THIRD AMENDED AND RESTATED
BYLAWS
of
PIMCO FLOATING RATE STRATEGY FUND
(Amended and Restated as of December 11, 2009)
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 Third Amended and Restated
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 Floating
Rate Strategy 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, 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 a 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 and Chairman of the Trustees
3.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Secretary, a Chief Compliance Officer and such other
officers, 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. Any officer may but need not 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 the same meeting at which the President, Treasurer
and Secretary are elected, or at any other time. If required by the 1940 Act,
the Chief Compliance Officer shall be elected or appointed by a majority of the
trustees, as well as a majority of the Trustees who are not Interested Persons
of the Trust ("Independent Trustees"), and otherwise in accordance with Rule
38a-1 (or any successor rule) under the 1940 Act, as such rule may be amended
from time to time ("Rule 38a-1"). 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, the Secretary and the Chief Compliance Officer 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, provided that, if required by the 1940 Act, any renewal
of the Chief Compliance Officer shall be in accordance with Rule 38a-1. 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 of the Trustees. There shall be an office of the Chairman of
the Trustees, which shall serve of behalf of the Trustees, but shall not be an
officer of the Trust. The office of the Chairman of the Trustees may be held by
more than one person. Any Chairman of
-2-
the Trustees shall be elected by a majority of the Trustees, as well as a
majority of the Independent Trustees if required by the 1940 Act. If required
by the 1940 Act, any Chairman of the Trustees shall be an Independent Trustee
and may, but need not, be a shareholder. The powers and the duties of the
Chairman of the Trustees shall include any and all such powers and duties
relating to the operations of the Trustees as, from time to time, may be
conferred upon or assigned to such office by the Trustees or as may be required
by law, provided that the Chairman of the Trustees shall have no individual
authority to act for the Trust as an officer of the Trust. In carrying out the
responsibilities and duties of the office, the Chairman of the Trustees may
seek assistance and input from other Trustees or Committees of the Trustees,
officers of the Trust and the Trust's investment adviser(s) and other service
providers, as deemed necessary or appropriate. The Trustees, including a
majority of the Independent Trustees if required by the 1940 Act, may appoint
one or more persons to perform the duties of the Chairman of the Trustees, in
the event of his absence at any meeting or in the event of his disability.
3.6 President; Vice President. 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.
3.7 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.
3.8 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.
3.9 Chief Compliance Officer. The Chief Compliance Officer shall perform the
duties and have the responsibilities of the chief compliance officer of the
Trust, including if required by the 1940 Act any such duties and
responsibilities imposed by Rule 38a-1, and shall have such other duties and
powers as may be designated from time to time by the Trustees.
3.10 Resignations. Any officer may resign at any time by written instrument
signed by him or her and delivered to the Chairman of the Trustees, if any, 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.
-3-
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 2.3 of these Bylaws relating to special meetings shall govern the
notice requirements for Committee meetings, except 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.
-4-
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 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 affect the ownership of Shares in the
Trust.
-5-
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 (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) or (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 Articles 11 and 12 hereto, (vi) to the 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 in respect of the terms of
a class of preferred shares of beneficial interest of the Trust as reflected in
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.
-6-
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 Common 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 a
majority of the Trustees and a majority of the Continuing 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 date, time, place and purpose of the
meeting, shall be given or caused to be given by a majority of the Trustees and
a majority of the Continuing 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 or agent designated for such purpose by the
Trustees. Whenever notice of a meeting is required to be 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.
Notwithstanding anything to the contrary in this Section 10.2, no matter shall
be properly before any annual or special meeting of Shareholders and no
business shall be transacted thereat unless in accordance with Section 10.6 of
these Bylaws.
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.
-7-
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.
10.6 Advance Notice of Shareholder Nominees for Trustees and Other
Shareholder Proposals.
(a) As used in this Section 10.6, the term "annual meeting" refers to any
annual meeting of Shareholders as well as any special meeting held in lieu
of an annual meeting as described in the first two sentences of Section 10.2
of these Bylaws, and the term "special meeting" refers to all meetings of
Shareholders other than an annual meeting or a special meeting in lieu of an
annual meeting.
(b) The matters to be considered and brought before any annual or special
meeting of Shareholders shall be limited to only such matters, including the
nomination and election of Trustees, as shall be brought properly before
such meeting in compliance with the procedures set forth in this
Section 10.6. Only persons who are nominated in accordance with the
procedures set forth in this Section 10.6 shall be eligible for election as
Trustees, and no proposal to fix the number of Trustees shall be brought
before an annual or special meeting of Shareholders or otherwise transacted
unless in accordance with the procedures set forth in this Section 10.6,
except as may be otherwise provided in these Bylaws with respect to the
right of holders of preferred shares of beneficial interest, if any, of the
Trust to nominate and elect a specified number of Trustees in certain
circumstances.
-8-
(c) For any matter to be properly before any annual meeting, the matter
must be (i) specified in the notice of meeting given by or at the direction
of a majority of the Trustees and a majority of the Continuing Trustees
pursuant to Section 10.2 of these Bylaws, (ii) otherwise brought before the
meeting by or at the direction of a majority of the Continuing Trustees (or
any duly authorized committee thereof), or (iii) brought before the meeting
in the manner specified in this Section 10.6(c) by a Shareholder of record
entitled to vote at the meeting or by a Shareholder (a "Beneficial Owner")
that holds Shares entitled to vote at the meeting through a nominee or
"street name" holder of record and that can demonstrate to the Trust such
indirect ownership and such Beneficial Owner's entitlement to vote such
Shares, provided that the Shareholder was the Shareholder of record or the
Beneficial Owner held such Shares at the time the notice provided for in
this Section 10.6(c) is delivered to the Secretary.
In addition to any other requirements under applicable law and the
Declaration of Trust and these Bylaws, persons nominated by Shareholders for
election as Trustees and any other proposals by Shareholders may be properly
brought before an annual meeting only pursuant to timely notice (the
"Shareholder Notice") in writing to the Secretary. To be timely, the
Shareholder Notice must be delivered to or mailed and received at the
principal executive offices of the Trust not less than forty-five (45) nor
more than sixty (60) days prior to the first anniversary date of the date on
which the Trust first mailed its proxy materials for the prior year's annual
meeting; provided, however, with respect to the first annual meeting to be
held after the offering of the Trust's Common Shares, the Shareholder Notice
must be so delivered or mailed and so received on or before August 1, 2005;
provided further, however, if and only if the annual meeting is not
scheduled to be held within a period that commences thirty (30) days before
the first anniversary date of the annual meeting for the preceding year and
ends thirty (30) days after such anniversary date (an annual meeting date
outside such period being referred to herein as an "Other Annual Meeting
Date"), such Shareholder Notice must be given in the manner provided herein
by the later of the close of business on (i) the date forty-five (45) days
prior to such Other Annual Meeting Date or (ii) the tenth (10th) business
day following the date such Other Annual Meeting Date is first publicly
announced or disclosed.
Any Shareholder desiring to nominate any person or persons (as the case
may be) for election as a Trustee or Trustees of the Trust shall deliver, as
part of such Shareholder Notice: (i) a statement in writing setting forth
(A) the name, age, date of birth, business address, residence address and
nationality of the person or persons to be nominated; (B) the class or
series and number of all Shares of the Trust owned of record or beneficially
by each such person or persons, as reported to such Shareholder by such
nominee(s); (C) any other information regarding each such person required by
paragraphs (a), (d), (e) and (f) of Item 401 of Regulation S-K or paragraph
(b) of Item 22 of Rule 14a-101 (Schedule 14A) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), adopted by the Securities and
Exchange Commission (or the corresponding provisions of any regulation or
rule subsequently adopted by the Securities and Exchange Commission or any
successor agency applicable to the Trust); (D) any other information
regarding the person or persons to be nominated that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitation of proxies for election of Trustees or
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder; and (E) whether
-9-
such Shareholder believes any nominee is or will be an "interested person"
of the Trust (as defined in the Investment Company Act of 1940, as amended)
and, if not an "interested person," information regarding each nominee that
will be sufficient for the Trust to make such determination; and (ii) the
written and signed consent of the person or persons to be nominated to be
named as nominees and to serve as Trustees if elected. In addition, the
Trustees may require any proposed nominee to furnish such other information
as they may reasonably require or deem necessary to determine the
eligibility of such proposed nominee to serve as a Trustee. Any Shareholder
Notice required by this Section 10.6(c) in respect of a proposal to fix the
number of Trustees shall also set forth a description of and the text of the
proposal, which description and text shall state a fixed number of Trustees
that otherwise complies with applicable law, these Bylaws and the
Declaration of Trust.
Without limiting the foregoing, any Shareholder who gives a Shareholder
Notice of any matter proposed to be brought before a Shareholder meeting
(whether or not involving nominees for Trustees) shall deliver, as part of
such Shareholder Notice: (i) the description of and text of the proposal to
be presented; (ii) a brief written statement of the reasons why such
Shareholder favors the proposal; (iii) such Shareholder's name and address
as they appear on the Trust's books; (iv) any other information relating to
the Shareholder that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with the solicitation of
proxies with respect to the matter(s) proposed pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder; (v) the
class or series and number of all Shares of the Trust owned beneficially and
of record by such Shareholder; (vi) any material interest of such
Shareholder in the matter proposed (other than as a Shareholder); (vii) a
representation that the Shareholder intends to appear in person or by proxy
at the Shareholder meeting to act on the matter(s) proposed; (viii) if the
proposal involves nominee(s) for Trustees, a description of all arrangements
or understandings between the Shareholder and each proposed nominee and any
other person or persons (including their names) pursuant to which the
nomination(s) are to be made by the Shareholder; and (ix) in the case of a
Beneficial Owner, evidence establishing such Beneficial Owner's indirect
ownership of, and entitlement to vote, Shares at the meeting of
Shareholders. As used in this Section 10.6, Shares "beneficially owned"
shall mean all Shares which such person is deemed to beneficially own
pursuant to Rules 13d-3 and 13d-5 under the Exchange Act.
(d) For any matter to be properly before any special meeting, the matter
must be specified in the notice of meeting given by or at the direction of a
majority of the Trustees and a majority of the Continuing Trustees pursuant
to Section 10.2 of these Bylaws. In the event the Trust calls a special
meeting for the purpose of electing one or more Trustees, any Shareholder
may nominate a person or persons (as the case may be) for election to such
position(s) as specified in the Trust's notice of meeting if and only if the
Shareholder provides a notice containing the information required in the
Shareholder Notice to the Secretary required with respect to annual meetings
by Section 10.6(c) hereof, and such notice is delivered to or mailed and
received at the principal executive
-10-
office of the Trust not later than the close of business on the tenth
(10th) day following the day on which the date of the special meeting and of
the nominees proposed by the Trustees to be elected at such meeting are
publicly announced or disclosed.
(e) For purposes of this Section 10.6, a matter shall be deemed to have
been "publicly announced or disclosed" if such matter is disclosed in a
press release reported by the Dow Xxxxx News Service, Associated Press or
comparable national news service, in a document publicly filed by the Trust
with the Securities and Exchange Commission, or in a Web site accessible to
the public maintained by the Trust or by its investment adviser or an
affiliate of such investment adviser with respect to the Trust.
(f) In no event shall an adjournment or postponement (or a public
announcement thereof) of a meeting of Shareholders commence a new time
period (or extend any time period) for the giving of notice as provided in
this Section 10.6.
(g) The person presiding at any meeting of Shareholders, in addition to
making any other determinations that may be appropriate to the conduct of
the meeting, shall have the power and duty to (i) determine whether a
nomination or proposal of other matters to be brought before a meeting and
notice thereof have been duly made and given in the manner provided in this
Section 10.6 and elsewhere in these Bylaws and the Declaration of Trust and
(ii) if not so made or given, to direct and declare at the meeting that such
nomination and/or such other matters shall be disregarded and shall not be
considered. Any determination by the person presiding shall be binding on
all parties absent manifest error.
(h) Notwithstanding anything to the contrary in this Section 10.6 or
otherwise in these Bylaws, unless required by federal law, no matter shall
be considered at or brought before any annual or special meeting unless such
matter has been approved for these purposes by a majority of the Continuing
Trustees and, in particular, no Beneficial Owner shall have any rights as a
Shareholder except as may be required by federal law. Furthermore, nothing
in this Section 10.6 shall be construed as creating any implication or
presumption as to the requirements of federal law.
