-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R0/C5zJKgw7maLvPgXNnH/keO4goEV/4uKATdHhJvzTl39qzZESqFrIkTv6rFYDg ZpKRYNVaHxH03zGEdW7xtQ== 0000902561-02-000214.txt : 20020430 0000902561-02-000214.hdr.sgml : 20020430 ACCESSION NUMBER: 0000902561-02-000214 CONFORMED SUBMISSION TYPE: POS AMI PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20020430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DNP SELECT INCOME FUND INC CENTRAL INDEX KEY: 0000806628 IRS NUMBER: 363480989 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AMI SEC ACT: 1940 Act SEC FILE NUMBER: 811-04915 FILM NUMBER: 02627595 BUSINESS ADDRESS: STREET 1: PO BOX 32760 CITY: LOUISVILLE STATE: KY ZIP: 40232 BUSINESS PHONE: 3123685510 MAIL ADDRESS: STREET 1: PO BOX 32760 CITY: LOUISVILLE STATE: KY ZIP: 40232 FORMER COMPANY: FORMER CONFORMED NAME: DUFF & PHELPS SELECTED UTILITIES INC DATE OF NAME CHANGE: 19910429 POS AMI 1 posami.txt As filed with the Securities and Exchange Commission on April 30, 2002 Investment Company Act file no. 811-4915 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------ FORM N-2 ------- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 44 [X] ------- DNP SELECT INCOME FUND INC. (Exact name of registrant as specified in charter) ------- 55 East Monroe Street Chicago, Illinois 60603 (Address of principal executive offices) Registrant's telephone number: 312/368-5510 Nathan I. Partain John R. Sagan DNP Select Income Fund Inc. Mayer, Brown, Rowe & Maw 55 East Monroe Street 190 South LaSalle Street Chicago, Illinois 60603 Chicago, Illinois 60603 (Names and addresses of agents for service) It is proposed that this filing will become effective: [X] immediately upon filing. [ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment. -1- ================================================================================ PART A: INFORMATION REQUIRED IN A PROSPECTUS Item 1. Outside Front Cover Not applicable. Item 2. Cover Pages; Other Offering Information Not applicable. Item 3. Fee Table and Synopsis 1. Shareholder Transaction Expenses Sales Load (as a percentage of offering price)........................N/A Dividend Reinvestment and Cash Purchase Plan Fees.....................(1) Annual Expenses (as a percentage of net assets attributable to common shares) Management Fees.................................................... 0.74% Interest Payments on Borrowed Funds................................ 0.46% Other Expenses..................................................... 0.37% Total Annual Expenses.......................................1.57% Example (2) 1 year 2 years 5 years 10 years You would pay the following expenses on a $1,000 investment, assuming a 5% annual return $16 $32 $86 $187 (1) Shareholders that reinvest dividends and/or capital gains distributions will be charged only brokerage fees in the event that shares are purchased in the open market. Investors investing cash in addition to any cash dividends reinvested will be charged brokerage commissions plus a service fee of $2.50 per transaction. See Item 10.1(c). (2) This Example should not be considered a representation of future expenses, and actual expenses may be greater or lesser than those shown. The purpose of the foregoing table is to assist an investor in understanding the costs and expenses that an investor will bear directly or indirectly, and the information contained therein is not necessarily indicative of future performance. See Item 9. 2. Not applicable. 3. Not applicable. 1 Item 4. Financial Highlights Not applicable. Item 5. Plan of Distribution Not applicable. Item 6. Selling Shareholders Not applicable. Item 7. Use of Proceeds Not applicable. Item 8. General Description of the Registrant 1. General (a) The Registrant, DNP Select Income Fund Inc. (the "Fund"), is a corporation organized under the laws of the State of Maryland on November 26, 1986. (b) The Fund is a diversified closed-end investment company. 2. Investment Objectives and Policies Investment objectives The Fund's primary investment objectives are current income and long-term growth of income. Capital appreciation is a secondary objective. Principal investment strategies The Fund seeks to achieve its investment objectives by investing primarily in a diversified portfolio of equity and fixed income securities of companies in the public utilities industry. Under normal conditions, more than 65% of the Fund's total assets will be invested in securities of public utility companies engaged in the production, transmission or distribution of electric energy, gas or telephone services. The Fund's investment objectives stated in the preceding paragraph and its policy of concentrating its investments in the utilities industry are fundamental policies and may not be changed without the approval of the holders of a "majority" (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of the outstanding shares of the common stock and the preferred stock voting together as one class, which means the lesser of (i) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares. 2 Fundamental investment restrictions The following are fundamental investment restrictions of the Fund that may be changed only with approval of the holders of a "majority" (as defined in the 1940 Act) of the outstanding shares of the common stock and the preferred stock voting together as one class: 1. The Fund may not invest more than 25% of its total assets (valued at the time of investment) in securities of companies engaged principally in any one industry other than the utilities industry, which includes companies engaged in the production, transmission or distribution of electric energy or gas or in telephone services, except that this restriction does not apply to securities issued or guaranteed by the United States Government or its agencies or instrumentalities. 2. The Fund may not: (a) invest more than 5% of its total assets (valued at the time of the investment) in the securities of any one issuer, except that this restriction does not apply to United States Government securities; or (b) acquire more than 10% of the outstanding voting securities of any one issuer (at the time of acquisition); except that up to 25% of the Fund's total assets (at the time of investment) may be invested without regard to the limitations set forth in this restriction. 3. The Fund may borrow money on a secured or unsecured basis for any purpose of the Fund in an aggregate amount not exceeding 15% of the value of the Fund's total assets at the time of any such borrowing (exclusive of all obligations on amounts held as collateral for securities loaned to other persons to the extent that such obligations are secured by assets of at least equivalent value). 4. The Fund may not pledge, mortgage or hypothecate its assets, except to secure indebtedness permitted by restriction 3 above. (The deposit in escrow of securities in connection with the writing of put and call options, collateralized loans of securities and collateral arrangements with respect to margin requirements for futures transactions and with respect to segregation of securities in connection with forward contracts are not deemed to be pledges or hypothecations for this purpose.) 5. The Fund may make loans of securities to other persons to the extent of not more than 33 1/3% of its total assets (valued at the time of the making of loans), and may invest without limitation in short-term obligations and publicly distributed obligations. 6. The Fund may not underwrite the distribution of securities of other issuers, although it may acquire securities that, in the event of a resale, might be required to be registered under the Securities Act of 1933, as amended, because the Fund could be regarded as an underwriter as defined in that act with respect to the resale. 7. The Fund may not purchase or sell real estate or any interest therein, except that the Fund may invest in securities secured by real estate or interests therein, such as mortgage pass-throughs, pay-throughs, collateralized mortgage obligations, and securities issued by companies (including partnerships and real estate investment trusts) that invest in real estate or interests therein. 8. The Fund may acquire securities of other investment companies to the extent (at the acquisition) of (i) not more than 3% of the outstanding voting stock of any one investment company, (ii) not more than 5% of the assets of the Fund in any one investment company and (iii) not more than 10% of the assets of the Fund in all investment companies (exclusive in each case of securities received as a dividend or as a result of a merger, consolidation or other plan of reorganization). 9. The Fund may not invest for the purpose of exercising control over or management of any company. 10. The Fund may not purchase securities on margin, or make short sales of securities, except the use of short-term credit necessary for the clearance of purchases and sales of portfolio securities, but it may make margin deposits in connection with transactions in options, futures and options on futures. 3 11. The Fund may not purchase or sell commodities or commodity contracts, except that it may enter into (i) stock index futures transactions, interest rate futures transactions and options on such future transactions and (ii) forward contracts on foreign currencies to the extent permitted by applicable law. 12. The Fund may not issue any security senior to its common stock, except that the Fund may borrow money subject to investment restriction 3 and except as permitted by the Fund's charter. If a percentage restriction set forth above is adhered to at the time a transaction is effected, later changes in percentages resulting from changes in value or in the number of outstanding securities of an issuer will not be considered a violation. Other Significant Investment Policies Fixed Income Securities. The Fund purchases a fixed income security only if, at the time of purchase, it is (i) rated investment grade by at least two of the following three nationally recognized statistical rating organizations: Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), and Fitch IBCA, Inc. ("Fitch") or (ii) determined by the Fund's investment adviser to be of investment grade and not rated below investment grade by any of the aforementioned rating services. A fixed income security rated investment grade has a rating of BBB- or better by Fitch, Baa3 or better by Moody's, or BBB- or better by S&P. In making its determination that a fixed income security is investment grade, the Fund's investment adviser will use the standards used by a nationally recognized statistical rating organization. Leverage. The Fund is authorized to borrow money in amounts of up to 15% of the value of its total assets at the time of such borrowings. However, for so long as the Fund's preferred stock is rated by S&P, the Fund will limit the aggregate amount of its borrowings to 10% of the value of its total assets and will not incur any borrowings, unless advised by S&P that such borrowings would not adversely affect S&P's then-current rating of the preferred stock. Lending of Portfolio Securities. In order to generate additional income, the Fund may from time to time lend securities from its portfolio, with a value not in excess of 33 1/3% of its total assets, to brokers, dealers and financial institutions such as banks and trust companies for which it will receive collateral in cash, United States Government securities or an irrevocable letter of credit that will be maintained in an amount equal to at least 100% of the current market value of the loaned securities. Rating Agency Guidelines. The Fund's preferred stock is currently rated by Moody's, S&P and Fitch, nationally recognized statistical rating organizations, which issue ratings for various securities reflecting the perceived creditworthiness of those securities. The Fund intends that, so long as shares of its preferred stock are outstanding, the composition of its portfolio will reflect guidelines established by the foregoing rating organizations in connection with the Fund's receipt of the highest rating for its preferred stock from at least two of such rating organizations. Options and Futures Transactions. The Fund may seek to increase its current return by writing covered options. In addition, through the writing and purchase of options and the purchase and sale of futures contracts and related options, the Fund may at times seek to hedge against a decline in the value of securities owned by it or an increase in the price of securities which it plans to purchase. However, for so long as shares of the Fund's preferred stock are rated either by Moody's or S&P, the Fund will not purchase or sell futures contracts or related options or engage in other hedging transactions unless Moody's or S&P, as the case may be, advises the Fund that such action or actions will not adversely affect its then-current rating of the Fund's preferred stock. Temporary Investments. For temporary defensive purposes, the Fund may be invested primarily in money market securities. These securities include securities issued or guaranteed by the United States Government and its agencies and instrumentalities, commercial paper and certificates of deposit. To the extent that the Fund engages in such defensive investments, it may not achieve its investment objectives. 4 Nonfundamental Restrictions. The Fund may not (i) invest in securities subject to legal or contractual restrictions on resale, if, as a result of such investment, more than 10% of the Fund's total assets would be invested in such securities, or (ii) acquire 5% or more of the outstanding voting securities of a public utility company. Each of the policies and restrictions described above may be changed by the board of directors without the approval of the Fund's shareholders. If a percentage restriction set forth above is adhered to at the time a transaction is effected, later changes in percentages resulting from changes in value or in the number of outstanding securities of an issuer will not be considered a violation. 3. Risk Factors Leverage. As of December 31, 2001, the Fund had outstanding indebtedness of $197,397,331 and five series of preferred stock with an aggregate liquidation preference of $500 million. The dividend rate on each series of preferred stock is reset every 49 days through a remarketing procedure. As of April 6, 2002, the dividend rate on the five series of preferred stock averaged 1.56% and the interest rate on the Fund's outstanding indebtedness averaged 2.06%. The Fund must experience an annual return of 0.46% on its portfolio in order to cover annual interest and dividend payments on the Fund's outstanding indebtedness and preferred stock. Leverage creates certain risks for holders of common stock, including higher volatility of both the net asset value and market value of the common stock. Fluctuations in dividend rates on the preferred stock and interest rates on the Fund's indebtedness will affect the dividend to holders of common stock. Holders of the common stock receive all net income from the Fund remaining after payment of dividends on the preferred stock and interest on the Fund's indebtedness, and generally are entitled to a pro rata share of net realized capital gains, if any. Upon any liquidation of the Fund, the holders of shares of preferred stock will be entitled to liquidating distributions (equal to $100,000 per share of preferred stock plus any accumulated and unpaid dividends thereon) and the holders of the Fund's indebtedness will be entitled to receive repayment of outstanding principal plus accumulated and unpaid interest thereon before any distribution is made to holders of common stock. The leverage obtained through the issuance of the preferred stock and from the Fund's presently outstanding indebtedness has provided holders of common stock with a higher dividend than such holders would have otherwise received. However, there can be no assurance that the Fund will be able to continue to realize such a higher net return on its investment portfolio. Changes in certain factors could cause the relationship between the dividends paid on the preferred stock and interest paid on the Fund's indebtedness to increase relative to the dividend and interest rates on the portfolio securities in which the Fund may be invested. Under such conditions the benefit of leverage to holders of common stock will be reduced and the Fund's leveraged capital structure could result in a lower rate of return to holders of common stock than if the Fund were not leveraged. The Fund is required by the 1940 Act to maintain an asset coverage of 200% on outstanding preferred stock and 300% on outstanding indebtedness. If the asset coverage declines below those levels (as a result of market fluctuations or otherwise), the Fund may be required to sell a portion of its investments at a time when it may be disadvantageous to do so. The following table illustrates the effects of leverage on a return to common stockholders. The figures appearing in the table are hypothetical and actual returns may be greater or less than those appearing in the table. - -------------------------------------------------------------------------------- Assumed annual return on -10.00% -5.00% 0.00% 5.00% 10.00% portfolio (net of expenses) - -------------------------------------------------------------------------------- Corresponding annual return -14.81% -8.05% -1.29% 5.46% 12.22% to common stockholder - -------------------------------------------------------------------------------- Investments in Securities of Foreign