10(d)(i) below.
(xiv) "Submitted Sell Order" has the meaning specified in Section
11.10(d)(i) below.
(xv) "Sufficient Clearing Bids" has the meaning specified in Section
11.10(d)(i) below.
-62-
(xvi) "Winning Bid Rate" has the meaning specified in Section
11.10(d)(i) below.
(b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing
------------------------------------------------------------------
Holders and Potential Holders.
-----------------------------
(i) Unless otherwise permitted by the Trust, 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 Preferred Shares 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:
(A) each Beneficial Owner may submit to its Broker-Dealer
information as to:
(1) the number of Outstanding Preferred Shares, if any, 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 for such shares;
(2) the number of Outstanding Preferred Shares, if any, 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 for such shares shall not be less than
the rate per annum specified by such Beneficial Owner; and/or
(3) the number of Outstanding Preferred Shares, if any, 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 Preferred Shares, if
any, 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
-63-
acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this Section 11.10(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 Section 11.10(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 Section
11.10(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this Section
11.10(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.
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of Outstanding Preferred Shares 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 Preferred
Shares to be determined as set forth in Section 11.10(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 Preferred Shares to be
determined as set forth in Section 11.10(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 Preferred Shares specified in such
Sell Order; or
(2) such number or a lesser number of Outstanding Preferred
Shares to be determined as set forth in Section 11.10(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 Preferred Shares 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
-64-
(2) such number or a lesser number of Outstanding Preferred
Shares to be determined as set forth in Section 11.10(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 Trust) 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 Trust);
(B) the aggregate number of Outstanding Preferred Shares that are
the subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding Preferred Shares, if any,
subject to any Hold Order placed by such Existing Holder;
(2) the number of Outstanding Preferred Shares, if any,
subject to any Bid placed by such Existing Holder and the rate
per annum specified in such Bid; and
(3) the number of Outstanding Preferred Shares, if any,
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
Preferred Shares 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 Special
Dividend Period of 28 days or less) or a Sell Order (in the case of an
Auction relating to a Special Dividend Period of longer than 28 days)
to have been submitted on
-65-
behalf of such Existing Holder covering the number of Outstanding
Preferred Shares 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 Preferred Shares
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
Preferred Shares 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 Preferred Shares subject to such Hold Orders exceeds the
number of Outstanding Preferred Shares held by such Existing Holder,
the number of Preferred Shares 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 Preferred Shares 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
Preferred Shares held by such Existing Holder over the number of
Preferred Shares subject to any Hold Order referred to in Section
11.10(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 Section 11.10(c)(iv)(A)
above and of the foregoing portion of this Section 11.10(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 Section 11.10(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 Preferred Shares held by such
Existing Holder over the number of Preferred Shares subject to Hold
Orders referred to in Section 11.10(c)(iv)(A) and Bids referred to in
Section 11.10(c)(iv)(B); provided that if more than one Sell Order is
submitted on behalf of any Existing Holder and the number of Preferred
Shares subject to such Sell Orders is greater than such excess, the
number of Preferred Shares 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 Preferred Shares equal to such excess.
-66-
(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 Preferred Shares therein 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.
(vii) The Trust shall not be responsible for a Broker-Dealer's failure
to act in accordance with the instructions of Beneficial Owners or
Potential Beneficial Owners or failure to comply with the provisions of
this Section 11.10.
(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 Preferred Shares over
the number of Outstanding Preferred Shares that are the subject of
Submitted Hold Orders (such excess being hereinafter referred to as the
"Available Preferred Shares");
(B) from the Submitted Orders whether the number of Outstanding
Preferred Shares 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 Preferred Shares 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 Preferred Shares that are subject
to Submitted Sell Orders (if such excess or such equality exists
(other than because the number of Outstanding Preferred Shares in
clause (1) above and this clause (2) are each zero because all of
the Outstanding Preferred Shares 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:
-67-
(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 Preferred Shares 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 Preferred Shares 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 Preferred
Shares.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to Section 11.10(d)(i), the Auction Agent shall advise the Trust
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 Preferred Shares 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 Preferred Shares 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 80% of the Reference Rate
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 Section
11.10(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 Section 11.10(e)(iii) and Section 11.10(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
-68-
Holder to sell the Outstanding Preferred Shares 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 Preferred Shares 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 Preferred Shares that are the subject of such Submitted