ARTICLE 11
Statement Creating Five Series of Auction Market Preferred Shares
A series of Auction Market Preferred Shares, Series M: 3,840 preferred
shares of beneficial interest, par value $.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 Market Preferred Shares, Series M." Each share of Auction Market
Preferred Shares, Series M (sometimes referred to herein as "Series M AMPS")
may be issued on a date to be determined by the Board of Trustees of the Trust
or pursuant to their delegated authority; has 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 has 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 AMPS shall constitute a separate series of
preferred shares of beneficial interest of the Trust, and each share of Series
M AMPS shall be identical.
-11-
A series of Auction Market Preferred Shares, Series T: 3,840 preferred
shares of beneficial interest, par value $.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 Market Preferred Shares, Series T." Each share of Auction Market
Preferred Shares, Series T (sometimes referred to herein as "Series T AMPS")
may be issued on a date to be determined by the Board of Trustees of the Trust
or pursuant to their delegated authority; has 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 has 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 AMPS shall constitute a separate series of
preferred shares of beneficial interest of the Trust, and each share of Series
T AMPS shall be identical.
A series of Auction Market Preferred Shares, Series W: 3,840 preferred
shares of beneficial interest, par value $.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 Market Preferred Shares, Series W." Each share of Auction Market
Preferred Shares, Series W (sometimes referred to herein as "Series W AMPS")
may be issued on a date to be determined by the Board of Trustees of the Trust
or pursuant to their delegated authority; has 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 has 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 AMPS shall constitute a separate series of
preferred shares of beneficial interest of the Trust, and each share of Series
W AMPS shall be identical.
A series of Auction Market Preferred Shares, Series TH: 3,840 preferred
shares of beneficial interest, par value $.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 Market Preferred Shares, Series TH." Each share of Auction Market
Preferred Shares, Series TH (sometimes referred to herein as "Series TH AMPS")
may be issued on a date to be determined by the Board of Trustees of the Trust
or pursuant to their delegated authority; has 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 has 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 AMPS shall constitute a separate series of
preferred shares of beneficial interest of the Trust, and each share of Series
TH AMPS shall be identical.
A series of Auction Market Preferred Shares, Series F: 3,840 preferred
shares of beneficial interest, par value $.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 Market Preferred Shares, Series F." Each share of Auction
-00-
Xxxxxx Xxxxxxxxx Shares, Series F (sometimes referred to herein as "Series F
AMPS") may be issued on a date to be determined by the Board of Trustees of the
Trust or pursuant to their delegated authority; has 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 has 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 AMPS shall constitute a separate series
of preferred shares of beneficial interest of the Trust, and each share of
Series F AMPS shall be identical.
11.1 Definitions. (a) Unless the context or use clearly 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:
"Accountant's Confirmation" has the meaning set forth in Section 11.7(c) of
these Bylaws.
"Additional Trustees" has the meaning set forth in Section 11.5(b) of these
Bylaws.
"ADR" has the meaning set forth in paragraph (iii) of the definition of
"Fitch Eligible Assets."
"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 or a participant in the Securities
Depository that will act on behalf of a Beneficial Owner of one or more AMPS or
on behalf of a Potential Beneficial Owner.
"AMPS" means the Series M AMPS, Series T AMPS, the Series W AMPS, the Series
TH AMPS and the Series, F AMPS.
"Applicable Percentage" has the meaning set forth in Section 11.10(a)(vii)
of these Bylaws.
"Applicable Rate" means the rate per annum at which cash dividends are
payable on the AMPS for any Dividend Period.
"Applicable Spread" has the meaning set forth in Section 11.10(a)(vii) of
these Bylaws.
"Approved Foreign Nations" has the meaning set forth in paragraph (iii) of
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 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.
-13-
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means Deutsche Bank Trust Company Americas 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 paying agent and redemption agent for the
AMPS.
"Auction Date" has the meaning set forth in Section 11.10(a)(ii) of these
Bylaws.
"Auction Procedures" means the procedures for conducting Auctions, as 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 AMPS or a Broker-Dealer that holds AMPS for its own account.
"Broker-Dealer" means any broker-dealer, or other entity permitted by law to
perform the functions required of a Broker-Dealer 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."
"Catastrophe Bonds" means securities that entitle the holders thereof to
receive a fixed principal or similar amount and a specified return on such
amount, generally having the following characteristics: (1) the issuer of such
asset-backed security has entered into a swap, insurance contract or similar
arrangement with a counterparty pursuant to which such issuer agrees to pay
amounts to the counterparty upon the occurrence of certain specified events,
including: hurricanes, earthquakes and other events, and (2) payments on such
security depend primarily upon the occurrence and/or severity of such events.
-14-
"Closing Transactions" has the meaning set forth in Section 11.8(a)(i) of
these Bylaws.
"Common Shares" means the shares of beneficial interest designated as common
shares, par value $.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 Auction Market Preferred
Share, the date on which the Trust first issues such share.
"Debt Securities" has the meaning set forth in paragraph (vi) of the
definition of "Fitch Eligible Assets."
"Declaration of Trust" means the Amended and Restated Agreement and
Declaration of Trust of the Trust dated October 5, 2004, 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 AMPS, has the meaning set forth in
Section 11.2(b)(i) of these Bylaws.
"Dividend Period" means the Initial Dividend Period, any Seven-Day Dividend
Period and any Special Dividend Period.
"Eligible Asset" means a Fitch Eligible Asset (if Fitch Ratings is then
rating the AMPS), a Moody's Eligible Asset (if Xxxxx'x is then rating the AMPS)
and/or any asset included in the calculations used by any Rating Agency then
rating the AMPS for purposes of determining such Rating Agency's rating on the
AMPS, 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 AMPS in
the Share Books.
"Extension Period" has the meaning set forth in Section 11.2(c)(iii) of
these Bylaws.
-15-
"FHLB, FNMA and FFCB Debentures" has the meaning set forth in paragraph
(ix) of the definition of "Moody's Eligible Assets."
"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 Ratings.
(i) Debt Securities: The percentage determined by reference to the rating
of the Debt Security with reference to the remaining term to maturity of the
Debt Security (other than short-term Debt Securities covered by clause
(iii) below), in accordance with the table set forth below.
Fitch Rating Category
---------------------------------------------------
Not rated or
Term to Maturity of Debt Security AAA AA A BBB BB below BB/1/
--------------------------------- ------ ------ ------ ------ ------ ------------
3 years or less (but longer than 1 year)...... 106.38% 108.11% 109.89% 111.73% 129.87% 151.52%
5 years or less (but longer than 3 years)..... 111.11 112.99 114.94 116.96 134.24 151.52
7 years or less (but longer than 5 years)..... 113.64 115.61 117.65 119.76 135.66 151.52
10 years or less (but longer than 7 years).... 115.61 117.65 119.76 121.95 136.74 151.52
15 years or less (but longer than 10 years)... 119.76 121.95 124.22 126.58 139.05 151.52
More than 15 years............................ 124.22 126.58 129.03 131.58 144.55 151.52
--------
/1/ If a security is not rated by Fitch Ratings 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
rating by Fitch Ratings of BBB+ will be used). If a security is not rated
by Fitch Ratings 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 rating by Fitch Ratings of AAA- will
be used, and where the only rating on a security is a Xxxxx'x rating of
Ba3, a rating by Fitch Ratings of BB- will be used). If a security is not
rated by any Rating Agency, the Trust will use the percentage set forth
under "Not rated or below BB" in this table.
The Fitch Discount Factors presented in the immediately preceding table
apply to Debt Securities that are Performing and have a Market Value
determined by a Pricing Service or an Approved Price. The Fitch Discount
Factor noted in the table above for a Debt Security not rated or rated below
BB by Fitch Ratings shall apply to any non-Performing Debt Security with a
price equal to or greater than $.20 per security. If a Debt Security does
not have a Market Value determined by a Pricing Service or an Approved
Price, a rating one rating category below the actual rating on the Debt
Security will be
-16-
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 that is not a Rule 144A Security 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 and TRAINs, 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 or TRAIN. 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 be determined by the underlying
debt instruments in the trust, unless such preferred trust certificates are
determined by Fitch Ratings to qualify for a traditional equity discount
factor, in which case the Fitch Discount Factor shall be 370%.
(ii) Preferred shares: The percentage determined by reference to the
rating of the preferred shares in accordance with the table set forth below.
Discount
Preferred Shares Factor
---------------- --------
AAA Taxable Preferred................................................ 130%
AA Taxable Preferred................................................. 133%
A Taxable Preferred.................................................. 135%
BBB Taxable Preferred................................................ 139%
BB Taxable Preferred................................................. 154%
Not rated or below BB Taxable Preferred.............................. 161%
Investment Grade DRD Preferred....................................... 164%
Not rated or below Investment Grade DRD Preferred.................... 200%/1/
--------
/1/ If a security is not rated by Fitch Ratings 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
rating by Fitch Ratings of BBB+ will be used). If a security is not rated
by Fitch Ratings 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 rating by Fitch Rating of AAA- will
be used, and where the only rating on a security is a Xxxxx'x rating of
Ba3, a rating by Fitch Ratings of BB- will be used). If a security is not
rated by any Rating Agency, the Trust will use the percentage set forth
opposite "Not rated or below Investment Grade DRD Preferred" in this table.
(iii) Short-term instruments: The Fitch Discount Factor applied to
short-term portfolio securities, including without limitation Debt
Securities with terms to maturity of one year or less, Short Term Money
Market Instruments and municipal debt obligations with terms to maturity
within the Fitch Exposure Period, will be (A) 100%, so long as
-17-
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 neither mature nor have a demand feature exercisable at par
within the Fitch Exposure Period; and (C) 125%, so long as such portfolio
securities neither mature within the Fitch Exposure Period nor have a demand
feature at par. A Fitch Discount Factor of 100% will be applied to cash.
(iv) U.S. Government Securities and U.S. Treasury Strips: The percentage
determined by reference to the remaining term to maturity of the security in
accordance with the table below.
Discount
Time Remaining to Maturity Factor
-------------------------- --------
1 year or less........................................................ 101.5%
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
(v) Convertible securities: The Fitch Discount Factor applied to
convertible securities will be (a) 200% for investment grade convertible
securities and (b) 222% for below investment grade convertible securities so
long as such convertible securities have neither (x) a conversion premium
greater than 100% nor (y) a yield to maturity or yield to worst of greater
than 15.00% above the corresponding Treasury curve.
The Fitch Discount Factor applied to convertible securities which have
conversion premiums of greater than 100% will be (a) 152% for investment
grade convertible securities and (b) 179% for below investment grade
convertible securities so long as such convertible securities do not have a
yield to maturity or yield to worst of greater than 15.00% above the
corresponding Treasury curve.
The Fitch Discount Factor applied to convertible securities which have a
yield to maturity or yield to worst of greater than 15.00% above the
corresponding Treasury curve will be 370%.
If a security is not rated by Fitch Ratings 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 rating
by Fitch Ratings of BBB+ will be used). If a security is not rated by Fitch
Ratings 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 rating by Fitch Ratings of AAA will be used, and where the only
rating on a security is a Xxxxx'x rating of Ba3, a rating by Fitch Ratings
of BB- will be used). If a security is not rated by any Rating Agency, the
Trust will treat the security as if it were below investment grade.
-18-
(vi) 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.
(vii) Asset-backed and mortgage-backed securities: The percentage
determined by reference to the asset type in accordance with the table set
forth below.
Discount
Asset Type (with time remaining to maturity, if applicable) 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)............................................ 128%
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 $.40)............ 696%
U.S. agency interest only securities (with Market Value less than or equal to $.40)... 214%
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.
(viii) Bank Loans: The percentage determined by reference to the Fitch
Loan Category in accordance with the table set forth below.