Issuers. While the Fund is prohibited from investing 15% or more of its assets in securities of foreign issuers, the Fund may be exposed to certain risks as a result of foreign investments. Investing in securities of foreign issuers 5 involves certain considerations not typically associated with investing in securities of U.S. companies, including (a) controls on foreign investment and limitations on repatriation of invested capital and on the Fund's ability to exchange local currencies for U.S. dollars, (b) greater price volatility, substantially less liquidity and significantly smaller market capitalization of securities markets, (c) currency devaluations and other currency exchange rate fluctuations, (d) more substantial government involvement in the economy, (e) higher rates of inflation, (f) less government supervision and regulation of the securities markets and participants in those markets and (g) political uncertainty and other considerations. The Fund will treat investments in countries with repatriation restrictions as illiquid for purposes of any applicable limitations under the 1940 Act; however, as a closed-end fund, the Fund is not currently limited under that Act in the amount of illiquid securities it may acquire. Because of the limited forward market for the purchase of U.S. dollars in most foreign countries and the limited circumstances in which the Fund expects to hedge against declines in the value of foreign country currencies generally, the Fund will be adversely affected by devaluations of foreign country currencies against the U.S. dollar to the extent the Fund is invested in securities denominated in currencies experiencing a devaluation. The Fund's fundamental investment policies permit the Fund to enter into currency hedging transactions. In addition, accounting, auditing and financial reporting standards in foreign countries are different from U.S. standards. As a result, certain material disclosures may not be made and less information may be available to the Fund and other investors than would be the case if the Fund's investments were restricted to securities of U.S. issuers. Moreover, it may be more difficult to obtain a judgment in a court outside the United States. Interest and dividends paid on securities held by the Fund and gains from the disposition of such securities may be subject to withholding taxes imposed by foreign countries. Anti-takeover Provisions. Certain provisions of the Fund's charter may be regarded as "anti-takeover" provisions because they could have the effect of limiting the ability of other entities or persons to acquire control of the Fund. See Item 10.l(e). Premium/Discount From Net Asset Value. Shares of closed-end investment companies trade in the market above, at and below net asset value. This characteristic of shares of closed-end investment companies is a risk separate and distinct from the risk that the Fund's net asset value may decline. Since inception, the Fund's common stock has generally traded at a premium to net asset value. For example, in the two-year period ended December 31, 2001, as of the close of business of the New York Stock Exchange on the last day in each week on which the New York Stock Exchange was open (the date the Fund calculates its net asset value per share), the Fund's shares were trading at a premium to net asset value 87% of the time. The Fund usually does not calculate its net asset value per share on any other day and does not know whether the Fund's shares were trading at a premium to net asset value on such days. The Fund is not able to predict whether its shares will trade above, at or below net asset value in the future. Dividend Captures. The Fund acts to increase its dividend income using a strategy called "dividend capture." Under this strategy, the Fund purchases shares of stock of a particular issuer immediately prior to the market close on the stock's ex-dividend date and then writes a covered call option on the same number of shares of that issuer. The call option expires at 10:00 a.m. on the immediately following trading day. Because the Fund is the holder of the stock at the market close on the ex-dividend date, it is entitled to receive the dividend on the stock. If, as expected, the holder of the call option elects to exercise the option, the Fund will no longer hold the stock after 10:00 a.m. on the trading day immediately following the ex-dividend date. However, because of the possibility that the call option will not be exercised, the Fund utilizes this dividend capture strategy only in connection with equity securities that the Adviser has determined to be suitable for inclusion in the Fund's portfolio for a more extended period. During 2001, dividend captures accounted for approximately 35% of the Fund's investment income. The use of dividend captures entails certain costs and risks. Because the market price of the stock generally declines by the amount of the dividend immediately after the ex-dividend date, the Fund experiences a capital loss on the stock approximating the amount of the captured dividend. In addition, the 6 Fund incurs transaction costs in connection with the purchase of the stock and the sale of the option. In 2001 such transaction costs equaled approximately 0.1% of the value of the stock. It is also possible that the issuer of the stock could experience a material adverse event during the period between the time of purchase of the stock and the time of expiration of the option that would cause a decline in the market value of the stock significantly in excess of the expected decline that reflects the amount of the dividend. If this occurred, the option holder would likely decline to exercise the option, and the Fund would continue to hold the stock. 4. Other Policies None. 5. Share Price Data The Fund's common stock has been listed on the New York Stock Exchange since January 21, 1987 (trading symbol DNP). Since the commencement of trading, the Fund's common stock has most frequently traded at a premium to net asset value, but has periodically traded at a slight discount. The following table shows the range of the market prices of the Fund's common stock, net asset value of the Fund's shares corresponding to such high and low prices and the premium to net asset value presented by such high and low prices:
Market Premium (Discount) Market Price Net Asset Value at to Net Asset Value at Quarter Ended Market Market Market Market High Low High Low High Low 2002 March 31 $ 11.3700 $10.9000 $ 9.32 $ 9.13 22.00% 19.39% 2001 December 31 11.2500 10.7000 9.56 9.26 17.68% 15.55% September 30 11.2000 10.2000 9.77 9.13 14.64% 11.72% June 30 11.2000 10.4300 10.23 9.96 9.48% 4.72% March 31 10.9800 9.5625 9.88 9.80 11.13% (2.42%) 2000 December 31 10.8125 9.5000 10.28 9.90 5.18% (4.04%) September 30 10.0625 9.5000 9.87 8.95 1.95% 6.15% June 30 9.6875 8.6875 9.16 8.96 5.76% (3.04%) March 31 9.3125 8.3125 8.85 8.77 5.23% (5.22%)
On April 5, 2002, the net asset value was $9.30, trading prices ranged between $11.29 and $11.34 (representing a premium to net asset value of 21.40% and 21.94%, respectively) and the closing price was $11.32 (representing a premium to net asset value of 21.70%). 6. Business Development Companies Not applicable. Item 9. Management 1. General (a) Board of Directors The business and affairs of the Fund are managed under the direction of the board of directors. (b) Investment Adviser 7 The Fund's investment adviser (the "Adviser") is Duff & Phelps Investment Management Co., 55 East Monroe Street, Chicago, Illinois 60603. The Adviser (together with its predecessor) has been in the investment advisory business for more than 60 years and, excluding the Fund, currently has more than $4.3 billion in client accounts under discretionary management. The Adviser acts as adviser to two other closed-end investment companies registered under the 1940 Act and as sub-adviser to six open-end investment companies registered under the 1940 Act. The Adviser is a wholly-owned subsidiary of Phoenix Investment Partners, Ltd. ("Phoenix Investment Partners"), which is an indirect, wholly-owned subsidiary of The Phoenix Companies, Inc. Prior to May 11, 1998, Phoenix Investment Partners was known as Phoenix Duff & Phelps Corporation. Phoenix Investment Partners, through its subsidiaries, provides investment management, investment research, financial consulting and investment banking services. The Adviser is responsible for the management of the Fund's investment portfolio, subject to the overall control of the board of directors of the Fund. Under the terms of an investment advisory agreement between the Fund and the Adviser (the "Advisory Agreement"), the Adviser receives from the Fund a quarterly fee at an annual rate of .60% of the average weekly net asset value of the Fund up to $1.5 billion and .50% of average weekly net assets in excess of $1.5 billion. The net assets for each weekly period are determined by averaging the net assets at the end of a week with the net assets at the end of the prior week. For purposes of the foregoing calculation, "net assets" are defined as the sum of (i) the aggregate net asset value of the Fund's common stock, (ii) the aggregate liquidation preference of the Fund's preferred stock and (iii) the aggregate proceeds to the Fund of commercial paper issued by the Fund. Under the terms of a service agreement among the Adviser, Phoenix Investment Partners, and the Fund (the "Service Agreement"), Phoenix Investment Partners makes available to the Adviser the services, on a part-time basis, of its employees and various facilities to enable the Adviser to perform certain of its obligations to the Fund. However, the obligation of performance under the Advisory Agreement is solely that of the Adviser, for which Phoenix Investment Partners assumes no responsibility, except as described in the preceding sentence. The Adviser reimburses Phoenix Investment Partners for any costs, direct or indirect, fairly attributable to the services performed and the facilities provided by Phoenix Investment Partners under the Service Agreement. The Fund does not pay any fees pursuant to the Service Agreement. (c) Portfolio Management The Fund's portfolio is managed by Nathan I. Partain and T. Brooks Beittel. Mr. Partain has been responsible for the management of the equity investments in the Fund's portfolio since January 1998. He has been President and Chief Executive Officer of the Fund since February 2001 (Executive Vice President April 1998-February 2001, Chief Investment Officer January 1998-February 2001, Senior Vice President January 1997-April 1998, Assistant Secretary January 1997-February 2001); Executive Vice President, Duff & Phelps Investment Management Co. since January 1997; and Director of Utility Research, Phoenix Investment Partners, Ltd., 1989-1996 (Director of Equity Research, 1993-1996 and Director of Fixed Income Research, 1993). Mr. Beittel has been responsible for the management of the fixed income investments in the Fund's portfolio since April 1994. He has been Secretary, Treasurer and Senior Vice President of the Fund since January 1995; and Senior Vice President, Duff & Phelps Investment Management Co. since 1993 (Vice President 1987-1993). (d) Administrator The Fund's administrator (the "Administrator") is J.J.B. Hilliard, W.L. Lyons, Inc., Hilliard Lyons Center, Louisville, Kentucky 40202. The Administrator is a wholly-owned subsidiary of The PNC Financial Services Group, Inc. Under the terms of an administration agreement (the "Administration Agreement"), the Administrator provides all management and administrative services required in connection 8 with the operation of the Fund not required to be provided by the Adviser pursuant to the Advisory Agreement, as well as the necessary office facilities, equipment and personnel to perform such services. For its services, the Administrator receives from the Fund a quarterly fee at annual rates of .25% of the Fund's average weekly net assets up to $100 million, .20% of the Fund's average weekly net assets from $100 million to $1.0 billion and .10% of average weekly net assets over $1.0 billion. The net assets for each weekly period are determined by averaging the net assets at the end of a week with the net assets at the end of the prior week. For purposes of the foregoing calculation, "net assets" are defined as the sum of (i) the aggregate net asset value of the Fund's common stock, (ii) the aggregate liquidation preference of the Fund's preferred stock and (iii) the aggregate proceeds to the Fund of commercial paper issued by the Fund. (e) Custodian The Fund's custodian is The Bank of New York, Church Street Station, Post Office Box 11258, New York, New York 10286. The transfer agent and dividend disbursing agent for the Fund's common and preferred stock is The Bank of New York, Church Street Station, P.O. Box 11258, New York, New York 10286. (f) Expenses The Fund is responsible for all expenses not paid by the Adviser or the Administrator, including brokerage fees. (g) Affiliated Brokerage The Fund has paid, and in the future may pay, broker commissions to the Administrator. See Item 21.2. 2. Non-resident Managers. Not applicable. 3. Control Persons. The Fund does not consider that any person "controls" the Fund within the meaning of this item. For information concerning the Fund's officers and directors, see Item 18. No person is known by the Fund to own of record or beneficially five percent or more of any class of the Fund's outstanding equity securities. Item 10. Capital Stock, Long-Term Debt, and Other Securities 1. Capital Stock. (a) Common Stock. Holders of common stock, $.001 par value per share, of the Fund are entitled to dividends when and as declared by the board of directors, to one vote per share in the election of directors (with no right of cumulation), and to equal rights per share in the event of liquidation. They have no preemptive rights. There are no redemption, conversion or sinking fund provisions. The shares are not liable to further calls or to assessment by the Fund. (b) Preferred Stock. Holders of preferred stock, $.001 par value per share, of the Fund are entitled to receive dividends before the holders of the common stock and are entitled to receive the liquidation value of their shares ($100,000 per share) before any distributions are made to the holders of the common stock, in the event the Fund is ever liquidated. Each 9 share of preferred stock is entitled to one vote per share. The holders of the preferred stock have the right to elect two directors of the Fund at all times and to elect a majority of the directors if at any time dividends on the preferred stock are unpaid for two years. In addition to any approval by the holders of the shares of the Fund that might otherwise be required, the approval of the holders of a majority of the outstanding shares of the preferred stock, voting separately as a class, will be required under the 1940 Act to adopt any plan of reorganization that would adversely affect the holders of preferred stock and to approve, among other things, changes in the Fund's sub-classification as a closed-end investment company, changes in its investment objectives or changes in its fundamental investment restrictions. Subject to certain restrictions, the Fund may, and under certain circumstances is required to, redeem shares of its preferred stock at a price of $100,000 per share, plus accumulated but unpaid dividends. The shares of preferred stock are not liable to further calls or to assessment by the Fund. There are no preemptive rights or sinking fund or conversion provisions. The Fund, may, however, upon the occurrence of certain events, authorize the exchange of its current preferred stock on a share-for-share basis for a separate series of authorized but unissued preferred stock having different dividend privileges. (c) Dividend Reinvestment Plan. Under the Fund's dividend reinvestment plan shareholders may elect to have all dividends and capital gains distributions paid on their common stock automatically reinvested by The Bank of New York, as agent for shareholders, in additional shares of common stock of the Fund. Registered shareholders may participate in the plan. The plan permits a nominee, other than a depository, to participate on behalf of those beneficial owners for whom it is holding shares who elect to participate. However, some nominees may not permit a beneficial owner to participate without transferring the shares into the owner's name. Shareholders who do not elect to participate in the plan will receive all distributions in cash paid by check mailed directly to the shareholder (or, if the shareholder's shares are held in street or other nominee name, then to such shareholder's nominee) by The Bank of New York as dividend disbursing agent. Registered shareholders may also elect to have cash dividends deposited directly into their bank accounts. When a dividend or distribution is reinvested under the plan, the number of shares of common stock equivalent to the cash dividend or distribution is determined as follows: (i) If shares of the common stock are trading at net asset value or at a premium above net asset value at the valuation date, the Fund issues new shares of common stock at the greater of net asset value or 95% of the then current market price. (ii) If shares of the common stock are trading at a discount from net asset value at the valuation date, The Bank of New York receives the dividend or distribution in cash and uses it to purchase shares of common stock in the open market, on the New York Stock Exchange or elsewhere, for the participants' accounts. Shares are allocated to participants' accounts at the average price per share, plus commissions, paid by The Bank of New York for all shares purchased by it. If, before The Bank of New York has completed its purchases, the market price exceeds the net asset value of a share, the average purchase price per share paid by The Bank of New York may exceed the net asset value of the Fund's shares, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund. The valuation date is the business day immediately preceding the date of payment of the dividend or distribution. On that date, the Administrator compares that day's net asset value per share and the closing price per share on the New York Stock Exchange and determines which of the two alternative procedures described above will be followed. 