Bid, unless the number of Outstanding Preferred Shares subject to all
such Submitted Bids shall be greater than the number of Outstanding
Preferred Shares ("Remaining Shares") equal to the excess of the
Available Preferred Shares over the number of Outstanding Preferred
Shares subject to Submitted Bids described in Section 11.10(e)(i)(B)
and Section 11.10(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 Preferred Shares, but only in an
amount equal to the difference between (1) the number of Outstanding
Preferred Shares then held by such Existing Holder subject to such
Submitted Bid and (2) the number of Preferred Shares obtained by
multiplying (x) the number of Remaining Shares by (y) a fraction the
numerator of which shall be the number of Outstanding Preferred Shares
held by such Existing Holder subject to such Submitted Bid and the
denominator of which shall be the sum of the number of Outstanding
Preferred Shares 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 Preferred
Shares obtained by multiplying (x) the difference between the Available
Preferred Shares and the number of Outstanding Preferred Shares subject
to Submitted Bids described in Section 11.10(e)(i)(B), Section
11.10(e)(i)(C) and Section 11.10(e)(i)(D) by (y) a fraction the
numerator of which shall be the number of Outstanding Preferred Shares
subject to such Submitted Bid and the denominator of which shall be the
sum of the number of Outstanding Preferred Shares 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 Preferred Shares are subject to
Submitted Hold Orders), subject to the
-69-
provisions of Section 11.10(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 Preferred Shares 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 Preferred Shares 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 Preferred Shares then held by
such Existing Holder subject to such Submitted Bid or Submitted Sell
Order and (2) the number of Preferred Shares obtained by multiplying
(x) the difference between the Available Preferred Shares and the
aggregate number of Outstanding Preferred Shares subject to Submitted
Bids described in Section 11.10(e)(ii)(A) and Section 11.10(e)(ii)(B)
by (y) a fraction the numerator of which shall be the number of
Outstanding Preferred Shares 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 Preferred Shares subject to all such
Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in Section 11.10(e),
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 Preferred Share 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 Preferred Shares to be purchased or sold by any Existing Holder
or Potential Holder on such Auction Date so that each Outstanding
Preferred Share purchased or sold by each Existing Holder or Potential
Holder on such Auction Date shall be a whole Preferred Share.
(iv) If, as a result of the procedures described in Section 11.10(e),
any Potential Holder would be entitled or required to purchase less than a
whole Preferred Share on any Auction Date, the Auction Agent shall, in
such manner as in its sole discretion it shall determine, allocate
Preferred Shares for purchase among Potential Holders so that only whole
Preferred Shares 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 Preferred Shares on such Auction Date.
-70-
(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 Preferred Shares to be purchased and the aggregate
number of the Outstanding Preferred Shares 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 Preferred
Shares.
(f) Miscellaneous.
-------------
(i) The Trust may interpret the provisions of this Section 11.10 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 Preferred Shares.
(ii) A Beneficial Owner or an Existing Holder (A) may sell, transfer or
otherwise dispose of Preferred Shares only pursuant to a Bid or Sell Order
in accordance with the procedures described in this Section 11.10 or to or
through a Broker-Dealer or to such other persons as may be permitted by
the Trust, 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 Preferred Shares 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. The Trust may not submit an Order in any Auction.
(iii) All of the Outstanding Preferred Shares of a series shall be
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 Trust's option and upon its
receipt of such documents as it deems appropriate, any Preferred Shares
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.
11.11 Securities Depository; Stock Certificates. (a) If there is a
Securities Depository, all of the Preferred Shares of each series shall be
issued to the Securities Depository and registered in the name of the Securities
Depository or its nominee. Certificates may be issued as necessary to represent
Preferred Shares. All such certificates shall bear a legend to the effect that
such certificates are issued subject to the provisions restricting the transfer
of Preferred Shares contained in these Bylaws. Unless the Trust shall have
elected, during a Non-Payment Period, to
-71-
waive this requirement, the Trust will also issue stop-transfer instructions to
the Auction Agent for the Preferred Shares. 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 Preferred Shares of a series
shall be the Non-Payment Period Rate or there is no Securities Depository, the
Trust may at its option issue one or more new certificates with respect to such
shares (without the legend referred to in Section 11.11(a)) registered in the
names of the Beneficial Owners or their nominees and rescind the stop-transfer
instructions referred to in Section 11.11(a) with respect to such shares.
ARTICLE 12
AMENDMENT TO THE BYLAWS
12.1 General. Except to the extent that the Declaration of Trust or
applicable law require a vote or consent of Shareholders, these Bylaws may be
amended, changed, altered or repealed, in whole or part, only by resolution of a
majority of the Trustees then in office at any meeting of the Trustees, or by
one or more writings signed by such Trustees.
12.2 Article 11. Without limiting the provisions of Section 12.1, the
Board of Trustees of the Trust may, by resolution duly adopted, without
shareholder approval (except as otherwise required by Article 11 or required by
applicable law), amend Article 11 to (a) reflect any amendments hereto which the
Board of Trustees of the Trust is entitled to adopt pursuant to the terms of
Article 11 without shareholder approval or (b) add additional series of
Preferred Shares or additional shares of a series of Preferred Shares (and terms
relating thereto) to the series and Preferred Shares described herein. Each such
additional series and all such additional Preferred Shares shall be governed by
the terms of Article 11.
-72-