Discount
Fitch Loan Category Factor
------------------- --------
A..................................................................... 126%
B..................................................................... 157
C..................................................................... 184
D..................................................................... 433
-19-
(ix) REITs:
(a) Common stock and preferred stock of REITs and other real estate
companies:
Discount
Factor
--------
REIT or other real estate company preferred stock..................... 154%
REIT or other real estate company common stock........................ 196%
(b) Corporate debt securities of REITs:
Term to Maturity AAA AA A BBB BB B CCC
---------------- --- --- --- --- --- --- ---
1 year or less.............................. 111% 114% 117% 120% 121% 127% 227%
2 years or less............................. 116% 125% 125% 127% 132% 137% 137%
3 years or less............................. 121% 123% 127% 131% 133% 140% 225%
4 years or less............................. 126% 126% 129% 132% 136% 140% 164%
5 years or less............................. 131% 132% 135% 139% 144% 149% 185%
7 years or less............................. 140% 143% 146% 152% 159% 167% 228%
10 years or less............................ 141% 143% 147% 153% 160% 168% 232%
12 years or less............................ 144% 144% 150% 157% 165% 174% 249%
15 years or less............................ 148% 151% 155% 163% 172% 182% 274%
20-30 years or less......................... 152% 156% 160% 169% 180% 191% 306%
If a security is not rated by Fitch Ratings 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 rating
by Fitch Ratings of BBB+ will be used). If a security is not rated by Fitch
Ratings 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 rating by Fitch Ratings of AAA will be used, and where the only
rating on a security is a Xxxxx'x rating of Ba3, a rating by Fitch Ratings
of BB- will be used). If a security is not rated by any Rating Agency, the
Trust will treat the security as if it were below investment grade.
-20-
(x) 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.
Fitch Rating Category
---------------------------------
Fitch Exposure Period AAA AA A BBB F1/1/ Unrated/2/
--------------------- --- --- --- --- ---- ---------
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/ Municipal debt obligations rated by Fitch Ratings which do not mature or
have a demand feature at par exercisable in 30 days and which do not have
a long-term rating.
/2/ If a security is not rated by Fitch Ratings 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
rating by Fitch Ratings of BBB+ will be used). If a security is not rated
by Fitch Ratings 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 rating by Fitch Ratings of AAA- will
be used, and where the only rating on a security is a Xxxxx'x rating of
Ba3, a rating by Fitch Ratings 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.
(xi) 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%.
(xii) 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.
(xiii) Unhedged foreign investments: A discount factor of 105% shall be
applied to the Market Value of unhedged foreign investments otherwise
determined in accordance with the preceding paragraphs; provided, however,
if the foreign issuer of such unhedged foreign investment is from a country
whose sovereign debt rating in a non-local currency is not assigned a rating
of 'AA' or better by Fitch, a discount factor of 117% shall be applied to
the Market Value thereof otherwise determined in accordance with the
preceding paragraphs.
-21-
(xiv) Catastrophe Bonds: The Fitch Discount Factor applied to Catastrophe
Bonds will be 333.33%
(xv) Common stock and warrants: The Fitch Discount Factor applied to
common stock will be 200% for large-cap stocks (i.e., stocks of companies
having a market capitalization greater than $10 billion), 233% for mid-cap
stocks (i.e., stocks of companies with a market capitalization between $2
billion to $10 billion), 286% for small cap stocks (i.e., stocks of
companies with market capitalizations between $300 million to $2 billion),
and 370% for others.
"Fitch Eligible Assets" means
(i) cash (including interest and dividends due on assets rated (A) BBB or
higher by Fitch Ratings 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 Ratings 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 Ratings 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 Ratings or (B) (1) with
counterparties having a long-term debt rating of at least BBB- from Fitch
Ratings 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 Ratings or the equivalent by another Rating Agency;
(ii) preferred shares if (A) dividends on such preferred shares 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 common stock or its equivalent at any time over the respective
lives of such securities, (C) the issuer of such a preferred shares has
common stock listed on either the New York Stock Exchange or the American
Stock Exchange, (D) the issuer of such preferred shares has a senior debt
rating or preferred stock rating from Fitch Ratings of BBB- or higher or the
equivalent rating by another Rating Agency and (E) the preferred shares are
part of an issue that is at least $50 million;
(iii) (A) common stocks (1) which are traded on the New York Stock
Exchange or the American Stock Exchange or in the over-the-counter market,
(2) which, if cash dividend paying, pay cash dividends in U.S. dollars, and
(3) which may be sold without restriction by the Trust; provided, however,
that (a) common stock which, while a Fitch Eligible Asset owned by the
Trust, ceases paying any regular cash dividend will no longer be considered
a Fitch Eligible Asset until 60 calendar days after the date of the
-22-
announcement of such cessation, unless the issuer of the common stock has
senior debt securities rated at least A- by Fitch and (b) the aggregate
Market Value of the Trust's holdings of the common stock of any issuer in
excess of 5% per U.S. issuer of the number of outstanding shares of such
issuer times the Market Value of such common stock shall not be a Fitch's
Eligible Asset; and (B) common stocks or their equivalent denominated in any
currency other than the U.S. dollar and common stocks or their equivalent of
issuers formed under the laws of jurisdictions other than the United States,
its states and the District of Columbia for which there are
dollar-denominated American Depository Receipts ("ADRs") which are traded in
the United States on exchanges or over-the-counter and are issued by banks
formed under the laws of the United States, its states or the District of
Columbia; provided, however, that the aggregate Market Value of the Trust's
holdings of securities denominated in currencies other than the U.S. dollar
and ADRs in excess of 3% of the aggregate Market Value of the outstanding
shares of common stock or its equivalent of such issuer or in excess of 10%
of the Market Value of the Trust's Fitch Eligible Assets with respect to
issuers formed under the laws of any single such non-U.S. jurisdiction other
than Argentina, Australia, Austria, Brazil, Belgium, Chile, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Japan, Korea, Luxembourg,
Mexico, Netherlands, New Zealand, Norway, Portugal, Russia, Spain, Sweden,
Turkey or the United Kingdom (each an "Approved Foreign Nation," and
collectively the "Approved Foreign Nations") or Canada shall not be a Fitch
Eligible Asset;
(iv) Short Term Money Market Instruments so long as (A) such securities
are rated at least F1+ by Fitch Ratings 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 Ratings or the
equivalent by another Rating Agency, or (C) in all other cases, the
supporting entity (1) is rated at least A by Fitch Ratings or the equivalent
by another Rating Agency and the security matures within one month, (2) is
rated at least A by Fitch Ratings or the equivalent by another Rating Agency
and the security matures within three months or (3) is rated at least AA by
Fitch Ratings or the equivalent by another Rating Agency and the security
matures within six months;
(v) U.S. Government Securities and U.S. Treasury Strips;
(vi) debt securities if (A) 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 (B) 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 an Approved Foreign
Nation, (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
-23-
referred to collectively as "Canadian Bonds"). Foreign 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.
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 Ratings, which approval shall not be
unreasonably withheld. All debt securities satisfying the foregoing
requirements and restrictions of this paragraph (vi) are herein referred to
as "Debt Securities."
(vii) asset-backed and mortgage-backed securities;
(viii) Rule 144A Securities;
(ix) Bank Loans;
(x) municipal debt obligations;
(xi) TRACERs, TRAINs and Structured Notes;
(xii) interest rate swaps entered into according to International Swap
Dealers Association standards if (A) the counterparty to the swap
transaction has a short-term rating of not less than F1 from Fitch Ratings
or the equivalent by another Rating Agency, or, if the swap counterparty
does not have a short-term rating, the counterparty has a senior unsecured
long-term debt rating of AA or higher from Fitch Ratings or the equivalent
from another Rating Agency and (B) the original aggregate notional amount of
the interest rate swap transaction or transactions is not greater than the
liquidation preference of the AMPS originally issued;
(xiii) any common stock, preferred stock or any debt security of REITs or
real estate companies;
-24-
(xiv) Catastrophe Bonds; and
(xv) unrated debt securities issued by an issuer which (A) has not filed
for bankruptcy in the past three years; (B) is current on all interest and
principal on its fixed income obligations; and (C) is current on all
preferred stock dividends.
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 Ratings 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 Ratings to the AMPS.
In addition, portfolio holdings as described below must be within the
following diversification and issue size requirements in order to be included
in Fitch's Eligible Assets:
Maximum Single Maximum Single Minimum Issue Size
Security Rated At Least Issuer/1/ Industry/1,2/ ($ in million)/3/
----------------------- -------------- -------------- ------------------
AAA........................... 100% 100% $100
AA-........................... 20 75 100
A-............................ 10 50 100
BBB-.......................... 6 25 100
BB-........................... 4 16 50
B-............................ 3 12 50
CCC........................... 2 8 50
--------
/1/ Percentages represent a portion of the aggregate market value of the
portfolio holdings.
/2/ Industries are determined according to Fitch's Industry Classifications,
as defined herein.
/3/ Preferred stock has a minimum issue size of $50 million for all rating
categories in the table.
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 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 Ratings 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 Ratings 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.
-25-
"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 (or such
other classifications as Fitch Ratings may from time to time approve for
application to the AMPS):
1. Aerospace & Defense
2. Automobiles
3. Banking, Finance & Real Estate
4. Broadcasting & Media
5. Building & Materials
6. Business Services
7. Cable
8. Chemicals
9. Computers & Electronics
10. Consumer Products
11. Energy
12. Environmental Services
13. Farming & Agriculture
14. Food, Beverage & Tobacco
15. Gaming, Lodging & Restaurants
16. Healthcare & Pharmaceuticals
17. Industrial/Manufacturing
18. Insurance
19. Leisure & Entertainment
20. Metals & Mining
21. Miscellaneous
22. Packaging and Containers
23. Paper & Forest Products
24. Retail
25. Sovereign
26. Structured Finance Obligations
27. Supermarkets & Drugstores
28. Telecommunications
29. Textiles & Furniture
30. Transportation
31. Utilities
-26-
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 $.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 $.80 but
less than $.90; and (B) non-Performing Bank Loans which have a Market Value
or an Approved Price greater than or equal to $.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 $.70 but
less than $.80; (B) non-Performing Bank Loans which have a Market Value or
an Approved Price of greater than or equal to $.75 but less than $.85; and
(C) Performing Bank Loans without an Approved Price rated BB- or higher by
Fitch Ratings. If a security is not rated by Fitch Ratings 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 rating by Fitch Ratings of BBB+ will be used). If a security is not
rated by Fitch Ratings 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 rating by Fitch Ratings of AAA- will be
used, and where the only rating on a security is a Xxxxx'x rating of Ba3, a
rating by Fitch Ratings 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.
"Fitch Ratings" means Fitch, Inc., doing business as Fitch Ratings, or its
successors.
"Foreign Bonds" has the meaning set forth in clause (vi) of the definition
of "Fitch Eligible Assets."
"Forward Commitment" has the meaning set forth in Section 11.8(d) of these
Bylaws.
"Holder" means a Person identified as a holder of record of AMPS in the
Share Register.
-27-
"Independent Accountant" means a nationally recognized accountant, or firm
of accountants, that is, with respect to the Trust, an independent registered
public accountant or firm of independent registered public accountants under
the Securities Act and serving as such for the Trust.
"Initial Dividend Payment Date" means, with respect to a series of AMPS, the
initial dividend payment date with respect to the Initial Dividend Period 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 AMPS, the rate
per annum applicable to the Initial Dividend Period for such series of AMPS.
"LIBOR Dealers" means Xxxxxxx Lynch, Pierce, Xxxxxx and Xxxxx Incorporated
and such other dealer or dealers as the Trust may from time to time appoint,
or, in lieu of any thereof, their respective affiliates or successors.