10 The reinvestment shares are credited to the participant's plan account in the Fund's stock records maintained by The Bank of New York, including a fractional share to four decimal places. The Bank of New York will send participants written confirmation of all transactions in the participant's plan account, including information participants will need for tax records. Shares held in the participant's plan account have full dividend and voting rights. Dividends and distributions paid on shares held in the participant's plan account will also be reinvested. The cost of administering the plan is borne by the Fund. There is no brokerage commission on shares issued directly by the Fund. However, participants do pay a pro rata share of brokerage commissions incurred on any open market purchases of shares by The Bank of New York. The automatic reinvestment of dividends and distributions does not relieve participants of any income taxes that may be payable (or required to be withheld) on dividends or distributions. If the closing market price of shares of the Fund's common stock should be equal to or greater than their net asset value on the valuation date, the participants in the plan would receive shares priced at the higher of net asset value or 95% of the market price. Consequently they would receive more shares at a lower per share price than if they had used the cash distribution to purchase Fund shares on the payment date in the market at the market price plus commission. If the market price should be less than net asset value on the valuation date, the cash distribution for the plan participants would be used by The Bank of New York to purchase the shares to be received by the participants, which would be at a discount from net asset value unless the market price should rise during the purchase period so that the average price and commission exceeded net asset value as of the payment date. Also, since the Fund does not redeem its shares, the price on resale may be less or more than the net asset value. Plan participants may purchase additional shares of common stock through the plan by delivering to The Bank of New York a check for at least $100, but not more than $5,000, in any month. The Bank of New York will use such funds to purchase shares in the open market or in private transactions. The purchase price of such shares may be more than or less than net asset value per share. The Fund will not issue new shares or supply treasury shares for such voluntary additional share investment. Purchases will be made commencing with the time of the first distribution payment following the second business day after receipt of the funds for additional purchases, and may be aggregated with purchases of shares for reinvestment of the distribution. Shares will be allocated to the accounts of participants purchasing additional shares at the average price per share, plus a service charge of $2.50 imposed by The Bank of New York and a pro rata share of any brokerage commission (or equivalent purchase costs) paid by The Bank of New York in connection with such purchases. Funds sent to the bank for voluntary additional share reinvestment may be recalled by the participant by written notice received by The Bank of New York not later than two business days before the next dividend payment date. If for any reason a regular monthly dividend is not paid by the Fund, funds for voluntary additional share investment will be returned to the participant, unless the participant specifically directs that such funds continue to be held by The Bank of New York for subsequent investment. Participants will not receive interest on voluntary additional funds held by The Bank of New York pending investment. 11 A shareholder may leave the plan at any time by written notice to The Bank of New York. To be effective for any given distribution, notice must be received by the Bank at least seven business days before the record date for that distribution. When a shareholder leaves the plan: (i) such shareholder may request that The Bank of New York sell such shareholder's shares held in such shareholder's plan account and send such shareholder a check for the net proceeds (including payment of the value of a fractional share, valued at the closing price of the Fund's common stock on the New York Stock Exchange on the date discontinuance is effective) after deducting The Bank of New York's $5.00 charge and any brokerage commission (or equivalent sale cost) or (ii) if no request is made, such shareholder will receive a certificate for the number of full shares held in such shareholder's plan account, along with a check for any fractional share interest, valued at the closing price of the Fund's common stock on the New York Stock Exchange on the date discontinuance is effective. If and when it is determined that the only balance remaining in a shareholder's plan account is a fraction of a single share, such shareholder's participation will be deemed to have terminated, and The Bank of New York will send to such shareholder a check for the value of such fractional share, valued at the closing price of the Fund's common stock on the New York Stock Exchange on the date discontinuance is effective. The Fund may change, suspend or terminate the plan at any time upon mailing a notice to participants. For more information regarding, and an authorization form for, the dividend reinvestment plan, please contact The Bank of New York at 1-877-381-2537 or on the World Wide Web at http://stock.bankofny.com. (d) Capital Gains Distribution Reinvestment Plan. Unless otherwise indicated by a holder of shares of common stock of the Fund that does not participate in the Fund's dividend reinvestment plan, all distributions in respect of capital gains distributions on shares of common stock held by such holder will be automatically invested by The Bank of New York, as agent of the common shareholders participating in the plan, in additional shares of common stock of the Fund. Distributions in respect of capital gains distributions on shares of common stock that participate in the Fund's dividend reinvestment plan will be reinvested in accordance with the terms of such plan. In any year in which the Fund declares a capital gains distribution, the Fund after the declaration of such dividend and prior to its payment, will provide to each registered holder of Fund common stock that does not participate in the Fund's dividend reinvestment plan a cash election card. A registered shareholder may elect to receive cash in lieu of shares in respect of a capital gains distribution by signing the cash election card in the name(s) of the registered shareholder(s), and mailing the card to The Bank of New York. If a holder's shares of common stock, or some of them, are registered in the name of a broker or other nominee, and the holder wishes to receive a capital gains distribution in cash in lieu of shares of common stock, such shareholder must exercise that election through its nominee (including any depositor of shares held in a securities depository). 12 When a distribution is reinvested under the plan, the number of reinvestment shares is determined as follows: (i) If, at the time of valuation, the shares are being traded in the securities markets at net asset value or at a premium over net asset value, the reinvestment shares are obtained by The Bank of New York directly from the Fund, at a price equal to the greater of net asset value or 95% of the then current market price, without any brokerage commissions (or equivalent purchase costs). (ii) If, at the time of valuation, the shares are being traded in the securities markets at a discount from net asset value, The Bank of New York receives the distribution in cash, and uses it to purchase shares in the open market, including on the New York Stock Exchange, or in private purchases. Shares of common stock are allocated to participants at the average price per share, plus any brokerage commissions (or equivalent transaction costs), paid by The Bank of New York for all shares purchased by it in reinvestment of the distribution(s) paid on a particular day. The time of valuation is the close of trading on the New York Stock Exchange on the most recent day preceding the date of payment of the dividend or distribution on which that exchange is open for trading. As of that time, the Administrator compares the net asset value per share as of the time of the close of trading on the New York Stock Exchange on that day and the last reported sale price per share on the New York Stock Exchange, and determines which of the alternative procedures described above are to be followed. If as of any day on which the last reported sale price of the Fund's shares on the New York Stock Exchange is required to be determined pursuant to this plan, no sales of the shares are reported on that exchange, the mean of the bid prices and of the asked prices on that exchange as of the time of the close of trading on the exchange will be substituted. No certificates will be issued representing fractional shares, nor will The Bank of New York purchase fractional shares in the market. The Bank of New York will send to all registered holders of common stock that do not participate in the Fund's dividend reinvestment plan certificates for all shares of common stock purchased or issued pursuant to the capital gains distribution plan and cash in lieu of fractional shares of common stock. The Fund may change, suspend or terminate the plan at any time upon mailing a notice to participants. (e) Anti-takeover provisions of charter and bylaws. The Fund's charter includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of the Fund or to change the composition of its board of directors and could have the effect of depriving shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund. The board of directors is divided into three classes, each having a term of three years. At each annual meeting of shareholders, the term of one class will expire. This provision could delay for up to two years the replacement of a majority of the board of directors. A director may be removed from office only by vote of the holders of at least 75% of the shares of preferred stock or of common stock, as the case may be, entitled to be voted on the matter. The Fund's charter requires the favorable vote of the holders of at least 75% of the shares of preferred stock and common stock of the Fund entitled to be voted on the matter, voting together as a single class, to approve, adopt or authorize the following: (i) a merger or consolidation of the Fund with another corporation, 13 (ii) a sale of all or substantially all of the Fund's assets (other than in the regular course of the Fund's investment activities), or (iii) a liquidation or dissolution of the Fund, unless such action has been approved, adopted or authorized by the affirmative vote of two-thirds of the total number of directors fixed in accordance with the bylaws, in which case the affirmative vote of the holders of a majority of the outstanding shares of preferred stock and common stock entitled to be voted on the matter, voting together as a single class, is required. In addition, the holders of a majority of the outstanding shares of the preferred stock, voting separately as a class, would be required under the 1940 Act to adopt any plan of reorganization that would adversely affect the holders of the preferred stock. Finally, conversion of the Fund to an open-end investment company would require an amendment to the charter. Such an amendment would require the favorable vote of the holders of a majority of the shares of preferred stock and common stock entitled to be voted on the matter voting separately by class. At any time, the amendment would have to be declared advisable by the board of directors prior to its submission to shareholders. Shareholders of an open-end investment company may require the company to redeem their shares of common stock at any time (except in certain circumstances as authorized by or under the 1940 Act) at their net asset value, less such redemption charge, if any, as might be in effect at the time of a redemption. In addition, conversion to an open-end investment company would require redemption of all outstanding shares of the preferred stock. The board of directors has determined that the 75% voting requirements described above, which are greater than the minimum requirements under Maryland law or the 1940 Act, are in the best interests of shareholders generally. Reference should be made to the charter on file with the Securities and Exchange Commission (the "SEC") for the full text of these provisions. 2. Long-Term Debt. Not applicable. 3. General Not applicable. 4. Taxes. The Fund intends to continue to qualify as a regulated investment company under the Internal Revenue Code of 1986, as it has in each year since the inception of its operations, so as to be relieved of Federal income tax on net investment income and net capital gains distributed to shareholders. Dividends paid by the Fund from its ordinary income and distributions of the Fund's net realized short-term capital gains are taxable to shareholders as ordinary income. Shareholders may be proportionately liable for taxes on income and gains of the Fund but shareholders not subject to tax on their income will not be required to pay tax on amounts distributed to them. The Fund will inform shareholders of the amount and nature of the income or gains. Dividends from ordinary income may be eligible for the dividends-received deduction available to corporate shareholders. Under its 14 charter, the Fund is required to designate dividends paid on its preferred stock as qualifying for the dividends-received deduction to the extent such dividends do not exceed the Fund's qualifying income. In the event the Fund is required to allocate all of its qualifying income to dividends on the preferred stock, dividends payable on the common stock will not be eligible for the dividends-received deduction. Any distributions attributable to the Fund's net realized long-term capital gains are taxable to shareholders as long-term capital gains, regardless of the holding period of shares of the Fund. The Fund intends to distribute substantially all its net investment income and net realized capital gains in the year earned or realized. A dividend reinvestment plan is available to all holders of common stock of the Fund. Under the dividend reinvestment plan, all cash distributions to participating shareholders are reinvested in additional shares of common stock. See Item 10.1(c). 5. Outstanding Securities (4) (3) Amount Outstanding Amount Held by at 3/31/2002 Exclusive (1) (2) the Fund or for of Amount Shown Title of Class Amount Authorized its Account Under (3) - -------------- ------------------ ---------------- --------------------- Common, $.001 par value 250,000,000 -0- 214,184,640 Preferred, $.001 par value 100,000,000 -0- 5,000 6. Securities Ratings. ------------------ Not applicable. Item 11. Defaults and Arrears on Senior Securities Not applicable. Item 12. Legal Proceedings There are no pending legal proceedings to which the Fund, any subsidiary of the Fund, or the Adviser is a party. Item 13. Table of Contents of the Statement of Additional Information Not applicable. PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION Item 14. Cover Page Not applicable. Item 15. Table of Contents Not applicable. Item 16. General Information and History During the past five years, the Fund has not engaged in any business other than that of an investment company and has not been the subject of any bankruptcy, receivership or similar proceedings, or any other material reorganization, readjustment or succession. The Fund's name was changed from Duff & Phelps Utilities Income Inc. on April 23, 2002. 15 Item 17. Investment Objective and Policies 1. See Item 8.2. 2. See Item 8.2. 3. See Item 8.2. 4. The Fund's portfolio turnover rate was 213.48% in 2001, 229.70% in 2000 and 223.78% in 1999. During the last two fiscal years, the Fund's portfolio turnover rate has been influenced by a number of factors: (i) the Fund's proactive response to changes in the telecommunications, gas and electric industries, which response includes the use of dividend captures (see Item 8.3 for an explanation of dividend captures); and (ii) changes in the Fund's international portfolio designed to benefit from capital gain opportunities that were able to be offset by available loss carryovers. Item 18. Management 1. Set forth below are the names and certain biographical information about the directors and officers of the Fund. Except as indicated in the table, directors are elected by the holders of the Fund's common stock. The officers are elected at the annual meeting of the board of directors of the Fund.