"LIBOR Rate," on any Auction Date, means (i) the rate for deposits in U.S.
dollars for the designated Dividend Period, which appears on display page 3750
of Moneyline's Telerate Service ("Telerate Page 3750") (or such other page as
may replace that page on that service, or such other service as may be selected
by the LIBOR Dealer or its successors that are LIBOR Dealers) as of 11:00 a.m.,
London time, on the day that is the London Business Day preceding the Auction
Date (the "LIBOR Determination Date"), or (ii) if such rate does not appear on
Telerate Page 3750 or such other page as may replace such Telerate Page 3750,
(A) the LIBOR Dealer will determine the arithmetic mean of the offered
quotations of the Reference Banks to leading banks in the London interbank
market for deposits in U.S. dollars for the designated Dividend Period in an
amount determined by such LIBOR Dealer by reference to requests for quotations
as of approximately 11:00 a.m. (London time) on such date made by such LIBOR
Dealer to the Reference Banks, (B) if at least two of the Reference Banks
provide such quotations, LIBOR Rate will equal such arithmetic mean of such
quotations, (C) if only one or none of the Reference Banks provide such
quotations, LIBOR Rate will be deemed to be the arithmetic mean of the offered
quotations that leading banks in The City of New York selected by the LIBOR
Dealer (after obtaining the Trust's approval) are quoting on the relevant LIBOR
Determination Date for deposits in U.S. dollars for the designated Dividend
Period in an amount determined by the LIBOR Dealer (after obtaining the Trust's
approval) that is representative of a single transaction in such market at such
time by reference to the principal London offices of leading banks in the
London interbank market; provided, however, that if one of the LIBOR Dealers
does not quote a rate required to determine the LIBOR Rate, the LIBOR Rate will
be determined on the basis of the quotation or quotations furnished by any
Substitute LIBOR Dealer or Substitute LIBOR Dealers selected by the Trust to
provide such rate or rates not being supplied by the LIBOR Dealer; provided
further, that if the LIBOR Dealer and Substitute LIBOR Dealers are required but
unable to determine a rate in accordance with at least one of the procedures
provided above, LIBOR Rate will be LIBOR Rate as determined on the previous
Auction Date. If the number of Dividend Period days will be (i) 7 or more but
fewer than 21 days, such rate will be the seven-day LIBOR rate; (ii) 21 or more
but fewer than 49 days, such
-28-
rate will be the one-month LIBOR rate; (iii) 49 or more but fewer than 77 days,
such rate will be the two-month LIBOR rate; (iv) 77 or more but fewer than 112
days, such rate will be the three-month LIBOR rate; (v) 112 or more but fewer
than 140 days, such rate will be the four-month LIBOR rate; (vi) 140 or more
but fewer than 168 days, such rate will be the five-month LIBOR rate; (vii) 168
or more but fewer than 189 days, such rate will be the six-month LIBOR rate;
(viii) 189 or more but fewer than 217 days, such rate will be the seven-month
LIBOR rate; (ix) 217or more but fewer than 252 days, such rate will be the
eight-month LIBOR rate; (x) 252 or more but fewer than 287 days, such rate will
be the nine-month LIBOR rate; (xi)287 or more but fewer than 315 days, such
rate will be the ten-month LIBOR rate; (xii) 315 or more but fewer than 343
days, such rate will be the eleven-month LIBOR rate; and (xiii) 343 or more but
fewer than 365 days, such rate will be the twelve-month LIBOR rate.
"Lien" means any material lien, mortgage, pledge, security interest or
security agreement of any kind.
"London Business Day" means any day on which commercial banks are generally
open for business in London.
"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
(sometimes referred to as a "Long Term Special Rate Period").
"Mandatory Redemption Price" means $25,000 per Auction Market Preferred
Share plus an amount equal to accumulated but unpaid dividends (whether or not
earned or declared) to (but not including) the date fixed for redemption.
"Market Value" of any asset of the Trust shall be the market value thereof
determined by a Pricing Service. The 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 prices 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 bid quotations 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. If
two bid quotations are not readily available for any securities, such
securities shall be valued in good faith at fair value pursuant to procedures
approved by the Board of Trustees of the Trust. Futures contracts and options
are valued at the 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 in good faith pursuant to
procedures approved by the Board of Trustees of the Trust. All other assets
will be valued at fair value on a consistent basis using methods determined in
good faith by the Board of Trustees of the Trust.
-29-
"Maximum Applicable Rate," with respect to AMPS, has the meaning set forth
in Section 11.10(a)(vii) 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) Convertible securities (including convertible preferred stock):
(1) For convertible securities having a Delta between 0.4 and 0.0, the
Moody's Discount Factor shall be 100% of the Moody's Discount Factor applied
to non-convertible corporate debt securities (i.e. using the Moody's
Discount Factors found in the subsection (ii) of this definition), (2) for
convertible securities having a Delta between 0.8 and 0.4, the Moody's
Discount Factor shall be 192% for securities rated Baa or above and 226% for
securities rated Ba and below, and (3) for convertible securities having a
Delta between 1.0 and 0.8, the Moody's Discount Factor shall be 195% for
securities rated Baa or above and 229% for securities rated Ba and below;
provided, however, that for any unrated convertible security, the Moody's
Discount Factor shall be 250%./1,2/
/1/ Unless conclusions regarding liquidity risk as well as estimates of both
the probability and severity of default for applicable Trust assets can be
derived from other sources as well as combined with a number of sources as
presented by the Trust to Moody's, unrated fixed-income and convertible
securities, which are securities that are not rated by any of Moody's, S&P
or Fitch Ratings, are limited to 10% of Moody's Eligible Assets for
purposes of calculations related to the APS Basic Maintenance Amount. If a
convertible security is not rated by any of Moody's, S&P or Fitch Ratings,
the Trust will consider the security unrated for the purposes of the
discounts discussed above. Ratings assigned by S&P and/or Fitch Ratings
are generally accepted at face value. However, adjustments to face value
may be made to particular categories of credits for which the ratings by
S&P and/or Fitch Ratings do not seem to approximate a Xxxxx'x rating
equivalent. Split-rated securities assigned by S&P and Fitch Ratings
(i.e., these Rating Agencies assign different rating categories to the
security) will be accepted at the lower of the two ratings.
/2/ Discount factors are for 7-week exposure period.
For the purposes of determining such discount factors, "Delta", which is
intended to express the change in the price of the convertible security per
unit of change in the price of the common stock into which the convertible
security is convertible, shall be the number provided by Xxxxxxx Lynch,
Pierce, Xxxxxx and Xxxxx, Incorporated or such other provider as the Trust
shall determine from time to time. The Trust shall use commercially
reasonable efforts to update such Delta figures monthly.
-30-
Upon conversion to common stock, the Discount Factors applicable to common
stock will apply:
Common Stocks(1) Large-Cap Mid-Cap Small Cap
---------------- --------- ------- ---------
7 week exposure period............................. 200% 205% 220%
(1) Market cap for Large-cap stocks are $10 billion and up, Mid-cap stocks
range between $2 billion and $10 billion, and Small-cap stocks are $2
billion and below.
(ii) Corporate debt securities (non-convertible): 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 Below B and
Corporate Debt Security Aaa Aa A Baa Ba B Unrated/1/
----------------------- --- --- --- --- --- --- -----------
1 year or less.................................... 109% 112% 115% 118% 137% 150% 250%
2 years or less (but longer than 1 year).......... 115 118 122 125 146 160 250
3 years or less (but longer than 2 years)......... 120 123 127 131 153 168 250
4 years or less (but longer than 3 years)......... 126 129 133 138 161 176 250
5 years or less (but longer than 4 years)......... 132 135 139 144 168 185 250
7 years or less (but longer than 5 years)......... 139 143 147 152 179 197 250
10 years or less (but longer than 7 years)........ 145 150 155 160 189 208 250
15 years or less (but longer than 10 years)....... 150 155 160 165 196 216 250
20 years or less (but longer than 15 years)....... 150 155 160 165 196 228 250
30 years or less (but longer than 20 years)....... 150 155 160 165 196 229 250
Greater than 30 years............................. 165 173 181 189 205 240 250
/1/ Unless conclusions regarding liquidity risk as well as estimates of both
the probability and severity of default for applicable Trust assets can be
derived from other sources as well as combined with a number of sources as
presented by the Trust to Moody's, securities rated below B by Moody's
and, unrated fixed-income and convertible securities (which are securities
that are not rated by any of Moody's, S&P or Fitch Ratings) are limited to
10% of Moody's Eligible Assets for purposes of calculations related to the
Preferred Shares Basic Maintenance Amount. If a corporate debt security is
not rated by any of Moody's, S&P or Fitch Ratings, the Trust will use the
applicable percentage set forth under the column entitled "Below B and
Unrated" in the table above. Ratings assigned by S&P and/or Fitch Ratings
are generally accepted by Moody's at face value. However, adjustments to
face value may be made to particular categories of credits for which the
ratings by S&P and/or Fitch Ratings do not seem to approximate a Xxxxx'x
rating equivalent. Split-rated securities assigned by S&P and Fitch
Ratings (i.e., these Rating Agencies assign different rating categories to
the security) will be accepted at the lower of the two ratings.
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 and TRAINs, 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 or TRAIN, provided that (i) the Moody's Discount Factor for any
TRAIN or TRACER rated by Moody's will be the percentage determined, based on
the Xxxxx'x rating of the TRAIN or TRACER, in accordance with the table set
forth above and (ii) the Moody's Discount Factors determined from the table
shall be multiplied by a factor of 120% for purposes of calculating the
Discounted Value of TRAINs. 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. The Trust will consult
with Moody's to determine incremental discount factors for non-U.S. dollar
and non-euro denominated bonds.
-31-
(iii) Preferred stock (other than convertible preferred stock, which is
subject to paragraph (i) above): 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%.
(iv) Short-term instruments: The Moody's Discount Factor applied to
short-term portfolio securities, including without limitation short-term
corporate debt securities, Short Term Money Market Instruments and
short-term 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 do not mature within the Moody's Exposure Period, 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 or Fitch
Ratings 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.
(v) U.S. Government Securities and U.S. Treasury Strips: The percentage
determined by reference to the remaining term to maturity of such asset, in
accordance with the table set forth below.
U.S. Government U.S. Treasury
Securities 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
(vi) Rule 144A Securities: The Moody's Discount Factor applied to Rule
144A Securities whose terms include rights to registration under the
Securities Act exercisable within 1 year of the applicable date shall be
100% of the Moody's Discount Factor that would apply were the securities
registered under the Securities Act. The Moody's Discount Factor applied to
Rule 144A Securities whose terms include rights to registration under the
Securities Act that are not exercisable within 1 year of the applicable date
shall be 120% of the Moody's Discount Factor that would apply were the
securities registered under the Securities Act. The Moody's Discount Factor
applied to Rule 144A Securities whose terms do not include rights to
registration under the Securities Act shall be 130% of the Moody's Discount
Factor that would apply were the securities registered under the Securities
Act.
-32-
(vii) Bank Loans: The Moody's Discount Factor applied to senior Bank
Loans ("Senior Loans") shall be the percentage specified in accordance with
the table set forth below (or such lower percentages as Moody's may approve
in writing from time to time):
Xxxxx'x Rating Category
------------------------------------------------
Caa and below (including
Type of Loan Aaa-A Baa and Ba/1/ B/1/ distressed and unrated)/1/
------------ ----- ------------ --- -------------------------
Senior Loans > $250 MM........ 118% 136% 149% 250%
Non-Senior Loans > $250 MM.... 128% 146% 159% 260%
Loans < $250 MM............... 138% 156% 169% 270%
Second Lien Bank Loans........ 168% 185% 200% 270%
/1/ If a Bank Loan is not rated by any of Moody's, S&P or Fitch Ratings, the
Trust will use the applicable percentage set forth under the column
entitled "Caa and below (including distressed and unrated)" in the table
above. Ratings assigned by S&P and/or Fitch Ratings are generally accepted
by Moody's at face value. However, adjustments to face value may be made
to particular categories of securities for which the ratings by S&P and/or
Fitch Ratings do not seem to approximate a Xxxxx'x rating equivalent.
Split-rated securities assigned by S&P and Fitch Ratings (i.e., these
Rating Agencies assign different rating categories to the security) will
be accepted at the lower of the two ratings; provided however, that, in a
situation where a security is rated "B" (or equivalent) by a given Rating
Agency and rated "Caa" (or equivalent) by another Rating Agency, the Trust
will use the applicable percentage set forth under the column entitled "B"
in the table above.
(viii) Asset-backed and mortgage-backed securities: The Moody's Discount
Factor applied to asset-backed securities shall be 131%. 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.
Cash Flow Cash Flow
Remaining Term to Maturity Retained 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
-33-
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.
Cash Flow Cash Flow
Coupon Retained 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
(relating to whole loans).
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.
Cash Flow Cash Flow
Coupon Retained 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
(ix) 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, except as provided in the following table, any municipal
obligation:
-34-
Exposure Period Aaa Aa A Baa Other (V)MIG-1/1/ SP-1+/2/ Unrated/3/
--------------- --- --- --- --- ----- ---------- ------- ---------
7 weeks......................................... 151% 159% 166% 173% 187% 136% 148% 225%
8 weeks or less but greater than seven weeks.... 154 161 168 176 190 137 149 231
9 weeks or less but greater than eight weeks.... 158 163 170 177 192 138 150 240
--------
/1/ Municipal debt obligations not rated by Moody's but rated equivalent to
XXX-0, (X)XXX-0, xx X-0, by S&P and Fitch Ratings that have a maturity
less than or equal to 49 days.
/2/ Municipal debt obligations not rated by Moody's but rated equivalent to
MIG-1, (V)MIG-1, or P-1 by S&P and Fitch Ratings that have a maturity
greater than 49 days.
/3/ Unless conclusions regarding liquidity risk as well as estimates of both
the probability and severity of default for the corporation's or
municipal issuer's assets can be derived from other sources as well as
combined with a number of sources as presented by the Trust to Moody's
securities rated below B by Moody's and unrated securities, which are
securities rated by neither Moody's, S&P nor Fitch Ratings, are limited
to 10% of Moody's Eligible Assets. If a municipal debt security is
unrated by Moody's, S&P or Fitch, the Trust will use the percentage set
forth under "Other" in the Municipal Debt Table. Ratings assigned by S&P
or Fitch are generally accepted by Moody's at face value (e.g., treating
a rating of AAA by S&P or Fitch Ratings as Aaa for purposes of the table
above and a rating of AA by S&P or Fitch Ratings as Aa for purposes of
the table above. However, adjustments to face value may be made to
particular categories of credits for which the ratings by S&P and/or
Fitch Rating do not seem to approximate a Xxxxx'x rating equivalent.
Split-rated securities assigned by S&P and Fitch Ratings (i.e., these
Rating Agencies assign different rating categories to the security) will
be accepted at the lower of the two ratings.
(x) 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 (ii) 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 (ii); 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 (v) under this
definition.
The Moody's Discount Factor for any Moody's Eligible Asset other than the
securities set forth above will be the percentage provided in writing by
Moody's. Additionally, in order to merit consideration as a Moody's Eligible
Asset, securities should be issued by entities which: (a) have not filed for
bankruptcy within the past three years, (b) are current on all principal and
interest in their fixed income obligations, (c) are current on all preferred
stock dividends, and (d) possess a current, unqualified auditor's report
without qualified, explanatory language.
-35-
"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 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 or Fitch Ratings and
not rated by Moody's) need not meet any otherwise applicable rating criteria
of S&P or Fitch Ratings;
(iii) U.S. Government Securities and U.S. Treasury Strips;
(iv) Rule 144A Securities;
(v) Senior Loans and other Bank Loans*;
* Bank Loans that are not Senior Loans will be designated in any Preferred
Shares Basic Maintenance Report delivered to 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, S&P or Fitch Ratings; (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 Trust'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.
-36-
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
none of Moody's, S&P, or Fitch Ratings 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) Convertible securities (including convertible preferred stock),
provided that (A) the issuer of common stock must have a Moody's senior
unsecured debt of Caa or better, or a rating of CCC or better by S&P or
Fitch Ratings, (B) the common stocks must be traded on the New York Stock
Exchange, the American Stock Exchange, or the NASDAQ, (C) dividends must be
paid in U.S. dollars, (D) the portfolio of convertible bonds must be
diversified as set forth in the table set forth below, (E) the company shall
not hold shares exceeding the average weekly trading volume during the
preceding month and (F) synthetic convertibles are excluded from asset
eligibility.
Convertible Bonds Diversification Guidelines
Maximum Single Maximum Single Maximum Single
Type Issuer (%)/1/ Industry (%) State (%)/1/
---- -------------- -------------- --------------
Utility........................... 4 50 7/2/
Other............................. 6 20 n/a
--------
/1/ Percentage represent a portion of the aggregate market value and number
of outstanding shares of the convertible stock portfolio.
/2/ Utility companies operating in more than one state should be diversified
according to the state in which they generate the largest part of their
revenues. Publicly available information on utility company revenues by
state is available from the Uniform Statistical Report (USR) or the
Federal Energy Regulation Commission (FERC).
(viii) 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
-37-
either the New York Stock Exchange, the American Stock Exchange or the
NASDAQ, (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); provided, however, that convertible
preferred stock shall be treated as convertible securities in accordance
with paragraph (vii) above. 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;
(ix) 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 or Fitch Ratings, (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-set formula, provided that any CMO held by the
Trust (1) has been rated Aaa by Moody's or AAA by S&P or Fitch Ratings,
(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
-00-
XXXX, XXXX 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 or Fitch Ratings
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 Xxxxx'x; and
(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) 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 that 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 Xxxxx'x and (e) loan balances in excess of the current
FHLMC limit plus $75,000 represent no greater than
-39-
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 .15% and .25% for either cost-of-funds index and
between .175% and .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; and (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.
(x) Any municipal debt obligation that (A) pays interest in cash,
(B) does not have a Xxxxx'x rating, as applicable, suspended by Xxxxx'x, 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 Xxxxx'x,
in which case the minimum issue size is $10,000,000;
(xi) Structured Notes, rated TRACERs and TRAINs;
(xii) Financial contracts, as such term is defined in
Section 3(c)(2)(B)(ii) of the 1940 Act, not otherwise provided for in this
definition but only upon receipt by the Trust of a letter from Xxxxx'x
specifying any conditions on including such financial contract in Xxxxx'x
Eligible Assets and assuring the Trust that including such financial
contract in the manner so specified would not affect the credit rating
assigned by Xxxxx'x to the AMPS; and
(xiii) Common stock, preferred stock or any debt security of REITs or
real estate companies.
-40-
In addition, portfolio holdings as described below must be within the
following diversification and issue size requirements in order to be included
in Xxxxx'x Eligible Assets:
Maximum Single Maximum Single Minimum Issue Size
Ratings/1/ Issuer/2,3/ Industry/3,4/ ($ 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 the
portfolio holdings.
/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 Trust'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 (i) 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 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, or (ii) has been segregated against obligations of the
Trust in connection with an outstanding derivative transaction.
"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.
-41-
"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 AMPS):
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
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
00.Xxxxxxx: Investment Brokerage, Leasing, Syndication, Securities
-42-
15.Farming and Agriculture: Livestock, Grains, Produce, Agriculture
Chemicals, Agricultural Equipment, Fertilizers
00.Xxxxxxx: Grocery Stores, Convenience Food Stores
00.Xxxxxxxxxx, 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
00.Xxxxxx, Motels, Inns and Gaming
00.Xxxxxxxxx: 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
25.Printing, Publishing, and Broadcasting: Graphic Arts, Paper, Paper
Products, Business Forms, Magazines, Books, Periodicals, Newspapers,
Textbooks, Radio, TV, Cable Broadcasting Equipment
26.Cargo Transport: Rail, Shipping, Railroads, Railcar Builders, Ship
Builders, Containers, Container Builders, Parts, Overnight Mail,
Trucking, Truck Manufacturing, Trailer Manufacturing, Air Cargo,
Transport
27.Retail Stores: Apparel, Toy, Variety, Drug, Department, Mail Order
Catalog, Showroom
28.Telecommunications: Local, Long Distance, Independent, Telephone,
Telegraph, Satellite, Equipment, Research, Cellular
-43-
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.
"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 AMPS (or such other asset coverage as may in the future be
specified in or under the 1940 Act as the minimum asset coverage for senior
securities which are 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 (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 AMPS 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 AMPS called
for redemption, the Mandatory Redemption Price per
-44-
share of such AMPS or, in the case of an optional redemption, the Optional
Redemption Price per share, and ending on and including the Business Day on
which, by 12:00 noon, New York City time, all unpaid cash dividends and unpaid
redemption prices shall have been so deposited or shall have otherwise been
made available to Holders in same-day funds; provided that a Non-Payment Period
shall not end unless the 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
Ratings and Xxxxx'x (and any Substitute Rating Agency in lieu of Fitch Ratings
or Xxxxx'x in the event Fitch Ratings or Xxxxx'x shall not rate the AMPS)
advises the Trust in writing that such adjustment, modification, alteration or
change will not adversely affect its then current ratings on the AMPS.
"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
AMPS 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 Auction Market Preferred Share
plus an amount equal to accumulated but unpaid dividends (whether or not earned
or declared) to (but not including) 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 AMPS, AMPS
theretofore issued by the Trust except, without duplication, (A) any AMPS
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 AMPS 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 AMPS held by an Affiliate
shall be deemed outstanding for purposes of calculating the Preferred Shares
Basic Maintenance Amount and (ii) with respect to other preferred shares of
beneficial interest of the Trust, the meaning equivalent to that for AMPS as
set forth in clause (i).
-45-
"Parity Shares" means the AMPS and each other outstanding series of
preferred shares of beneficial interest of the Trust the holders of which,
together with the holders of the AMPS, shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or winding
up, as the case may be, in proportion to the full respective preferential
amounts to which they are entitled, without preference or priority one over the
other.
"Performing" means with respect to the issuer of any asset that is a Bank
Loan, Corporate Debt Security 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 corporation, 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 AMPS but that wishes to
purchase such shares, or that is a Beneficial Owner that wishes to purchase
additional AMPS.
"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 AMPS (or, in the case of an Existing Holder, additional AMPS).
"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 AMPS
Outstanding on such date multiplied by $25,000, plus any redemption premium
applicable to AMPS 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 AMPS Outstanding that follow such
Valuation Date (plus the aggregate amount of dividends, whether or not earned
or declared, that will have accumulated in respect of other outstanding
preferred shares to, but not including, the first respective dividend payment
dates for such other shares that follow such Valuation Date); (C) the aggregate
amount of dividends that would accumulate on shares of each series of AMPS
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 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
-46-
(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 tenth 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 Ratings, Xxxxx'x or any Substitute
Rating Agency, 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
February 28, 2005.
"Rating Agency" means a nationally recognized statistical rating
organization.
"Reference Banks" means four major banks in the London interbank market
selected by Xxxxxxx Lynch, Pierce, Xxxxxx and Xxxxx Incorporated or its
affiliates or successors or such other party as the Trust may from time to time
appoint.
"Reference Rate" means the LIBOR Rate (for a Dividend Period of fewer than
365 days) or the applicable Treasury Index Rate (for a Dividend Period of 365
days or more).
"REITs" means real estate investment trusts.
"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.
-47-
"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 AMPS that agrees to follow the
procedures required to be followed by such securities depository in connection
with the AMPS.
"Senior Loans" has the meaning set forth in paragraph (vii) of the
definition of "Xxxxx'x Discount Factor."
"Series M AMPS" means the Auction Market Preferred Shares, Series M.
"Series T AMPS" means the Auction Market Preferred Shares, Series T.
"Series W AMPS" means the Auction Market Preferred Shares, Series W.
"Series TH AMPS" means the Auction Market Preferred Shares, Series TH.
"Series F AMPS" means the Auction Market Preferred Shares, Series F.
"Seven-Day Dividend Period" means a Subsequent Dividend Period that
(a) consists of seven days or (b) would consist of seven days but for the fact
that the Dividend Payment Date which immediately follows, or the Dividend
Payment Date which falls within, such Subsequent Dividend Period is not a
Business Day.
"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 AMPS.
"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 AMPS.
"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.
-48-
"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 F-1 by Fitch Ratings or A-1 by S&P if
such commercial paper matures in 30 days or P-1 by Xxxxx'x and either F-1+
by Fitch Ratings 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 F-1+ from Fitch Ratings 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
Ratings 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, Xxxxx Ratings
and S&P shall be at least A2, A-2 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, F-1+ by Fitch Ratings 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.
"Special Dividend Period" (sometimes referred to as a "Special Rate Period")
means a Short Term Dividend Period or a Long Term Dividend Period.
-49-
"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 AMPS subject to such Special 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 AMPS
subject to such Special Dividend Period shall be redeemable at the Trust's
option at a price per share equal to $25,000, plus accumulated but unpaid
dividends (whether or not earned or declared) to (but not including) the date
fixed for redemption, plus a premium expressed as a percentage or percentages
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 LIBOR Dealer" means any LIBOR Dealer selected by the Trust, as
to which Xxxxx'x, Xxxxx Ratings or any other Rating Agency then rating the AMPS
shall not have objected; provided, however that none of such entities shall be
a LIBOR Dealer.
"Substitute Rating Agency" means a Rating Agency selected by Xxxxxxx Lynch,
Pierce, Xxxxxx and Xxxxx Incorporated or its affiliates and successors, after
consultation with the Trust, to act as the substitute Rating Agency to
determine the credit ratings of the AMPS.