Name, Position(s) Held With the Fund, Principal Occupation(s) Address Length of Time Served During Past 5 Years and Age and Term of Office and Other Affiliations Interested Director Claire V. Hansen (1)(2) Chairman and director Senior Advisor to the Board of Directors, Phoenix 55 East Monroe Street since January 1987. Investment Partners, Ltd. since November 1995; Chicago, Illinois 60603 Term expires in 2005. President and Chief Executive Officer of the Fund, Age: 76 January 2000-February 2001; Senior Advisor to the Board of Directors, Duff & Phelps Corporation, 1988-November 1995 (Chairman of the Board, 1987-1988; Chairman of the Board and Chief Executive Officer prior thereto); Chairman of the Board, Duff Research Inc. and Duff & Phelps Investment Management Co., 1985-1987. Independent Directors Wallace B. Behnke(3) Director since January 1987. Consulting engineer since July 1989; prior thereto, 323 Glen Eagle Term expires in 2003. Vice Chairman, Commonwealth Edison Company (public Kiawah Island, utility). South Carolina 29455 Age: 76 Harry J. Bruce(3) Director since January 1989. Private investor; former Chairman and Chief 1630 Sheridan Road Term expires in 2003. Executive Officer, Illinois Central Railroad Co. Wilmette, Illinois 60091. Age: 70 Franklin A. Cole(2)(5) Director since January 1989. Chairman, Croesus Corporation (private management 54 West Hubbard Street Term expires in 2004. and investment company); former Chairman and Chief Chicago, Illinois 60610. Executive Officer, Amerifin Corporation (formerly Age: 75 named Walter E. Heller International Corporation); director, Aon Corporation. Gordon B. Davidson(4) Director since January 1989. Of Counsel, Wyatt, Tarrant & Combs (law firm) since PNC Plaza Term expires in 2004. September 1995 (Chairman of the Executive Committee Louisville, Kentucky 40202 prior thereto); retired director, BellSouth Corp.; Age: 75 former Chairman of the Board and director, Trans Financial Advisers, Inc. Connie K. Duckworth (3)(5) Director since April 2002. Partner, Eight Wings Enterprises (investor in 77 Stone Gate Lane Term expires in 2005. early-stage businesses) since December 2001; Lake Forest, Illinois 60045 Advisory Director, Goldman, Sachs & Company, Age 47 December 2000-December 2001 (Managing Director, December 1996-December 2000, Partner 1990-1996, Chief Operating Officer of Firmwide Diversity Committee 1990-1995); Chair, The Committee of 200 (organization of women business leaders)
16
Name, Position(s) Held With the Fund, Principal Occupation(s) Address Length of Time Served During Past 5 Years and Age and Term of Office and Other Affiliations Robert J. Genetski (4)(5)(6) Director since April 2001. President, Robert J. Genetski & Associates, Inc. 195 North Harbor Drive Term expires in 2004. (economic and financial consulting firm) since 1991; Chicago, Illinois 60601 Senior Managing Director, Chicago Capital, Inc. Age: 59 (financial services firm) 1995-2001; former Senior Vice President and Chief Economist, Harris Trust & Savings Bank; author of several books; regular contributor to the Nikkei Financial Daily Francis E. Jeffries (2)(4)(7) Director since January 1987. Retired Chairman, Phoenix Investment Partners, Ltd. 8477 Bay Colony Drive Term expires in 2004. since May 1997 (Chairman, November 1995-May 1997); Naples, Florida 34108 Chairman and Chief Executive Officer, Duff & Phelps Age: 71 Corporation, June 1993-November 1995 (President and Chief Executive Officer, January 1992-June 1993); President and Chief Executive Officer, Duff & Phelps Illinois Inc. since 1987 (President and Chief Operating Officer, 1984-1987) and Chairman of the Board, Duff & Phelps Investment Management Co. (1988-1993); director, The Empire District Electric Company. Nancy Lampton (4)(5)(6) Director since October 1994. Chairman and Chief Executive Officer, Hardscuffle 3 Riverfront Plaza Term expires in 2003. Inc. (insurance holding company) and Chairman and Louisville, Kentucky 40202 Chief Executive Officer, American Life and Accident Age: 59 Insurance Company of Kentucky; director, Constellation Energy Group, Inc. Carl F. Pollard (3) Director since April 2002. Owner, Hermitage Farm L.L.C. (Thoroughbred breeding) 10500 W. U.S. Hwy 42 Term expires in 2005. since January 1995; Chairman, Columbia Healthcare Goshen, Kentucky 40026 Corporation 1993-1994; Chairman and Chief Executive Age 63 Officer, Galen Health Care, Inc. March-August 1993; President and Chief Operating Officer, Humana Inc. 1991-1993 (previously Senior Executive Vice President, Executive Vice President and Chief Financial Officer); Chairman and Director, Churchill Downs Incorporated; Director, National City Bank, Kentucky (Executive Committee), Breeders' Cup Limited, Kentucky Derby Museum Corporation; Trustee, Thoroughbred Owners and Breeders Association David J. Vitale (3)(5) Director since April 2000. President and Chief Executive Officer, Board of 141 West Jackson Boulevard Term expires in 2003. Trade of the City of Chicago, Inc. since March 2001; Chicago, Illinois 60604 Retired bank executive 1999-2001; Vice Chairman and Age: 55 Director, Bank One Corporation 1998-1999; Vice Chairman and Director, First Chicago NBD Corporation, and President, The First National Bank of Chicago, 1995-1998; Vice Chairman, First Chicago Corporation and The First National Bank of Chicago 1993-1998 (Director 1992-1998, Executive Vice President 1986-1993); Director, Ariel Capital Management, Inc.; Ark Investment Management, Wheels Inc.
17
Name, Position(s) Held With the Fund, Principal Occupation(s) Address Length of Time Served During Past 5 Years and Age and Term of Office and Other Affiliations Officers of the Fund (other than the Chairman, for whom see above) Nathan I. Partain President and Chief Executive Executive Vice President, Duff & Phelps Investment 55 East Monroe Street Officer since February 2001 Management Co. since January 1997; Director of Chicago, Illinois 60603 (Executive Vice President April Utility Research, Phoenix Investment Partners, Ltd., Age: 45 1998-February 2001, Chief 1989-1996 (Director of Equity Research, 1993-1996 Investment Officer January and Director of Fixed Income Research, 1993); 1998-February 2001, Senior Vice director, Otter Tail Corporation. President January 1997-April 1998, Assistant Secretary January 1997-February 2001). T. Brooks Beittel Secretary, Treasurer and Senior Senior Vice President, Duff & Phelps Investment 55 East Monroe Street Vice President since January 1995. Management Co. since 1993 (Vice President 1987-1993). Chicago, Illinois 60603 Age: 52 Michael Schatt Senior Vice President Fund since Senior Vice President, Duff & Phelps Investment 55 East Monroe Street April 1998 (Vice President January Management Co. since January 1997; Managing Chicago, Illinois 60603 1997-April 1998. Director, Phoenix Investment Partners, Ltd., Age: 55 1994-1996; Self-employed consultant, 1994; Director of Real Estate Advisory Practice, Coopers & Lybrand, 1990-1994. Joseph C. Curry, Jr. Vice President since April 1988. Senior Vice President, J.J.B. Hilliard, W.L. Lyons, Hilliard Lyons Center Inc. since 1994 (Vice President 1982-1994); Vice Louisville, Kentucky 40202 President, Hilliard Lyons Trust Company; President, Age: 57 Hilliard-Lyons Government Fund, Inc.; Treasurer and Secretary, Hilliard Lyons Growth Fund, Inc.; Treasurer, Senbanc Fund. Dianna P. Wengler Assistant Secretary since April Vice President, J.J.B. Hilliard, W.L. Lyons, Inc. Hilliard Lyons Center 1988. since 1990; Vice President, Hilliard-Lyons Louisville, Kentucky 40202 Government Fund, Inc.; Assistant Secretary, Hilliard Age: 41 Lyons Growth Fund, Inc.
- -------------------------------------------------------------------------------- (1) Mr. Hansen is deemed to be an "interested person" of the Fund (as defined in the 1940 Act) because of his positions with the Fund and with Phoenix Investment Partners (parent company of the Adviser). (2) Member of the executive committee of the board of directors, which has authority, with certain exceptions, to exercise the powers of the board of directors between board meetings. The executive committee acted once during 2001 by unanimous written consent in lieu of a meeting. (3) Member of the audit committee of the board of directors, which makes recommendations regarding the selection of the Fund's independent public accountants and meets with representatives of the accountants to determine the scope of and review the results of each audit. The audit committee met twice during 2001. 18 (4) Member of the nominating committee of the board of directors, which selects nominees for election as directors and officers. The nominating committee met four times during 2001. The nominating committee does not consider nominees recommended by shareholders. (5) Member of the contracts committee of the board of directors, which makes recommendations regarding the Fund's contractual arrangements for investment management and administrative services, including the terms and conditions of such contracts. The contracts committee met twice during 2001. (6) Director elected by holders of preferred stock. (7) Mr. Jeffries oversees 34 portfolios in the Fund Complex to which the Fund belongs. 2. Included in Item 18.1. 3. Not applicable. 4. Not applicable. 5. Included in Item 18.1. 6. Included in Item 18.1. 7. The following table provides certain information relating to the equity securities beneficially owned, as of December 31, 2001, by each director (i) in the Fund and (ii) on an aggregate basis, in any registered investment companies overseen by the director within the same family of investment companies as the Fund. Aggregate Dollar Range of Equity Dollar Range Securities in All Funds Overseen of Equity or to be Overseen by Director or Name of Securities Nominee in Family of Investment Director in the Fund Companies Interested Director Claire V. Hansen over $100,000 over $100,000 Independent Directors Wallace B. Behnke $10,001-$50,000 $10,001-$50,000 Harry J. Bruce over $100,000 over $100,000 Franklin A. Cole $10,001-$50,000 $10,001-$50,000 Gordon B. Davidson over $100,000 over $100,000 Connie K. Duckworth none none Robert J. Genetski $10,001-$50,000 $10,001-$50,000 Francis E. Jeffries over $100,000 over $100,000 Nancy Lampton over $100,000 over $100,000 Carl F. Pollard none none David J. Vitale $10,001-$50,000 $10,001-$50,000 8. As of December 31, 2001, none of the foregoing directors, or their immediate family members, owned any securities of the Adviser or any person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with the Adviser. 9. Mr. Jeffries was formerly a shareholder and member of senior management of Duff & Phelps Corporation, predecessor to Phoenix Investment Partners. Under the terms of his employment contract, Phoenix Investment Partners continued to pay through 2001 the annual premium on life insurance policies owned by Mr. Jeffries. The amount of such premiums in 2000 and 2001 was $62,682 and $22,989, respectively. In 2000, Mr. Jeffries received $283,554 for the repurchase of his common shares in Phoenix Investment Partners and $228,850 for the purchase of outstanding unexercised options, which transactions were effected at the then market value for such shares and options. 19 10. Included in Item 18.9. 11. Included in Item 18.9. 12. Not applicable. 13. Approval of Advisory Agreement. Each year, the board of directors of the Fund, including a majority of the directors who are not interested persons of the Fund or the Adviser voting separately as a class, is required to approve the renewal of the Advisory Agreement. The board of directors requests and evaluates, and the Adviser furnishes, such information as the board determines to be reasonably necessary to evaluate the terms of the Advisory Agreement. The board of directors also retains an independent consultant on an annual basis to provide detailed comparative data regarding the Adviser's fees, expense ratios and investment performance. In arriving at their decision to renew the current Advisory Agreement, the directors reviewed the foregoing information and took into account all factors that they deemed relevant to the best interests of the shareholders of the Fund. Such factors included the following: (i) the nature, quality and extent of the services furnished to the Fund by the Adviser; (ii) fees paid by other mutual funds for similar services; (iii) the profitability to the Adviser of its relationship with the Fund; (iv) the continuation of appropriate incentives to assure that the Adviser will be able to continue to furnish high-quality services to the Fund; (v) the capabilities of the team of investment professionals employed by the Adviser who perform services for the Fund; (vi) the necessity of the Adviser maintaining and enhancing its ability to attract and retain capable personnel to serve the Fund; (vii) the investment performance over time of the Fund compared to various market indices and other mutual funds; (viii) the extent to which the Fund's stock trades at a premium or a discount to net asset value; (ix) the benefits of any economies of scale that may be available to the Adviser; and (x) the direct and indirect benefits the Adviser receives from its relationship with the Fund, including brokerage and soft dollar arrangements (see description in Item 21.3 below). In comparing the Fund's expenses and investment performance to those of other mutual funds, the directors took note of the fact that there are no other closed-end income-oriented funds that have a utilities and REIT investment focus, an equity and fixed-income asset mix and an asset level and leverage policy comparable to the Fund. While expressly declining to use investment performance as the sole, or even the primary, measure of the quality of the Adviser's services, the directors noted that the Fund's investment performance in 2001 had enabled the Fund to pay all of its regular monthly dividends plus an enhanced dividend in the final month of the year. The directors also viewed the fact that the Fund's stock traded at an average premium of 11.8% to net asset value during 2001 as evidence that investors take a favorable view of the extent to which the Fund has been meeting its primary objective of providing current income for shareholders. With respect to investment personnel, the directors considered the fact that the specific individuals who manage the Fund's portfolio bring a significant depth of experience to their jobs, have worked together for many years and are well respected in the industry. With respect to expenses, the directors noted that the management fees paid by the Fund were at or below the median levels paid by other leveraged closed-end domestic equity funds. It should be emphasized that, in arriving at their decision, the directors did not single out any one factor or group of factors as being more important than other factors. Rather, the directors considered all factors together in light of the totality of circumstances presently facing the Fund, recognizing that different circumstances might lead them to weigh the various factors differently when considering the best interests of the Fund and its shareholders. 20 Based on the foregoing considerations, the board of directors of the Fund, including a majority of the directors who are not interested persons of the Fund or the Adviser voting separately as a class, determined that the fees payable to the Adviser under the Advisory Agreement were fair and reasonable to the Fund and that the renewal of the Advisory Agreement for a one-year period ending on April 30, 2003 was in the best interests of the Fund and its shareholders. 14. The following table shows the compensation paid by the Fund to the Fund's current directors during 2001: COMPENSATION TABLE (1)(2) Aggregate Compensation from the Name of Director Fund Interested Director Claire V. Hansen....................................... $ 0 Independent Directors Wallace B. Behnke...................................... $ 39,429 Harry J. Bruce......................................... 33,500 Franklin A. Cole....................................... 44,500 Gordon B. Davidson..................................... 40,500 Connie K. Duckworth (3)................................ 0 Robert J. Genetski..................................... 22,453 Francis E. Jeffries (2)................................ 34,500 Nancy Lampton.......................................... 37,500 Carl F. Pollard (3).................................... 