"Sufficient Clearing Bids" has the meaning set forth in Section 11.10(d)(i)
of these Bylaws.
"TRACERs" means traded custody receipts representing direct ownership in a
portfolio of underlying securities.
"TRAINs" means Targeted Return Index Securities, which are trust
certificates comprised of bonds that are chosen to track a particular index.
"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 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
-50-
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.
"Trust" means the PIMCO Floating Rate Strategy Fund.
"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, Preferred
Shares Basic Maintenance Amount, Preferred Shares Basic Maintenance Cure
Date, Preferred Shares Basic Maintenance Report, Bank Loans, Closing
Transactions, Cure Date, Debt Securities, Deposit Securities, Discounted
Value, Fitch Discount Factor, Fitch Eligible Assets, Fitch Exposure Period,
Fitch Hedging Transactions, Fitch Industry Classifications, Forward
Commitment, LIBOR Dealer, 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, 1940 Act Cure Date, 1940 Act Preferred
Shares Asset Coverage, Performing, Senior Loans, Short Term Money Market
Instruments, Structured Notes, Substitute LIBOR Dealer, TRAINs, TRACERs,
Treasury Xxxx, Treasury Bonds, U.S. Government Securities, U.S. Treasury
Securities, U.S. Treasury Strips, 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
Ratings and a rating of "Aaa" from Xxxxx'x on the AMPS 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 Ratings, Xxxxx'x or any Substitute Rating Agency advises the Trust in
writing that such amendment, alteration or repeal will not adversely affect
its then current rating on the AMPS.
-51-
11.2 Dividends.
(a) The Holders of a particular series of AMPS 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 AMPS 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 AMPS shall accumulate
at the relevant Applicable Rate(s) 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
AMPS, dividends on that series of AMPS will be payable, at the option of the
Trust, either (i) with respect to any Seven-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; provided, however, that if a Normal Dividend
Payment Date is not a Business Day because the New York Stock Exchange is
closed for business for more than three consecutive Business Days due to an
act of God, natural disaster, act of war, civil or military disturbance, act
of terrorism, sabotage, riots or a loss or malfunction of utilities or
communication services, or the dividend payable on such date cannot be paid
for any such reason, then the Dividend Payment Date shall be the next
succeeding Business Day on which the Trust and its dividend paying agent, if
any, are able to cause the dividend to be paid using their reasonable best
efforts. 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 AMPS is scheduled to begin on the same day
and end on the same day as a Dividend Period for another series of AMPS,
then the last day of such Dividend Period for such other series of AMPS
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 AMPS shall be co-extensive with any Dividend Period
of any other series of AMPS 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 AMPS. 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 AMPS set
forth in the Declaration of Trust or the Bylaws. The Initial Dividend
-52-
Period, Seven-Day Dividend Periods and Special Dividend Periods with respect
to a series of AMPS 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."
(ii) Each dividend shall be paid to the Holders as they appear in the
Share 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 Share 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 AMPS (the
"Initial Dividend Period"), the Applicable Rate for such series of AMPS
shall be the Initial Dividend Rate. Commencing on the Initial Dividend
Payment Date for a series of AMPS, 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 AMPS, 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 Seven-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 AMPS on the date set for such redemption, any amount of any
dividend due on any Dividend Payment Date (if, prior to the close of
business on the second Business Day preceding such Dividend Payment Date,
the Trust has declared such dividend payable on such Dividend Payment Date
to the Holders of such AMPS as of 12:00 noon, New York City time, on the
Business Day preceding such Dividend Payment Date) or redemption price with
respect to any AMPS not paid to such Holders when due may be paid to such
Holders in the same form of funds by 12:00 noon, New York City time, on any
of the first three Business Days after such Dividend Payment Date or due
date, as the case may be, provided that such amount is accompanied by a late
charge calculated for such period of non-payment at the Non-Payment Period
Rate applied to the amount of such non-payment based on the actual number of
days comprising such period (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
-53-
of the Trust to pay a dividend on a Dividend Payment Date or to redeem any
AMPS on the date set for such redemption, the preceding sentence shall not
apply and the Applicable Rate for the Dividend Period commencing during the
Non-Payment Period resulting from such failure shall be the Non-Payment
Period Rate. For the purposes of the foregoing, payment to a person in
same-day funds on any Business Day at any time shall be considered
equivalent to payment to such person in New York Clearing House (next-day)
funds at the same time on the preceding Business Day, and any payment made
after 12:00 noon, New York City time, on any Business Day shall be
considered to have been made instead in the same form of funds and to the
same person before 12:00 noon, New York City time, on the next Business Day.
(ii) The amount of dividends per share of any series of AMPS payable
(if declared) on the Initial Dividend Payment Date, each Dividend
Payment Date of each Seven-Day Dividend Period, each Dividend Payment
Date of each Short Term Dividend Period and each Dividend Payment Date
of each Long 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.
(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 AMPS 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 AMPS and, in the case of a Long Term Dividend Period, shall be
given on or prior to the second Business Day but not more than 28 days
prior to an Auction Date for a series of AMPS. Upon receiving such
Request for Special Dividend Period, the Broker-Dealer(s) shall jointly
determine the Optional Redemption Price of the AMPS of the applicable
series of AMPS 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 curves for short-term and
long-term securities comparable to the AMPS, (4) industry and financial
conditions which may
-54-
affect the AMPS of the applicable series, (5) the investment objective
of the Trust, and (6) the Dividend Periods and dividend rates at which
current and potential beneficial holders of the AMPS 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, if any, 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 Ratings, 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 AMPS 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 Ratings, 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 AMPS,
the next succeeding Dividend Period for that series will be a Seven-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 Seven-Day Dividend Period
and the Trust may not again give a Notice of Special Dividend Period for
the AMPS (and any such attempted notice shall be null and void) until
Sufficient Clearing Bids have been made in an Auction with respect to a
Seven-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
-55-
the end of such Extension Period. The Trust will not declare a Special
Dividend Period unless it has received confirmation from Xxxxx'x and
Fitch Ratings, and any Substitute Rating Agency, that the proposed
Special Dividend Period will not adversely affect such Rating Agency's
then current rating on the AMPS.
(d) (i) Holders shall not be entitled to any dividends, whether payable
in cash, property or AMPS, 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 AMPS that may be in arrears.
(ii) For so long as any AMPS are 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 AMPS 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 AMPS 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 AMPS 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 AMPS 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 AMPS due on or
prior to the date of the transaction have been declared and paid or
shall have been declared and sufficient funds for the payment thereof
deposited with the Auction Agent and (C) the Trust has redeemed the full
number of AMPS required to be redeemed by any provision for mandatory
redemption contained herein. Further, for so long as any AMPS are
Outstanding, the Trust shall not declare, pay or set apart for payment
any dividend or other distribution on any Parity Shares other than the
AMPS unless contemporaneously herewith it declares, pays or sets apart
for payment, as the case may be, the same proportionate share of
dividends on the AMPS.
(e) Each dividend shall consist of cash at the Applicable Rate.
(f) No fractional AMPS 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.
-56-
11.3 Liquidation Rights. Upon any liquidation, dissolution or winding up of
the Trust, whether voluntary or involuntary, the Holders of AMPS then
outstanding 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 AMPS, the sum of
$25,000 per share plus accumulated but unpaid dividends (whether or not earned
or declared) thereon to (but not including) the date of distribution, and after
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 AMPS and any other Outstanding class or series of preferred
shares of beneficial interest of the Trust ranking on a parity with the AMPS as
to payment upon liquidation are not paid in full, the Holders and the holders
of such other class or series will share ratably in any such distribution of
assets in proportion to the respective preferential amounts to which they are
entitled. After payment of the full amount of the liquidating distribution to
which they are entitled, the Holders will have no right or claim to any of the
remaining assets of 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) AMPS 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 AMPS, in whole or in part, out of funds legally
available therefor, at the Optional Redemption Price per share, on any
Dividend Payment Date; provided that no AMPS 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, AMPS 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 AMPS to be redeemed
shall be equal to the lesser of (i) the minimum number of AMPS the
redemption of which, if deemed to have occurred immediately prior to the
opening of business on the Cure Date, together with all other preferred
shares of beneficial interest of the Trust subject to redemption or
retirement, would
-57-
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 AMPS and
other preferred shares of beneficial interest of the Trust the
redemption of which would have such result, all AMPS and other preferred
shares of beneficial interest of the Trust then Outstanding shall be
redeemed), and (ii) the maximum number of AMPS, 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 determining
the number of AMPS 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 AMPS 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 AMPS 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 remaining
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 remaining 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 AMPS 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 AMPS which it is unable to redeem on the
earliest practicable date on which it is able to effect such redemption
out of funds legally available therefor.
(b) Notwithstanding any other provision of this Section 11.4, no AMPS may
be redeemed pursuant to Section 11.4(a)(i) of these Bylaws unless (i) 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) redemption thereof would not 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 AMPS are to be redeemed and there is more than one
Holder, the shares of that series of AMPS to be redeemed shall be selected
by lot or such other method as the Trust shall deem fair and equitable.
(c) Whenever AMPS 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 AMPS to be redeemed and to the
-58-
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
AMPS of such series to be redeemed, (iv) the place or places where AMPS of
such series are to be surrendered for payment of the redemption price, (v) a
statement that dividends on the shares to be redeemed shall cease to
accumulate on such redemption date 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.
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 (including any applicable premiums) for the AMPS as to which such
Notice of Redemption has been given with irrevocable instructions and
authority to pay the redemption price to the Holders of such shares, then
upon the date of such deposit or, if no such deposit is made, then upon such
date fixed for redemption (unless the 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 or as otherwise required by applicable law, each Holder of AMPS 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 Outstanding preferred
shares of beneficial interest of the Trust, including AMPS, and of Common
Shares shall vote together as a single class; provided that the holders of
Outstanding preferred shares of beneficial interest of the Trust, including
AMPS, 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 AMPS,
voting as a single class, shall elect the balance of the trustees.
-59-
(b) Right to Elect Majority of Board of Trustees. Except as otherwise
required by law, 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, including
the AMPS, 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 (as so elected, the "Additional
Trustees"), in addition to the two trustees that such holders are in any
event entitled to elect.
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 any outstanding preferred shares,
including the AMPS, equal to at least two full years' dividends shall be
due and unpaid and sufficient cash or specified securities shall not
have been deposited with the Auction Agent for the payment of such
accumulated dividends; or
(ii) if at any time holders of any preferred shares of beneficial
interest of the Trust, including the holders of AMPS, 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 revesting
of such voting rights in the Holders upon the further occurrence of any of
the events described in this Section 11.5(b), the terms of the Additional
Trustees shall terminate automatically, and the remaining Trustees shall
constitute the Trustees of the Trust.
(c) Right to Vote with Respect to Certain Other Matters. So long as any
AMPS are Outstanding, the Trust shall not, without the affirmative vote or
consent of the holders of a majority of the preferred shares of the Trust,
including the AMPS, 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 AMPS or any other series of preferred shares
of beneficial interest of the Trust with respect to payment of dividends or
the distribution of assets upon dissolution, liquidation or winding up the
affairs of the Trust; provided, however, that no vote is required to
authorize the issuance of another series of AMPS or another class of
preferred shares of beneficial interest of the Trust that is substantially
identical in all respects to the AMPS; 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 AMPS 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 of the Trust, including the AMPS, 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
-60-
Declaration of Trust or Bylaws of a Holder of a series of AMPS differently
than those of a Holder of any other series of preferred shares of the Trust,
including the AMPS, without the affirmative vote of the holders of at least
a majority of the AMPS 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 AMPS, voting together as a single class, will be required to
approve any plan of reorganization (including bankruptcy proceedings)
adversely affecting such shares or any action requiring a vote of security
holders under Section 13(a) of the 1940 Act. To the extent permitted under
the 1940 Act, in the event shares of more than one series of AMPS 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 AMPS of each series Outstanding at such time (each such series voting
separately as a class) shall also be required. The class (and, where
applicable, the series) vote of holders of preferred shares of beneficial
interest of the Trust, including AMPS, 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 AMPS,
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 AMPS 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 at which
trustees are to be elected, 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 Trustees 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, an Auction Market Preferred Share which
is not Outstanding shall not be counted.
-61-
(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 termination of a Voting Period, the
terms of office of the Additional Trustees shall automatically
terminate, the remaining trustees 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 AMPS,
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 AMPS are Outstanding, the
1940 Act Preferred Shares Asset Coverage.
11.7 Preferred Shares Basic Maintenance Amount.
(a) So long as any AMPS are outstanding and any Rating Agency so
requires, 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 Xxxxx'x 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
Xxxxx'x 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 Ratings, Xxxxx'x and any other Rating
Agency then rating the AMPS 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
-62-
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 Ratings 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 Ratings and
Xxxxx'x. The Trust shall also provide Fitch Ratings or Xxxxx'x with a
Preferred Shares Basic Maintenance Report when specifically requested by
Fitch Ratings or Xxxxx'x, 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 (except as described in the following
sentence), the Independent Accountant will confirm in writing to the Auction
Agent and Xxxxx'x, (i) the mathematical accuracy of the calculations
reflected in such Report, (ii) that, in such Report, the Trust correctly
determined the assets of the Trust which constitute Fitch Eligible Assets
and Xxxxx'x Eligible Assets at such Quarterly Valuation Date in accordance
with these Bylaws, (iii) that, in such Report, the Trust determined whether
the Trust had, at such Quarterly Valuation Date in accordance with these
Bylaws, Fitch Eligible Assets and Xxxxx'x 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 verified
such information in reference to third-party information sources (such as
Reuters or Bloomberg) and the Independent Accountant shall provide a listing
in its letter of any differences, (v) with respect to the Fitch Ratings'
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 verified such information in reference to third-party
information sources (such as Reuters or Bloomberg) and the Independent
Accountant shall provide a listing in its letter of any differences,
(vi) with respect to the Xxxxx'x 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 verified such information in
reference to third-party information sources (such as Reuters or Bloomberg)
and the Independent Accountant shall provide a listing in its letter of any
differences and (vii) that the Independent Accountant has compared the
prices in such Report to the prices in the applicable pricing appraisal
report provided by the custodian of the Trust's assets to the Trust for
purposes of valuing securities in the Trust's portfolio and verified that
such information agrees (in the event such information does not agree, the
Independent Accountant will provide a listing in
-63-
its letter of such differences) (such confirmation is herein called the
"Accountant's Confirmation"). Notwithstanding the foregoing sentence, the
Independent Accountant will provide the confirmation described in the
foregoing sentence with respect to Preferred Shares Basic Maintenance
Reports delivered pursuant to the third sentence of Section 11.7(b) above
only for such Preferred Shares Basic Maintenance Reports relating to the
last fiscal quarter of each fiscal year.
(d) Within ten Business Days after the date of delivery to the Auction
Agent and Xxxxx'x of a Preferred Shares Basic Maintenance Report in
accordance with Section 11.7(b) above relating to the Preferred Shares Basic
Maintenance Cure Date with respect to such failure, the Trust shall cause
the Independent Accountant to provide to the Auction Agent and Xxxxx'x an
Accountant's Confirmation as to such Preferred Shares Basic Maintenance
Report.
(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 Xxxxx'x 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) Within five Business Days after the Date of Original Issue of the
AMPS, the Trust will complete and deliver to Xxxxx'x a Preferred Shares
Basic Maintenance Report as of the close of business on such Date of
Original Issue. Also, on or before 5:00 p.m., New York City time, on the
first Business Day after any Common Shares are repurchased by the Trust, the
Trust will complete and deliver to Fitch Ratings and Xxxxx'x a Preferred
Shares Basic Maintenance Report as of the close of business on such date
that Common Shares are repurchased.
-64-
11.8 Certain Other Restrictions.
(a) For so long as any AMPS 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 Xxxxx'x that
engaging in such transactions would not impair the ratings then assigned to
the AMPS by Xxxxx'x, except that the Trust may purchase or sell
exchange-traded financial futures contracts based on any index approved by
Xxxxx'x or Treasury Bonds, and purchase, write or sell exchange-traded put
options on such financial futures contracts, any index approved by Xxxxx'x
or Treasury Bonds, and purchase, write or sell exchange-traded call options
on such financial futures contracts, any index approved by Xxxxx'x or
Treasury Bonds (collectively "Xxxxx'x Hedging Transactions"), subject to the
following limitations:
(i) the Trust will not engage in any Xxxxx'x Hedging Transaction
based on any index approved by Xxxxx'x (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% (or such higher percentage as Xxxxx'x may
approve) 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; or
(B) outstanding financial futures contracts based on any index
approved by Xxxxx'x having a Market Value exceeding 50% (or such
higher percentage as Xxxxx'x may approve) of the Market Value of all
portfolio securities of the Trust constituting Xxxxx'x Eligible
Assets owned by the Trust (other than Xxxxx'x Eligible Assets already
subject to a Xxxxx'x Hedging Transaction);
(ii) the Trust will not engage in any Xxxxx'x 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% (or such higher percentage as Xxxxx'x may approve) of the
aggregate Market Value of Xxxxx'x Eligible Assets owned by the Trust
and rated Aa or higher by Xxxxx'x (or, if not rated by Xxxxx'x but
rated by S&P or Fitch Ratings, rated AAA by S&P or Fitch Ratings); 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 Xxxxx'x Eligible Assets owned by the Trust (other
than Xxxxx'x Eligible Assets already subject to a Xxxxx'x Hedging
Transaction) and rated Baa or A by Xxxxx'x (or, if not rated by
Xxxxx'x but rated by S&P or Fitch Ratings, rated A or AA by S&P or
Fitch Ratings)
(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
Xxxxx'x 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
Xxxxx'x and the Trust;
-65-
(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 Xxxxx'x Hedging Transactions only with
respect to financial futures contracts or options thereon having the
next settlement date or the settlement date immediately thereafter;
(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
Trust'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 Trust'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) while the Trust may use options and futures transactions for
hedging and risk management purposes, it will not enter into an option
or futures transaction unless, after giving effect thereto, the Trust
would continue to have Xxxxx'x 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 Xxxxx'x Eligible
Assets with an aggregate Discounted Value that equals or exceeds the
Preferred Shares Basic Maintenance Amount, the Discounted Value of Xxxxx'x
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,
-66-
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 Xxxxx'x 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 Xxxxx'x Eligible
Assets held by the Trust to the extent the relevant asset is a Xxxxx'x
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 AMPS are rated by Xxxxx'x, 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 Xxxxx'x 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 Xxxxx'x or A-1 by S&P or Fitch
Ratings 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
-67-
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 Xxxxx'x 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 Xxxxx'x 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 AMPS are Outstanding and Fitch Ratings or Xxxxx'x
or both are rating such shares, the Trust, unless it has received written
confirmation from Fitch Ratings or Xxxxx'x or both, as applicable, that such
action would not impair the rating then assigned to the AMPS by Fitch
Ratings or Xxxxx'x 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 Xxxxx'x
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 AMPS 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 AMPS are rated by Fitch Ratings, 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
-68-
Ratings that engaging in such transactions would not impair the ratings then
assigned to the AMPS by Fitch Ratings, except that the Trust may purchase or
sell exchange-traded financial futures contracts based on any index approved
by Fitch Ratings or Treasury Bonds, and purchase, write or sell
exchange-traded put options on such financial futures contracts, any index
approved by Fitch Ratings or Treasury Bonds and purchase, write or sell
exchange-traded call options on such financial futures contracts, any index
approved by Fitch Ratings 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 Ratings (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 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 at least AA by Fitch Ratings (or, if not rated by
Fitch Ratings, rated at least Aa by Xxxxx'x; or, if not rated by
Xxxxx'x, 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 at least A or BBB by Fitch
Ratings (or, if not rated by Fitch Ratings, rated at least Baa by
Xxxxx'x; or, if not rated by Xxxxx'x, rated at least 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 Ratings 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 Ratings 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.
-69-
(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;
(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
-70-
(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 AMPS are rated by Fitch Ratings, the Trust will
not enter into any Forward Commitments, except that the Trust may enter into
Forward Commitments subject to the following limitations:
(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 Ratings (or, if not rated by Fitch Ratings,
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) "AMPS" means the AMPS being auctioned pursuant to this
Section 11.10
(ii) "Auction Date" means the first Business Day preceding the first
day of a Dividend Period.
(iii) "Available AMPS" has the meaning specified in
Section 11.10(d)(i)(A) below.
(iv) "Bid" has the meaning specified in Section 11.10(b)(i)(B) below.
(v) "Bidder" has the meaning specified in Section 11.10(b)(i)(B)
below.
-71-
(vi) "Hold Order" has the meaning specified in Section 11.10(b)(i)(B)
below.
(vii) "Maximum Applicable Rate" for any Dividend Period will be the
greater of the Applicable Percentage of the Reference Rate or the
Applicable Spread plus the Reference Rate. The Auction Agent will round
each applicable Maximum Applicable Rate to the nearest one-thousandth
(.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 (.001) of one percent. The Auction Agent will not round
the applicable Reference Rate as part of its calculation of the 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 Xxxxx
Ratings as follows:
Credit Ratings
--------------------------------------------------------------- Applicable
Xxxxx'x Fitch Percentage
------------------------------ ------------------------------- ----------
Aaa AAA 125%
Aa3 to Aa1 AA- to AA+ 150%
A3 to A1 A- to A+ 200%
Baa3 to Baa1 BBB- to BBB+ 250%
Ba1 and lower BB+ and lower 300%
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 the Board of Trustees has received assurance from Xxxxx'x, Xxxxx
Ratings and from any other Rating Agency then rating the AMPS that such
increase will not impair such Rating Agency's rating thereof, and further
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 or Fitch
Ratings to provide a rating for each series of AMPS. If Xxxxx'x or Xxxxx
Ratings shall not make such a rating available, Xxxxxxx Lynch, Pierce,
Xxxxxx and Xxxxx Incorporated or its affiliates and successors, after
consultation with the Trust, shall select another Rating Agency to act as a
Substitute Rating Agency.
"Applicable Spread" means the spread determined based on the credit
rating assigned to the series of AMPS on such date by Xxxxx'x and Fitch
Ratings as follows:
Credit Ratings
--------------------------------------------------- Applicable Spread over
Xxxxx'x Fitch Reference Rate
------------------------- ------------------------ ----------------------
Aaa AAA 125 bps
Aa3 to Aa1 AA- to AA+ 150 bps
A3 to A1 A- to A+ 200 bps
Baa3 to Baa1 BBB- to BBB+ 250 bps
Ba1 and lower BB+ and lower 300 bps
-72-
The Applicable Spread as so determined will be further subject to upward
but not downward adjustment in the discretion of the Board of Directors
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 will take all
reasonable action necessary to enable either Xxxxx'x or Fitch to provide a
rating for each series of AMPS. If neither Xxxxx'x nor Fitch will make such
a rating available, the Trust will select another Rating Agency to act as a
substitute Rating Agency.
For purposes of this definition, the "prevailing rating" of shares of a
series of AMPS will be (i) AAA if such shares have a rating of AAA by
Xxxxx'x or Fitch or the equivalent of such ratings by such agencies or
substitute rating agencies selected as provided below; (ii) if not AAA, then
AA- if such shares have a rating of AA- or better by Xxxxx'x or Fitch or the
equivalent of such ratings by such agencies or substitute rating agencies
selected as provided below, (iii) if not AA- or higher, than A- if such
shares have a rating of A- or better by Xxxxx'x or Fitch or the equivalent
of such ratings by such agencies or substitute rating agencies selected as
provided below, (iv) if not A- or higher then BBB- if such shares have a
rating of BBB- or better by Xxxxx'x or Fitch or the equivalent of such
ratings by such agencies or substitute rating agencies selected as provided
below, (v) if not BBB- or higher, then below BBB-; provided, however, that
if such shares are rated by only one rating agency, the prevailing rating
will be determined without reference to the rating of any other rating
agency.
(viii) "Order" has the meaning specified in Section 11.10(b)(i)(B)
below.
(ix) "Sell Order" has the meaning specified in Section 11.10(b)(i)(B)
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) "Submission Processing Deadline" means the earlier of (i) 40
minutes after the Submission Deadline and (ii) the time when the Auction
Agent begins to disseminate the results of the Auction to the
Broker-Dealers.