0 David J. Vitale........................................ 42,571 - ------------------------------------ (1) Each director not affiliated with the Adviser receives an annual fee of $22,500 (and an additional $3,000 if the director serves as chairman of a committee of the board of directors) plus an attendance fee of $1,500 for each meeting of the board of directors and $1,000 for each meeting of a committee of the board of directors attended in person or by telephone. Directors and officers affiliated with the Adviser or the Administrator receive no compensation from the Fund for their services as such. In addition to the amounts shown in the table above, all directors and officers who are not affiliated with the Adviser or the Administrator are reimbursed for the expenses incurred by them in connection with their attendance at a meeting of the board of directors or a committee of the board of directors. The Fund does not have a pension or retirement plan applicable to directors or officers of the Fund. (2) During 2001, Mr. Jeffries received aggregate compensation of $135,000 for service as a director of the Fund and as a director or trustee of 33 other investment companies in the same fund complex as the Fund. No other director received compensation for service as a director of any other investment company in the same fund complex as the Fund. (3) Ms. Duckworth and Mr. Pollard were elected as directors of the Fund on April 23, 2002 and consequently received no compensation from the Fund during 2001. 15. Codes of Ethics. Each of the Fund and the Adviser has adopted an Amended and Restated Code of Ethics (collectively, the "Codes") under Rule 17j-1 of the 1940 Act. The Codes impose significant restrictions on the ability of personnel subject to the Codes to engage in personal securities transactions. Among other things, the Codes generally prohibit covered personnel from knowingly buying or selling securities (except for mutual funds, U.S. government securities and money market instruments) that are being purchased, sold or considered for purchase or sale by the Fund unless the proposed purchases are approved in advance by the Adviser's compliance officer. The Codes also contain certain reporting requirements and compliance procedures. The Codes can be reviewed and copied at the Public Reference Room of the SEC in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. The Codes are also available at the EDGAR Database on the SEC's Internet site at http://www.sec.gov. Copies of the Codes may also be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. The SEC file number for documents filed by the Fund under the 1940 Act is 811-4915. 21 Item 19. Control Persons and Principal Holders of Securities 1. The Fund does not consider that any person "controls" the Fund within the meaning of this item. For information concerning the Fund's officers and directors, see Item 18. 2. No person is known by the Fund to own of record or beneficially five percent or more of any class of the Fund's outstanding equity securities. 3. As of December 31, 2001, the officers and directors of the Fund owned in the aggregate 229,862 shares of Common Stock, representing less than 1% of the Fund's outstanding Common Stock. Item 20. Investment Advisory and Other Services 1. The Adviser is a wholly-owned subsidiary of Phoenix Investment Partners, which is an indirect, wholly-owned subsidiary of The Phoenix Companies, Inc. Phoenix Investment Partners and its subsidiaries provide investment management services to institutional and private clients and to the life insurance subsidiaries of The Phoenix Companies, Inc. See Item 18 for the names and capacities of affiliated persons of the Fund who are also affiliated persons of the Adviser. For a discussion of the method of calculating the advisory fee under the Advisory Agreement, see Item 9.1(b). The investment advisory fees paid by the Fund totaled $15,284,267 in 2001, $14,719,244 in 2000 and $14,839,366 in 1999. 2. See Item 9.1(b) for a discussion of the Service Agreement. 3. No fees, expenses or costs of the Fund were paid by persons other than the Adviser or the Fund. 4. See Item 9.1 (d) for a discussion of the Administration Agreement. The administrative fees paid by the Fund totaled $3,806,813 in 2001, $3,693,849 in 2000 and $3,717,873 in 1999. 5. Not applicable. 6. See Item 9.1 (e). 7. The Fund's independent public accountant is Arthur Andersen LLP. 8. Not applicable. Item 21. Brokerage Allocation and Other Practices 1. The Adviser has discretion to select brokers and dealers to execute portfolio transactions initiated by the Adviser. The Fund paid brokerage commissions in the aggregate amount of $9,015,619, $7,158,821 and $8,510,655 during 2001, 2000 and 1999, respectively, not including the gross underwriting spread on securities purchased in underwritten public offerings. 2. The Fund did not pay any brokerage commissions during 2001, 2000 or 1999 to any broker that (1) is an affiliated person of the Fund, (2) is an affiliated person of an affiliated person of the Fund or (3) has an affiliated person that is an affiliated person of the Fund or the Adviser. 3. In selecting brokers or dealers to execute portfolio transactions and in evaluating the best net price and execution available, the Adviser is authorized to consider "brokerage and research services" (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934), statistical quotations, specifically the quotations necessary to determine the Fund's net asset value, and other information provided to the Fund and/or to the Adviser (or their affiliates). The Adviser is also authorized to cause the Fund to pay to a broker or dealer who provides such brokerage and research services a commission for 22 executing a portfolio transaction which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction. The Adviser must determine in good faith, however, that such commission was reasonable in relation to the value of the brokerage and research services provided, viewed in terms of that particular transaction or in terms of all the accounts over which the Adviser exercises investment discretion. It is possible that certain of the services received by the Adviser attributable to a particular transaction will benefit one or more other accounts for which investment discretion is exercised by the Adviser. 4. Neither the Fund nor the Adviser, during the last fiscal year, pursuant to an agreement or understanding with a broker or otherwise through an internal allocation procedure, directed the Fund's brokerage transactions to a broker or brokers because of research services. 5. The Fund has not acquired during its most recent fiscal year securities of its regular brokers or dealers as defined in Rule 10b-1 under the 1940 Act, or their parents. Item 22. Tax Status The Fund intends to continue to qualify as a regulated investment company under the Internal Revenue Code of 1986, as it has in each year since the inception of its operations, so as to be relieved of Federal income tax on net investment income and net capital gains distributed to shareholders. Dividends paid by the Fund from its ordinary income and distributions of the Fund's net realized short-term capital gains are taxable to shareholders as ordinary income. Dividends from ordinary income may be eligible for the dividends-received deduction available to corporate shareholders. Under its charter, the Fund is required to designate dividends paid on its preferred stock as qualifying for the dividends-received deduction to the extent such dividends do not exceed the Fund's qualifying income. In the event the Fund is required to allocate all of its qualifying income to dividends on the preferred stock, dividends payable on the common stock will not be eligible for the dividends-received deduction. Any distributions attributable to the Fund's net realized long-term capital gains are taxable to shareholders as long-term capital gains, regardless of the holding period of shares of the Fund. The Fund intends to distribute substantially all its net investment income and net realized capital gains in the year earned or realized. A dividend reinvestment plan is available to all holders of common stock of the Fund. Under the dividend reinvestment plan, all cash distributions to participating shareholders are reinvested in additional shares of common stock. See Item 10.1(c). As of December 31, 2001, the Fund had tax capital loss carryforwards of $72,506,566 which expire beginning on December 31, 2003. Item 23. Financial Statements The financial statements listed below are incorporated herein by reference from the Fund's Annual Report to Shareholders for the year ended December 31, 2001 as filed on Form N-30D with the Securities and Exchange Commission on February 27, 2002 (no. 811-4915). All other portions of the Annual Report to Shareholders are not incorporated herein by reference and are not part of the Registration Statement. A copy of the Annual Report to Shareholders may be obtained without charge by writing to the Fund at its address at 55 East Monroe Street, Chicago, Illinois 60603 or by calling the Administrator toll-free at 888-878-7845. - Report of independent public accountants - Schedule of Investments at December 31, 2001 - Balance Sheet at December 31, 2001 - Statement of Operations for the year ended December 31, 2001 - Statement of Changes in Net Assets for the years ended December 31, 2001 and 2000 - Statement of Cash Flows for the year ended December 31, 2001 - Notes to Financial Statements - Financial Highlights - Selected Per Share Data and Ratios 23 PART C: OTHER INFORMATION Item 24. Financial Statements and Exhibits 1. Financial Statements In Part B: Report of independent public accountants Schedule of Investments at December 31, 2001 Balance Sheet at December 31, 2001 Statement of Operations for the year ended December 31, 2001 Statement of Changes in Net Assets for the years ended December 31, 2001 and 2000 Statement of Cash Flows for the year ended December 31, 2001 Notes to Financial Statements Financial Highlights - Selected Per Share Data and Ratios In Part C: None 2. Exhibits a.1 Articles of Incorporation a.2 Amendment to Articles of Incorporation a.3 Second Amendment to Articles of Incorporation a.4 Form of Articles Supplementary creating Remarketed Preferred Stock, Series A, B, C, D and E a.5 Form of Articles Supplementary creating Remarketed Preferred Stock, Series I a.6 Third Amendment to Articles of Incorporation a.7 Fourth Amendment to Articles of Incorporation a.8 Fifth Amendment to Articles of Incorporation a.9 Sixth Amendment to Articles of Incorporation b. Bylaws (as amended through October 18, 2001) c. None 24 d.1 Specimen common stock certificate (Incorporated by reference from Registrant's registration statement on Form N-2, no. 33-10421) d.2 Form of certificate of Remarketed Preferred Stock, Series A (Incorporated by reference from pre-effective amendment no. 2 to Registrant's registration statement on Form N-2, no. 33-22933) d.3 Form of certificate of Remarketed Preferred Stock, Series B (Incorporated by reference from pre-effective amendment no. 1 to Registrant's registration statement on Form N-2, no. 33-24101) d.4 Form of certificate of Remarketed Preferred Stock, Series C (Incorporated by reference from pre-effective amendment no. 1 to Registrant's registration statement on Form N-2, no. 33-24100) d.5 Form of certificate of Remarketed Preferred Stock, Series D (Incorporated by reference from pre-effective amendment no. 1 to Registrant's registration statement on Form N-2, no. 33-24102) d.6 Form of certificate of Remarketed Preferred Stock, Series E (Incorporated by reference from pre-effective amendment no. 1 to Registrant's registration statement on Form N-2, no. 33-24099) d.7 Form of certificate of Remarketed Preferred Stock, Series I (Incorporated by reference from pre-effective amendment no. 2 to Registrant's registration statement on Form N-2, no. 33-22933) e. None f. None g.1 Investment Advisory Agreement (Incorporated by reference from post-effective amendment no. 39 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915) g.2 Service Agreement (Incorporated by reference from post-effective amendment no. 39 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915) g.3 Administration Agreement (Incorporated by reference from post-effective amendment no. 39 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915) h. Not applicable i. Not applicable j. Custodian agreement (Incorporated by reference from Registrant's registration statement on Form N-2, no. 33-10421) 25 k.1 Loan agreement (Incorporated by reference from Registrant's registration statement on Form N-2, no. 33-10421) k.2 Amendment dated November 15, 1988 to Loan Agreement (Incorporated by reference from post-effective amendment no. 1 to Registrant's registration statement on Form N-2, no. 33-20433) k.3 Form of Remarketing Agreement (Incorporated by reference from pre-effective amendment no. 3 to Registrant's registration statement on Form N-2, no. 33-22933) k.4 Form of Paying Agent Agreement (Incorporated by reference from pre-effective amendment no. 3 to Registrant's registration statement on Form N-2, no. 33-22933) l. Not applicable m. Not applicable n. Not applicable o. Not applicable p. Subscription Agreement for initial capital (Incorporated by reference from Registrant's registration statement on Form N-2, no. 33-10421) q. Not applicable r.1 Amended and Restated Code of Ethics of Registrant (Incorporated by reference from post-effective amendment no. 41 to Registrant's registration statement on Form N-2, no. 811-4915) r.2 Amended and Restated Code of Ethics of Duff & Phelps Investment Management Co. (investment adviser to Registrant) (Incorporated by reference from post-effective amendment no. 41 to Registrant's registration statement on Form N-2, no. 811-4915) Item 25. Marketing Arrangements Not applicable. Item 26. Other Expenses of Issuance and Distribution Not applicable. Item 27. Persons Controlled by or Under Common Control The Fund does not consider that it is controlled, directly or indirectly, by any person. The information on Item 20 is incorporated by reference. Item 28. Number of Holders of Securities 26 Number of Record Holders Title of Class March 31, 2002 Common Stock, $.001 par value 28,540 Preferred Stock, $.001 par value 1 Item 29. Indemnification Section 2-418 of the General Corporation Law of Maryland authorizes the indemnification of directors and officers of Maryland corporations under specified circumstances. Article Ninth of the Registrant's Articles of Incorporation (Exhibit a.1 to this registration statement) provides that the Registrant shall indemnify its directors and officers under specified circumstances; the provision contains the exclusion required by section 17(h) of the Investment Company Act of 1940. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "1933 Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person in connection with the securities being registered), the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. The Registrant, its directors and officers, the Adviser and persons affiliated with them are insured under a policy of insurance maintained by the Registrant and the Adviser, within the limits and subject to the limitations of the policy, against certain expenses in connection with the defense of actions, suits or proceedings and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been such directors or officers. The policy expressly excludes coverage for any director or officer whose personal dishonesty, fraudulent breach of trust, lack of good faith, or intention to deceive or defraud has been finally adjudicated or may be established or who willfully fails to act prudently. Item 30. Business and Other Connections of Investment Adviser Neither Duff & Phelps Investment Management Co., nor any of its directors or executive officers, has at any time during the past two years been engaged in any other business, profession, vocation or employment of a substantial nature either for its or his own account or in the capacity of director, officer, employee, partner or trustee, except as indicated in this Registration Statement. Item 31. Location of Accounts and Records All accounts, books and other documents required to be maintained by Section 31 (a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are maintained at the offices of the Fund (55 East Monroe Street, Chicago, Illinois 60603), the Adviser, the Administrator and the Fund's custodian and transfer agents. See Items 9.1(b), 9.1(d) and 9.1(e) for the addresses of the Adviser, the Administrator and the Fund's custodian and transfer agents. Item 32. Management Services Not applicable. Item 33. Undertakings Not applicable. 27 SIGNATURE Pursuant to the requirements of the Investment Company Act of 1940, the Registrant has duly caused this amendment to its registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, and State of Illinois, on April 30, 2002. DNP SELECT INCOME FUND INC. By: /s/ Nathan I Partain -------------------------------------- Nathan I Partain President and Chief Executive Officer EXHIBIT INDEX Sequential Exhibit No. Description Page No. a.1 Articles of Incorporation a.2 Amendment to Articles of Incorporation a.3 Second Amendment to Articles of Incorporation a.4 Form of Articles Supplementary creating Remarketed Preferred Stock, Series A, B, C, D and E a.5 Form of Articles Supplementary creating Remarketed Preferred Stock, Series I a.6 Third Amendment to Articles of Incorporation a.7 Fourth Amendment to Articles of Incorporation a.8 Fifth Amendment to Articles of Incorporation a.9 Sixth Amendment to Articles of Incorporation b Bylaws (as amended through October 18, 2001) EX-99.A.1 CHARTER 3 ex-99a1.txt Exhibit a.1 DUFF & PHELPS SELECTED UTILITIES INC. Articles of Incorporation The undersigned, being a natural person and acting as incorporator, hereby adopts the following articles of incorporation for the purpose of forming a business corporation under and by virtue of the general laws of the State of Maryland. FIRST. Incorporation. The incorporator is Cameron S. Avery, who is at least eighteen years of age and whose address is 70 West Madison Street, Suite 3200, Chicago, Illinois 60602. He is forming the corporation named in these articles of incorporation under the general laws of the State of Maryland. SECOND. Name. The name of the corporation is Duff & Phelps Selected Utilities Inc. THIRD. Purposes. The purposes for which the corporation is formed are: 1. To engage in the business of a closed-end management investment company. 2. To invest and reinvest in, to buy or otherwise acquire, to hold for investment or otherwise, and to sell or otherwise dispose of: a. Securities of all kinds, however evidenced, and rights or warrants to acquire securities, of private and public companies, corporations, associations, trusts and other enterprises and organizations; b. Obligations issued or guaranteed by national and state governments and their instrumentalities and subdivisions; c. Deposits in banks, savings banks, trust companies and savings and loan associations; d. Assets and interests other than securities or deposits. FOURTH. Principal office and resident agent. The post office address of the principal office of the corporation in the State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The name and post office address of the resident agent of the corporation in the State of Maryland is The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The resident agent is a Maryland corporation. FIFTH. Capital Stock. A. Authorized stock. The total number of shares of capital stock that the corporation shall have authority to issue is 100,000,000 shares, all of one class called common stock, $.001 par value per share (common stock), having an aggregate par value of $100,000. B. Sale of shares. The board of directors may authorize the sale and issuance from time to time of shares of common stock, whether now or hereafter authorized, for such consideration as the board of directors considers advisable, but not less than par value, subject to such limitations as may be set forth in these articles of incorporation, the bylaws, the General Laws of the State of Maryland, the Investment Company Act of 1940 and other applicable laws. C. Fractional shares. Stock may be issued in fractions of whole shares, to which attach pro rata all of the rights of whole shares, including the right of voting and of receipt of dividends, except that there shall be no right of receipt of a certificate representing any fraction of a whole share. D. No preemptive rights. No holder of shares of the corporation, whether now or hereafter authorized, shall be entitled as of right to acquire from the corporation any shares of the corporation, whether now or hereafter authorized. SIXTH. Bylaws. The board of directors is authorized to adopt, alter and repeal the bylaws of the corporation, except to the extent that the bylaws provide otherwise. SEVENTH. Board of Directors. 1. The total number of directors constituting the board of directors of the corporation shall be three, which number may be increased from time to time in accordance with the bylaws of the corporation but shall not be less than three. No decrease in the number of directors shall have the effect of shortening the term of any director then in office. 2. The names of the persons who will serve as the initial directors of the corporation are as follows: Claire V. Hansen Francis E. Jeffries Robert D. Milne 3. Beginning with the first annual meeting of shareholders held after the initial public offering of the shares of the corporation ("the initial annual meeting"), the board of directors shall be divided into three classes: class I, class II, and class III. The terms of office of the classes of directors elected at the initial annual meeting shall expire at the times of the annual meetings of the stockholders as follows-class I in 2 1988, class II in 1989, and class III in 1990-or thereafter in each case when their respective successors are elected and qualified. At each subsequent annual election, the directors chosen to succeed those whose terms are expiring shall be identified as being of the same class as the directors whom they succeed, and shall be elected for a term expiring at the time of the third succeeding annual meeting of stockholders, or thereafter in each case when their respective successors are elected and qualified. The number of directorships shall be apportioned among the classes so as to maintain the classes as nearly equal in number as possible. 4. Any vacancy occurring in the board of directors may be filled by a majority of the directors in office. A new directorship resulting from an increase in the number of directors shall be construed not to be a vacancy. Any director elected to fill a vacancy shall be in the same class and have the same remaining term as that of the predecessor. 5. A director may be removed with or without cause, but only by action of the shareholders taken by the holders of at least 75% of the shares then entitled to vote in an election of directors. 6. A majority of the total number of directors fixed in the bylaws shall be required to constitute a quorum at meetings of the board of directors. EIGHTH. Majority votes of stockholders. Notwithstanding any provision of the laws of the State of Maryland requiring approval by the stockholders of any action by the affirmative vote of a greater proportion than a majority of the votes entitled to be cast on the matter, any such action may be taken or authorized upon the concurrence of a majority of the number of votes entitled to be cast thereon. NINTH. Indemnification. Each person who is or was a director or officer of the corporation, and each person who serves or served at the request of the corporation as a director or officer of another enterprise, shall be indemnified by the corporation in accordance with, and to the fullest extent authorized by, the General Corporation Law of the State of Maryland as it may be in effect from time to time, provided that this section shall not protect any director or officer of the corporation against any liability to the corporation or to its shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; and provided further that this article shall not apply as to any action, suit or proceeding brought by or on behalf of a director or officer without prior approval of the board of directors. TENTH. Liability of directors and officers. The directors and officers of the corporation shall not be liable to the corporation or to any of its stockholders or creditors because of any action taken by them in good faith, and in taking any such action the directors and officers shall be fully protected in relying in good faith upon the books of account of the corporation or statements or reports prepared by any of its officials or employees or by others who they believe in good faith are qualified to make such statements or reports; provided that this sentence shall not protect any director or officer of the corporation against any liability to the corporation or to its stockholders to which he would otherwise be 3 subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. ELEVENTH. Merger, sale of assets, liquidation. Notwithstanding any other provisions of these articles of incorporation, a favorable vote of the holders of at least 75% of the shares of the corporation then entitled to be voted on the matter shall be required to approve, adopt or authorize (i) a merger or consolidation of the corporation with any other corporation, (ii) a sale of all or substantially all of the assets of the corporation (other than in the regular course of its investment activities), or (iii) a liquidation or dissolution of the corporation, unless such action has previously been approved, adopted or authorized by the affirmative vote of two-thirds of the total number of directors fixed in accordance with the bylaws. TWELFTH. Conversion to open-end company. Notwithstanding any other provisions of these articles of incorporation, at any time prior to January 1, 1992, a favorable vote of the holders of at least 75% of the shares of the corporation entitled to be voted on the matter shall be required to approve, adopt or authorize an amendment to the articles of incorporation of the corporation that makes the common stock a redeemable security (as that term is defined in the Investment Company Act of 1940), unless such action has previously been approved, adopted or authorized by the affirmative vote of two-thirds of the total number of directors fixed in accordance with the bylaws. THIRTEENTH. Amendment of articles of incorporation. The corporation reserves the right to amend, alter change or repeal any provision contained in its articles of incorporation, in the manner now or hereafter prescribed by statute, and any rights conferred upon the stockholders are granted subject to this reservation. Notwithstanding any other provisions of these articles of incorporation or the bylaws of the corporation (and notwithstanding the fact that a lesser percentage may be specified by law, the articles of incorporation or the bylaws of the corporation), the amendment or repeal of article seventh, eighth, ninth, tenth, eleventh, twelfth or of this article thirteenth, of the articles of incorporation shall require the affirmative vote of the holders of at least 75% of the shares then entitled to be voted on the matter. 4 IN WITNESS WHEREOF, I have signed these articles of incorporation and have acknowledged the same to be my act on this 25th day of November, 1986. /s/ Cameron S. Avery ------------------------------- Cameron S. Avery WITNESS: /s/ Janet D. Olsen - -------------------- Janet D. Olsen 5 EX-99.A.2 CHARTER 4 ex-99a2.txt Exhibit a.2 DUFF & PHELPS SELECTED UTILITIES INC. Articles of Amendment Duff & Phelps Selected Utilities Inc., a Maryland corporation having its principal office in Baltimore, Maryland (hereinafter called the corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland, that: FIRST: The Articles of Incorporation of the corporation are amended as follows: Article FIFTH, Paragraph A of the Articles of Incorporation is deleted, and the following is inserted in lieu thereof: A. Authorized Stock. The total number of shares of stock that the corporation shall have the authority to issue is 250,000,000 shares, all of one class called common stock, $.001 par value per share (common stock), having an aggregate par value of $250,000. SECOND: The board of directors of the corporation, including all of the directors of the corporation, on January 12, 1987 duly adopted a resolution in which was set forth the foregoing amendment to the Articles of Incorporation and approved the foregoing amendment. THIRD: The organizational meeting of the board of directors was held on November 26, 1986. There is no stock of the corporation outstanding or subscribed for entitled to be voted on the amendment. FIFTH:(a) The total number of shares of stock which the corporation has heretofore authorized to issue is 100,000,000 shares, all of one class, of the par value of $.001 per share and of the aggregate par value of $100,000. (b) The total number of shares of stock which the corporation is authorized to issue is increased by this amendment to 250,000,000 shares, $.001 par value per share, and the aggregate par value of the authorized shares is increased to $250,000. IN WITNESS WHEREOF, Duff & Phelps Selected Utilities Inc. has caused these articles to be signed in its name and on its behalf by its president and attested by its secretary on January 13, 1987. DUFF & PHELPS SELECTED UTILITIES INC. By /s/ Richard J. Spletzer ------------------------------- Richard J. Spletzer Senior Vice President Attest: /s/ Calvin J. Pedersen - ----------------------- Calvin J. Pedersen Assistant Secretary The undersigned, senior vice president of Duff & Phelps Selected Utilities Inc., who executed on behalf of the corporation the foregoing articles of amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of the corporation, the foregoing articles of amendment to be the corporate act of the corporation and further certifies that to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ Richard J. Spletzer --------------------------- Richard J. Spletzer 2 EX-99.A.3 CHARTER 5 ex-99a3.txt Exhibit a.3 DUFF & PHELPS SELECTED UTILITIES INC. Articles of Amendment Duff & Phelps Selected Utilities Inc., a Maryland corporation, having its principal office in Baltimore, Maryland (hereinafter called the corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the corporation is hereby amended as follows: (a) Article Fifth of the charter is amended in its entirety to read as follows: FIFTH. Capital Stock. ------------- The total number of shares of all classes of stock which the corporation shall have authority to issue is 350,000,000 shares with an aggregate par value of $350,000, divided into two classes, of 250,000,000 shares of common stock, $.001 par value per share (common stock), and of 100,000,000 shares of preferred stock, $.001 par value per share (preferred stock). The preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, of the common stock and the preferred stock are as follows: A. Common stock ------------ 1. Dividends. Subject to law and to the preferences of the preferred stock, the holders of the common stock shall be entitled to receive dividends at such time and in such amounts as may be determined by the board of directors. 2. Voting. Except as provided by law and in or pursuant to this article fifth, the holders of the common stock shall have one vote for each share on each matter submitted to a vote of the stockholders of the corporation. 