(xii) "Submitted Bid" has the meaning specified in
Section 11.10(d)(i) below.
(xiii) "Submitted Hold Order" has the meaning specified in
Section 11.10(d)(i) below.
-73-
(xiv) "Submitted Order" has the meaning specified in
Section 11.10(d)(i) below.
(xv) "Submitted Sell Order" has the meaning specified in
Section 11.10(d)(i) below.
(xvi) "Sufficient Clearing Bids" has the meaning specified in
Section 11.10(d)(i) below.
(xvii) "Winning Bid Rate" has the meaning specified in
Section 11.10(d)(i)(C) 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 AMPS in its own account as a Beneficial
Owner. A Broker-Dealer may thus submit Orders to the Auction Agent as a
Beneficial Owner or a Potential Beneficial Owner and therefore
participate in an Auction as an Existing Holder or Potential Holder on
behalf of both itself and its customers. On or prior to the Submission
Deadline on each Auction Date:
(A) each Beneficial Owner may submit to its Broker-Dealer
information as to:
(1) the number of Outstanding AMPS, 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 AMPS, 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 AMPS, 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 in a commercially
reasonable manner for the
-74-
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 AMPS, 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 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 a Beneficial Owner or an Existing Holder shall
constitute an irrevocable offer to sell:
(1) the number of Outstanding AMPS specified in such Bid if
the Applicable Rate determined on such Auction Date shall be less
than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding AMPS 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 AMPS 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 a Beneficial Owner or an Existing Holder shall
constitute an irrevocable offer to sell:
(1) the number of Outstanding AMPS specified in such Sell
Order; or
-75-
(2) such number or a lesser number of Outstanding AMPS 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 AMPS specified in such Bid if
the Applicable Rate determined on such Auction Date shall be
higher than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding AMPS 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 Processing Deadline on each Auction Date all Orders that were
(x) received by the Broker-Dealer from Beneficial Owners or Potential
Beneficial Owners prior to the Submission Deadline or (y) initiated
internally by the Broker-Dealer for its own account prior to the
Submission Deadline, in each case 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 AMPS that are the subject
of such Order;
(C) to the extent that such Bidder is a Beneficial Owner or an
Existing Holder:
(1) the number of Outstanding AMPS, if any, subject to any
Hold Order placed by such Beneficial Owner or Existing Holder;
(2) the number of Outstanding AMPS, if any, subject to any Bid
placed by such Beneficial Owner or Existing Holder and the rate
per annum specified in such Bid; and
-76-
(3) the number of Outstanding AMPS, if any, subject to any
Sell Order placed by such Beneficial Owner or 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 AMPS held
by an Existing Holder are not submitted to the Auction Agent prior to
the Submission Processing Deadline, the Auction Agent shall deem a Hold
Order (in the case of any Auction other than an Auction relating to a
Special Dividend Period longer than 91 days) or a Sell Order (in the
case of an Auction relating to a Special Dividend Period of longer than
91 days) to have been submitted on behalf of such Existing Holder
covering the number of Outstanding AMPS held by such Existing Holder and
not subject to Orders submitted to the Auction Agent.
(iv) If one or more Orders on behalf of an Existing Holder covering
in the aggregate more than the number of Outstanding AMPS held by such
Existing Holder are submitted to the Auction Agent, such Order shall be
considered valid as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder
shall be considered valid up to and including the number of
Outstanding AMPS held by such Existing Holder; provided that if more
than one Hold Order is submitted on behalf of such Existing Holder
and the number of AMPS subject to such Hold Orders exceeds the number
of Outstanding AMPS held by such Existing Holder, the number of AMPS
subject to each of such Hold Orders shall be reduced pro rata so that
such Hold Orders, in the aggregate, will cover exactly the number of
Outstanding AMPS held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder shall be
considered valid, in the ascending order of their respective rates
per annum if more than one Bid is submitted on behalf of such
Existing Holder, up to and including the excess of the number of
Outstanding AMPS held by such Existing Holder over the number of AMPS
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
-77-
(C) any Sell Order shall be considered valid up to and including
the excess of the number of Outstanding AMPS held by such Existing
Holder over the number of AMPS 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 AMPS
subject to such Sell Orders is greater than such excess, the number
of AMPS subject to each of such Sell Orders shall be reduced pro rata
so that such Sell Orders, in the aggregate, cover exactly the number
of AMPS equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate per
annum and number of AMPS therein specified.
(vi) Any Order submitted by a Beneficial Owner as a Potential
Beneficial Owner to its Broker-Dealer prior to the Submission Deadline,
or by a Broker-Dealer to the Auction Agent, prior to the Submission
Processing 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, more generally, as a
"Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding AMPS over the
number of Outstanding AMPS that are the subject of Submitted Hold
Orders (such excess being hereinafter referred to as the "Available
AMPS");
(B) from the Submitted Orders whether the number of Outstanding
AMPS that are the subject of Submitted Bids by Potential Holders
specifying one or more rates per annum equal to or lower than the
Maximum Applicable Rate exceeds or is equal to the sum of:
(1) the number of Outstanding AMPS that are the subject of
Submitted Bids by Existing Holders specifying one or more rates
per annum higher than the Maximum Applicable Rate, and
-78-
(2) the number of Outstanding AMPS that are subject to
Submitted Sell Orders (if such excess or such equality exists
(other than because the number of Outstanding AMPS in clause
(1) above and this clause (2) are each zero because all of the
Outstanding AMPS are the subject of Submitted Hold Orders), such
Submitted Bids by Potential Holders being hereinafter referred to
collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum
specified in the Submitted Bids (the "Winning Bid Rate") that if:
(1) each Submitted Bid from Existing Holders specifying the
Winning Bid Rate and all other Submitted Bids from Existing
Holders specifying lower rates per annum were rejected, thus
entitling such Existing Holders to continue to hold the AMPS that
are the subject of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the
Winning Bid Rate and all other Submitted Bids from Potential
Holders specifying lower rates per annum were accepted, thus
entitling the Potential Holders to purchase the AMPS that are the
subject of such Submitted Bids, would result in the number of
shares subject to all Submitted Bids specifying the Winning Bid
Rate or a lower rate per annum being at least equal to the
Available AMPS.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to 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 AMPS are the subject of Submitted Hold
Orders), that the Applicable Rate for the next succeeding Dividend
Period shall be equal to the Maximum Applicable Rate; or
(C) if all of the Outstanding AMPS are the subject of Submitted
Hold Orders, that the Dividend Period next succeeding the Auction
shall automatically be the same length as the immediately preceding
Dividend Period and the Applicable Rate for the next succeeding
Dividend Period shall be equal to 80% of the Reference Rate on the
date of the Auction.
-79-
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares. Existing Holders shall continue to hold the AMPS
that are subject to Submitted Hold Orders, and, 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 Holder to
sell the Outstanding AMPS that are the subject of such Submitted Sell
Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying
any rate per annum that is lower than the Winning Bid Rate shall be
rejected, thus entitling each such Existing Holder to continue to
hold the Outstanding AMPS that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders specifying
any rate per annum that is lower than the Winning Bid Rate shall be
accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be
rejected, thus entitling each such Existing Holder to continue to
hold the Outstanding AMPS that are the subject of such Submitted Bid,
unless the number of Outstanding AMPS subject to all such Submitted
Bids shall be greater than the number of Outstanding AMPS ("Remaining
Shares") equal to the excess of the Available AMPS over the number of
Outstanding AMPS 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 AMPS,
but only in an amount equal to the difference between (1) the number
of Outstanding AMPS then held by such Existing Holder subject to such
Submitted Bid and (2) the number of AMPS obtained by multiplying
(x) the number of Remaining Shares by (y) a fraction the numerator of
which shall be the number of Outstanding AMPS held by such Existing
Holder subject to such Submitted Bid and the denominator of which
shall be the sum of the number of Outstanding AMPS subject to such
Submitted Bids made by all such Existing Holders that specified a
rate per annum equal to the Winning Bid Rate; and
-80-
(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
AMPS obtained by multiplying (x) the difference between the Available
AMPS and the number of Outstanding AMPS 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 AMPS subject to such Submitted Bid and
the denominator of which shall be the number of Outstanding AMPS
subject to such Submitted Bids made by all such Potential Holders
that specified rates per annum equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding AMPS are subject to Submitted Hold
Orders), subject to the 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 AMPS that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate
shall be accepted, thus requiring such Potential Holder to purchase
the Outstanding AMPS that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any rate
per annum that is higher than the Maximum Applicable Rate shall be
accepted and the Submitted Sell Orders of each Existing Holder shall
be accepted, in both cases only in an amount equal to the difference
between (1) the number of Outstanding AMPS then held by such Existing
Holder subject to such Submitted Bid or Submitted Sell Order and
(2) the number of AMPS obtained by multiplying (x) the difference
between the Available AMPS and the aggregate number of Outstanding
AMPS 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 AMPS held by such Existing Holder
subject to such Submitted Bid or Submitted Sell Order and the
denominator of which shall be the number of Outstanding AMPS subject
to all such Submitted Bids and Submitted Sell Orders. If all of the
Outstanding shares of a series of AMPS are subject to Submitted Hold
Orders, all Submitted Bids for shares of such series shall be
rejected.
(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 an Auction Market 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 AMPS to be purchased or sold
by any Existing Holder or Potential Holder on such Auction Date so that
each Outstanding Auction Market Preferred Share purchased or sold by
each Existing Holder or Potential Holder on such Auction Date shall be a
whole Auction Market Preferred Share.
-81-
(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 Auction Market Preferred Share on any Auction Date, the Auction
Agent shall, in such manner as in its sole discretion it shall
determine, allocate AMPS for purchase among Potential Holders so that
only whole AMPS are purchased on such Auction Date by any Potential
Holder, even if such allocation results in one or more of such Potential
Holders not purchasing any AMPS on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or
Sell Orders on behalf of Existing Holders or Potential Holders, the
aggregate number of Outstanding AMPS to be purchased and the aggregate
number of the Outstanding AMPS to be sold by such Potential Holders and
Existing Holders and, to the extent that such aggregate number of
Outstanding shares to be purchased and such aggregate number of
Outstanding shares to be sold differ, the Auction Agent shall determine
to which other Broker-Dealer or Broker-Dealers acting for one or more
purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, Outstanding AMPS.
(f) Miscellaneous.
(i) To the extent permitted by applicable law, the Trust may in its
sole discretion 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 AMPS.
(ii) Unless otherwise permitted by the Trust, a Beneficial Owner or
an Existing Holder (A) may sell, transfer or otherwise dispose of AMPS
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
AMPS held by it maintained in book entry form by the Securities
Depository in the account of its Agent Member, which in turn will
maintain records of such Beneficial Owner's beneficial ownership. The
Trust may not submit an Order in any Auction.
(iii) All of the Outstanding AMPS 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 AMPS may be registered in
the Share 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.
-82-
11.11 Securities Depository; Stock Certificates.
(a) If there is a Securities Depository, all of the AMPS 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 AMPS. All such certificates shall bear a legend to
the effect that such certificates are issued subject to the provisions
restricting the transfer of AMPS contained in these Bylaws. Unless the Trust
shall have elected, during a Non-Payment Period, to waive this requirement,
the Trust will also issue stop-transfer instructions to the Auction Agent
for the AMPS. Except as provided in paragraph (b) below, the Securities
Depository or its nominee will be the Holder, and no Beneficial Owner shall
receive certificates representing its ownership interest in such shares.
(b) If the Applicable Rate applicable to all AMPS 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 requires a vote or consent of Shareholders or a higher vote or
consent by the Trustees and/or the Continuing Trustees, these Bylaws may be
amended, changed, altered or repealed, in whole or part, only by resolution of
a majority of the Trustees and a majority of the Continuing Trustees then in
office at any meeting of the Trustees, or by one or more writings signed by
such Trustees and Continuing 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 thereto 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 AMPS or additional
shares of a series of AMPS (and terms relating thereto) to the series and AMPS
described herein, provided that the Board of Trustees shall not authorize,
create or issue an additional series of AMPS unless it has received assurance
from Xxxxx'x, Xxxxx Ratings and from any other Rating Agency then rating the
AMPS that such authorization, creation or issuance will not impair such Rating
Agency's then current rating thereof. Each such additional series and all such
additional AMPS shall be governed by the terms of Article 11.
-83-