3. Liquidation. In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the corporation and the preferential amounts to which the holders of the preferred stock shall be entitled upon liquidation, the holders of the common stock shall be entitled to share in the remaining assets of the corporation according to their respective interests. B. Preferred stock --------------- 1. Authority of the board of directors to issue in series. The preferred stock may be issued from time to time in one or more series. All shares of any one series of preferred stock shall be identical except as to the respective dates of their issue, the dates from which dividends on shares of the series issued on different dates shall cumulate, dividend rates, dividend periods and dividend payment dates. Subject to the charter, authority is expressly granted to the board of directors to authorize the issue of one or more series of preferred stock, and to fix by resolution or resolutions providing for the issue of each such series the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemptions, of such series, to the full extent now or hereafter permitted by law, including but not limited to the following: a. The number of shares of such series, which may subsequently be increased (except as otherwise provided by the resolution or resolutions of the board of directors providing for the issue of such series) or decreased (to a number not less than the number of shares then outstanding) by resolution or resolutions of the board of directors, and the distinctive designation of the series; b. The rates or amounts, the periods, and the times of payment, of dividends on shares of such series; c. The voting powers, if any, of the holders of such series in addition to the voting powers provided by law and in this article fifth; d. The terms and conditions, if any, upon which the shares of such series shall be convertible into or exchangeable for shares of any other series, class or classes, or any other securities, to the full extent now or hereafter permitted by law; e. The time or times during which, the price or prices at which, and the terms and conditions on which, the shares of such series may be redeemed by the corporation; f. The terms of any sinking fund to be applied to the purchase or redemption, or both, of shares of such series, and the terms and amount of any sinking fund payments and the manner of their application; and g. The amount which the holders of each series shall be entitled to receive in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation. 2 Except as stated above in this part 1, all shares of preferred stock shall be identical. All shares of preferred stock, regardless of series, shall be of equal rank, and there shall be no priority of one series over any other series in any payment of dividends nor upon any distribution of assets. 2. Dividends. The holders of preferred stock of each series shall be entitled to receive, when and as declared by the board of directors, cumulative cash dividends at the rates or amounts, for the periods, and at the times, determined as, or in the manner, specified for such series by the board of directors as authorized in the preceding part 1. No dividends shall be paid or declared or set apart for payment on any share of preferred stock of any series for any dividend period unless at or prior to such time all dividends accumulated on all shares of preferred stock then outstanding shall have been declared through the most recently ended dividend period of the respective shares, and terminating on the same and any earlier date shall have been paid or declared and set apart for payment. 3. Voting. At any meeting of stockholders of the corporation at which directors are to be elected, the holders of preferred stock of all series, voting separately as a single class, shall be entitled to elect two members of the board of directors, and the holders of common stock, voting separately as a single class, shall be entitled to elect the balance of the members of the board of directors. If at any time dividends on any outstanding preferred stock of any series shall be unpaid in an amount equal to two full years' dividends, the number of directors constituting the board of directors shall automatically be increased by the smallest number that, when added to the number of directors then constituting the board of directors, shall constitute a majority of such increased number, including the two directors elected by the holders of preferred stock pursuant to the preceding paragraph; and at a special meeting of stockholders which shall be called and held as soon as practicable, and at all subsequent meetings at which directors are to be elected, the holders of preferred stock of all series, voting separately as a single class, shall be entitled to elect the smallest number of additional directors of the corporation who will constitute a majority of the total number of directors of the corporation so increased. The terms of office of the persons who are directors at the time of that election shall continue. If the corporation thereafter shall pay, or declare and set apart for payment, in full all dividends payable on all outstanding shares of preferred stock of all series for all past dividend periods, the voting rights stated in the preceding sentence shall cease, and the terms of office of all of the directors elected by the holders of preferred stock (but not of the directors elected by the holders of common stock) shall terminate automatically. A special meeting of stockholders shall be called and held as soon thereafter as practicable for the election of two directors by the holders of the preferred stock, as provided in the preceding paragraph; and at such meeting, and at all subsequent meetings of stockholders at which directors are to be elected, the holders of shares of preferred stock and of common stock shall have the right to elect the members of the board of directors as stated in the preceding paragraph, subject to the revesting of the rights of the holders 3 of the preferred stock as provided in the first sentence of this paragraph in the event of any subsequent arrearage in the payment of two full years' dividends on the shares of preferred stock of any series. Any vacancy in the office of any director elected by the holders of shares of preferred stock may be filled by the remaining directors (or director) so elected or, if not so filled, by the holders of shares of preferred stock of all series, voting separately as a single class, at any meeting of stockholders for the election of directors held thereafter. A director elected by the holders of preferred stock or of common stock may be removed with or without cause, but only by action taken by the holders of at least 75% of the shares of preferred stock or of common stock, respectively, then entitled to vote in an election to fill that directorship. Except to the extent stated otherwise in this article fifth, the provisions of article seventh shall apply to this article fifth. 4. Liquidation. In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the holders of preferred stock of each series shall be entitled to receive only such amount or amounts, including accumulated and unpaid dividends, as shall have been fixed by the charter or by the resolution or resolutions of the board of directors providing for the issue of such series. If, upon any such liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the assets of the corporation available for distribution among the holders of all outstanding shares of preferred stock of all series should be insufficient to permit the payment in full to such holders of the amounts to which they are entitled, then such available assets shall be distributed among the holders of shares of preferred stock ratably in any such distribution of assets according to the respective amounts that would be payable on all such shares if all amounts thereon were paid in full. A consolidation or merger of the corporation with or into one or more other corporations or a sale, lease or exchange of all or substantially all of the assets of the corporation shall not be deemed to be a voluntary or involuntary liquidation, dissolution or winding up, within the meaning of this article fifth. C. All stock --------- 1. Sale of shares. The board of directors may authorize the sale and issuance from time to time of shares of stock, whether now or hereafter authorized, for such consideration as the board of directors considers advisable, but not less than par value, subject to such limitations as may be set forth in the charter of the corporation, the bylaws, the General Laws of the State of Maryland, the Investment Company Act of 1940, and other applicable laws. 2. Fractional shares. Except as may be provided otherwise by the board of directors in authorizing the issuance of a series of preferred stock, stock may be issued in fractions of whole shares, to which attach pro rata all of the rights of whole shares, including the right of voting and of receipt of dividends, except that there shall be no right of receipt of a certificate representing any fraction of a whole share. 4 3. No preemptive rights. No holder of shares of the corporation, whether now or hereafter authorized, shall be entitled as of right to acquire from the corporation any shares of the corporation, whether now or hereafter authorized. (b) A new Article Fourteenth is added to the charter to read in its entirety as follows: FOURTEENTH. Limitation of Liability. To the fullest extent permitted by Maryland statutory or decisional law, as amended or interpreted, no director or officer of the corporation shall be personally liable to the corporation or to its stockholders for money damages; provided, however, that this article shall not protect any director or officer of the corporation against any liability to the corporation or to its stockholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. No amendment of the charter of the corporation or repeal of any of its provisions shall limit or eliminate the benefits provided to directors and officers under this provision in connection with any act or omission that occurred prior to such amendment or repeal. SECOND: The board of directors of the corporation on March 4, 1988 duly adopted a resolution in which was set forth each of the foregoing amendments to the charter, declaring that each amendment as proposed was advisable and directing that each amendment be submitted for consideration at the 1988 annual meeting of stockholders of the corporation. THIRD: Notice setting forth the proposed amendments to the charter and a summary of the changes to be effected by each amendment and stating that a purpose of the meeting of the stockholders called to be held on April 8, 1988 (which meeting, having been convened was adjourned to May 17, 1988) would be to take action thereon was given, as required by law, to all stockholders entitled to vote thereon. Each amendment to the charter of the corporation as hereinabove set forth was approved by the stockholders of the corporation at the adjourned session of said meeting by the affirmative vote of a majority of all the votes entitled to be cast thereon. FOURTH: Each amendment to the charter of the corporation as hereinabove set forth has been duly advised by the board of directors and duly approved by the stockholders of the corporation. FIFTH: (a) The total number of shares of stock which the corporation has heretofore been authorized to issue is 250,000,000 shares, all of one class called common stock, of the par value of $.001 per share and of the aggregate par value of $250,000. (b) The total number of shares of stock which the corporation is authorized to issue is increased by the amendment to Article Fifth of the charter to 350,000,000 shares, of which 250,000,000 shares are common stock, par value $.001 per share, and of which 100,000,000 shares are preferred stock, par value $.001 per share. The aggregate par value of the authorized shares is increased to $350,000. 5 (c) The description of each class of stock of the corporation as amended is fully contained in the text of the amendment to Article Fifth of the charter set out in its entirety in subsection (a) of Article First hereof. IN WITNESS WHEREOF, Duff & Phelps Selected Utilities Inc. has caused these articles to be signed in its name and on its behalf by its president and attested to by its secretary on May 17, 1988. DUFF & PHELPS SELECTED UTILITIES INC. By: /s/ Richard J. Spletzer ---------------------------- Richard J. Spletzer Senior Vice President ATTEST: /s/ Calvin J. Pedersen - ------------------------------ Calvin J. Pedersen Secretary THE UNDERSIGNED, senior vice president of Duff & Phelps Selected Utilities Inc., who executed on behalf of the corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of the corporation, the foregoing Articles of Amendment to be the corporate act of the corporation and further certifies that to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects, under the penalties of perjury. /s/ Richard J. Spletzer ------------------------------- Richard J. Spletzer 6 EX-99.A.4 CHARTER 6 ex-99a4.txt Exhibit a.4 DUFF & PHELPS SELECTED UTILITIES INC. Articles Supplementary creating five series of Remarketed Preferred Stock DUFF & PHELPS SELECTED UTILITIES INC., a Maryland corporation having its principal Maryland office in the City of Baltimore (the "Corporation"), certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by article fifth of its Charter, the Board of Directors has classified its preferred stock and has authorized the issuance of five series of 1,000 shares each of its authorized preferred stock, par value $.001 per share, liquidation preference $100,000 per share, designated respectively: Remarketed Preferred Stock, Series A; Remarketed Preferred Stock, Series B; Remarketed Preferred Stock, Series C; Remarketed Preferred Stock, Series D; and Remarketed Preferred Stock, Series E. SECOND: The preferences, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, of the shares of such series of preferred stock are as follows: DESIGNATION SERIES A: A series of 1,000 shares of preferred stock, par value $.001 per share, liquidation preference $100,000 per share plus accumulated but unpaid dividends, if any, thereon (whether or not earned or declared), is hereby designated "Remarketed Preferred Stock, Series A." Each share of Remarketed Preferred Stock, Series A shall be issued on a date to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; have an Initial Dividend Payment Date (as herein defined) to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; be redeemed (unless such share shall have been otherwise redeemed pursuant to paragraph 4 of Part I of these Articles Supplementary or exchanged prior thereto for a share of Remarketed Preferred Stock, Series I, pursuant to paragraph 11 of Part I of these Articles Supplementary) by the Corporation on a date to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof at a redemption price of $100,000 per share plus accumulated but unpaid dividends to the date fixed for redemption (whether or not earned or declared); and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in Part I and Part II of these Articles Supplementary. The Remarketed Preferred Stock, Series A shall constitute a separate series of preferred stock of the Corporation, and each share of Remarked Preferred Stock, Series A shall be identical except as provided in paragraph 4 of Part I of these Articles Supplementary. SERIES B: A series of 1,000 shares of preferred stock, par value $.001 per share, liquidation preference $100,000 per share plus accumulated but unpaid dividends, if any, thereon (whether or not earned or declared), is hereby designated "Remarketed Preferred Stock, Series B." Each share of Remarketed Preferred Stock, Series B shall be issued on a date to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; have an Initial Dividend Payment Date (as herein defined) to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; be redeemed (unless such share shall have been otherwise redeemed pursuant to paragraph 4 of Part I of these Articles Supplementary or exchanged prior thereto for a share of Remarketed Preferred Stock, Series I, pursuant to paragraph 11 of Part I of these Articles Supplementary) by the Corporation on a date to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof at a redemption price of $100,000 per share plus accumulated but unpaid dividends to the date fixed for redemption (whether or not earned or declared); and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in Part I and Part II of these Articles Supplementary. The Remarketed Preferred Stock, Series B shall constitute a separate series of preferred stock of the Corporation, and each share of Remarketed Preferred Stock, Series B shall be identical except as provided in paragraph 4 of Part I of these Articles Supplementary. SERIES C: A series of 1,000 shares of preferred stock, par value of $.001 per share, liquidation preference $100,000 per share plus accumulated but unpaid dividends, if any, thereon (whether or not earned or declared), is hereby designated "Remarketed Preferred Stock, Series C." Each share of Remarketed Preferred Stock, Series C shall be issued on a date to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; have an Initial Dividend Payment Date (as herein defined) to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; be redeemed (unless such share shall have been otherwise redeemed pursuant to paragraph 4 of Part I of these Articles Supplementary or exchanged prior thereto for a share of Remarketed Preferred Stock, Series I, pursuant to paragraph 11 of Part I of these Articles Supplementary) by the Corporation on a date to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof at a redemption price of $100,000 per share plus accumulated but unpaid dividends to the date fixed for redemption (whether or not earned or declared); and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in Part I and Part II of these Articles Supplementary. The Remarketed Preferred Stock, Series C 2 shall constitute a separate series of preferred stock of the Corporation, and each share of Remarketed Preferred Stock, Series C shall be identical except as provided in paragraph 4 of Part I of these Articles Supplementary. SERIES D: A series of 1,000 shares of preferred stock, par value $.001 per share, liquidation preference $100,000 per share plus accumulated but unpaid dividends, if any, thereon (whether or not earned or declared), is hereby designated "Remarketed Preferred Stock, Series D." Each share of Remarketed Preferred Stock, Series D shall be issued on a date to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; have an Initial Dividend Payment Date (as herein defined) to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; be redeemed (unless such share shall have been otherwise redeemed pursuant to paragraph 4 of Part I of these Articles Supplementary or exchanged prior thereto for a share of Remarketed Preferred Stock, Series I, pursuant to paragraph 11 of Part I of these Articles Supplementary) by the Corporation on a date to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof at a redemption price of $100,000 per share plus accumulated but unpaid dividends to the date fixed for redemption (whether or not earned or declared); and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth on the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in Part I and Part II of these Articles Supplementary. The Remarketed Preferred Stock, Series D shall constitute a separate series of preferred stock of the Corporation, and each share of Remarketed Preferred Stock, Series D shall be identical except as provided in paragraph 4 of Part I of these Articles Supplementary. SERIES E: A series of 1,000 shares of preferred stock, par value $.001 per share, liquidation preference $100,000 per share plus accumulated but unpaid dividends, if any, thereon (whether or not earned or declared), is hereby designated "Remarketed Preferred Stock, Series E." Each share of Remarketed Preferred Stock, Series E shall be issued on a date to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; have an Initial Dividend Payment Date (as herein defined) to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; be redeemed (unless such share shall have been otherwise redeemed pursuant to paragraph 4 of Part I of these Articles Supplementary or exchanged prior thereto for a share of Remarketed Preferred Stock, Series I, pursuant to paragraph 11 of this Part I of these Articles Supplementary) by the Corporation on a date to be determined by the Board of Directors of the Corporation of a duly authorized committee thereof at a redemption price of $100,000 per share plus accumulated but unpaid dividends to the date fixed for redemption (whether or not earned or declared); and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in Part I and Part II of these Articles Supplementary. The Remarketed Preferred Stock, Series E shall constitute a separate series of preferred stock of the Corporation, and each share of Remarketed Preferred Stock, Series E shall be identical except as provided in paragraph 4 of Part I of these Articles Supplementary. 3 PART I. ------ 1. Definitions. Unless the context or use indicates another or different meaning or intent, the following terms shall have the following meanings, whether used in the singular or plural: "`AA' Composite Commercial Paper Rate," on any date, means (i) the Interest Equivalent of the rate on commercial paper placed for the number of days specified in the succeeding sentence on behalf of issuers whose corporate bonds are rated "AA" by S&P and "Aa" by Moody's, or the equivalent of such rating by another nationally recognized statistical rating organization, as such rate is made available by the Federal Reserve Bank of New York on a discount basis or otherwise for the Business Day immediately preceding such date, or (ii) if the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the Interest Equivalent of such rates on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers to the Remarketing Agent for the close of business on the Business Day immediately preceding such date. In respect of any Dividend Period (determined without regard to any adjustment in the remarketing schedule in respect of non-Business Days, as provided herein), the "AA" Composite Commercial Paper Rate shall be the Interest Equivalent of the 60-day rate. If any Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Dealers or, if none of the Commercial Paper Dealers quotes such a rate, by any Substitute Commercial Paper Dealer or Dealers selected by the Corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer. "Accountant's Confirmation" has the meaning set forth in paragraph 8(a) (iii) of this Part I. "Adviser" means Duff & Phelps Investment Management Co., the Corporation's investment adviser. "Agent Member" means a designated member of the Securities Depository that will maintain records for a Beneficial Owner of shares of RP that has identified such Agent Member in its Master Purchaser's Letter and that will be authorized and instructed to disclose information to the Remarketing Agent and the Paying Agent with respect to such Beneficial Owner. "Applicable Dividend Rate" means, with respect to the Initial Dividend Period, the rate of cash dividend per annum established by the Board of Directors and, for each subsequent Dividend Period, means the rate of cash dividend per annum that (i) except for a Dividend Period commencing during a Non-Payment Period, will be equal to the lower of the rate of cash dividend per annum that the Remarketing Agent advises results on the Dividend Reset Date preceding the first day of such Dividend Period from implementation of the remarketing procedures set forth in Part II hereof and the Maximum Dividend Rate or (ii) for each Dividend Period commencing during a Non-Payment Period, will be equal to the Non-Payment Period Rate. 4 "Applicable Percentage" has the meaning set forth under "Maximum Dividend Rate" below. "Authorized Newspaper" means a newspaper of general circulation in the English language generally published on Business Days in The City of New York. "Beneficial Owner" means a person that has signed a Master Purchaser's Letter and is listed as the beneficial owner of one or more shares of RP in the records of the Paying Agent or, with respect to any share not registered in the name of the Securities Depository on the stock transfer books of the Corporation, the person in whose name such share is so registered. "Board of Directors" means the Board of Directors of the Corporation. "Business Day" means a day on which the New York Stock Exchange, Inc. is open for trading, and is not a day on which banks in The City of New York are authorized or obligated by law to close. "Certificate of Minimum Liquidity" has the meaning set forth in paragraph 8(b) (i) of this Part I. "Charter" means the Articles of Incorporation, as amended, of the Corporation, including these Articles Supplementary and the Articles Supplementary relating to the Serial RP (if any) on file in the State Department of Assessments and Taxation of the State of Maryland. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") and such other Commercial Paper Dealer or Dealers as the Corporation may from time to time appoint, or, in lieu of any thereof, their respective affiliates or successors. "Common Stock" means the common stock, par value $.001 per share, of the Corporation. "Conventional Mortgage Pass-Through Certificate" means an instrument publicly issued in bearer or registered form, that is one of a class or series or by its terms is divisible into a class or series, and that is of a type commonly dealt in on securities exchanges or markets or commonly recognized in any area in which it is issued or dealt in as a medium for investment, evidencing (directly or indirectly) a proportional undivided interest in specified pools of whole loans that are secured by a valid first lien on each mortgagor's fee or leasehold interest in related mortgaged property (except for Permitted Tax Liens and other matters to which like properties are commonly subject which neither individually nor in the aggregate materially interfere with the benefits of the security intended to be provided by such mortgages or deeds of trust, and standard exceptions and exclusions in title insurance policies) on one- to four-unit residences (including, without limitation, owner-occupied attached or detached single-unit residences, one- to four-unit primary residences, condominiums, second/vacation homes and non-owner occupied residences) and 5 with respect to which the Required Documentation is required to be held by a trustee or independent custodian, which mortgage loans are serviced pursuant to servicing agreements with servicers that have either expressed the intention to advance funds to meet deficiencies (to the extent such servicers reasonably believe such advances are recoverable) or provided for alternative credit enhancement in lieu thereof, and which instruments (a) have been rated AA or better by S&P or Aa or better by Moody's or (b) do not qualify pursuant to clause (a) above, but the inclusion of which in the Eligible Portfolio Property will not, in and of itself, impair, or cause the RP to fail to retain, the then-current ratings assigned to the RP by the Rating Agencies, as evidenced by letters to the Corporation to such effect from the Rating Agencies which letters shall be delivered to the Remarketing Agent and the Paying Agent at the time each such Conventional Mortgage Pass-Through Certificate is to be included in the Eligible Portfolio Property; provided that, a Conventional Mortgage Pass-Through Certificate shall be eligible for inclusion in the Eligible Portfolio Property as of any Valuation Date only if it continues to satisfy as of such Valuation Date the requirements of at least one clauses (a) or (b) above, as the Corporation may confirm, verbally or in writing, directly or indirectly, or by reference to publications of the Rating Agencies, by confirmation from a nationally recognized securities dealer having a minimum capitalization of $25 million or by such other means as the Rating Agencies shall approve. The Remarketing Agent and the Paying Agent shall be entitled to rely on the representation of the Corporation contained in the RP Basic Maintenance Report with respect to any Valuation Date that, as of such Valuation Date, the Corporation has confirmed that the Conventional Mortgage Pass-Through Certificates included in the Corporation's Eligible Portfolio Property are within the scope of this paragraph. "Corporation" means Duff & Phelps Selected Utilities Inc., a Maryland corporation and the issuer of the shares of RP. "Date of Original Issue" means, with respect to any share of RP, the date on which the Corporation originally issues such share. "Debt Obligations" has the meaning set forth under "Utility Stocks" below. "Deposit Securities" means cash, U.S. Government Obligations and Short Term Money Market Instruments. Except for purposes of determining compliance with the RP Basic Maintenance Amount, each Deposit Security shall be deemed to have a value equal to its principal or face amount payable at maturity plus any interest payable thereon after delivery of such Deposit Security but only if payable on or prior to the applicable payment date in advance of which the relevant deposit is made. "Discount Factor" means Discount Factor Supplied by Moody's or Discount Factor supplied by S&P, as the case may be. "Discount Factor Supplied By S&P" means, initially, for any asset held by the Corporation, the number set forth opposite such type of asset in the following table (it being understood that any asset held by the Corporation and not listed in the following table or in an amendment or supplement thereto shall have a Discounted Value of zero): 6
Discounted Factor(1) -------------------- Type A Utility Bonds: 1.80 Type B Utility Bonds: 1.85 Type A Utility Stocks: 2.25 Type B Utility Stocks: 2.35 GNMA Certificates with fixed interest rates: 1.40 GNMA Certificates with adjustable interest rates: 1.40 FHLMC and FNMA Certificates with fixed interest rates: 1.50 FHLMC and FNMA Certificates with adjustable interest rates: 1.50 FHLMC Multifamily Securities: 1.50 FHLMC and FNMA Certificates with variable interest rates: 1.50 GNMA Graduated Payment Securities: 1.60 Conventional Mortgage Pass-Through Certificates (2) 1.55 U.S. Government Obligations having a remaining term to maturity of 90 days or less: 1.00 U.S. Government Obligations having a remaining term to maturity of more than 90 days but not more than five years: 1.28 U.S. Government Obligations having a remaining term to maturity of more than five years but not more than 10 years: 1.35 U.S. Government Obligations having a remaining term to maturity of more than 10 years but not more than 15 years: 1.40 U.S. Government Obligations having a remaining term to maturity of more than 15 years but not more than 30 years: 1.50 Cash and Short Term Money Market Instruments: 1.00 - ------------------------ (1) In the case of Eligible Portfolio Property rated by Moody's but not rated by S&P, the Discount Factor Supplied by S&P shall be the Discount Factor determined therefor in writing by S&P. Absent such written notification, the asset shall have a Discounted Value of zero. (2) In the event such asset is not rated AA or better by S&P, such asset shall have a Discounted Value of zero.
7 Notwithstanding the foregoing, for so long as is required by S&P to maintain its then-current credit rating of the RP, the Discount Factor Supplied by S&P with respect to Eligible Portfolio Property sold pursuant to a reverse repurchase agreement with a remaining term to maturity of more than 25 days on the date of determination of the Discounted Value of such Eligible Portfolio Property shall be the then-current Discount Factor provided by S&P to the Corporation in writing for the purpose of such determination. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial Discount Factor Supplied by S&P listed above applied to calculate the Discounted Value of any item of Eligible Portfolio Property or may specify from time to time a Discount Factor Supplied by S&P for any asset constituting Eligible Portfolio Property if the Board of Directors determines and S&P advises the Corporation in writing that such adjustment, modification, alteration, change or specification will not adversely affect S&P's then-current rating of the RP. "Discount Factor Supplied By Moody's" means initially, for any asset held by the Corporation, the number set forth opposite such type of asset in the following table (it being understood that any asset held by the Corporation and not listed in the following table or in an amendment or supplement thereto shall have a Discounted Value of zero): 8
Discount Factor(1) ------------------ Type I Utility Bonds having a remaining term to maturity of one year or less: 1.20 Type I Utility Bonds having a remaining term to maturity of more than one year but not more than two years: 1.27 Type I Utility Bonds having a remaining term to maturity of more than two years but not more than three years: 1.32 Type I Utility Bonds having a remaining term to maturity of more than three years but not more than four years: 1.38 Type I Utility Bonds having a remaining term to maturity of more than four years but not more than five years: 1.44 Type I Utility Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.53 Type I Utility Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.61 Type I Utility Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.69 Type I Utility Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.76 Type I Utility Bonds having a remaining term to maturity of more than 20 years but less than 30 years: 1.79 Type II Utility Bonds having a remaining term to maturity of one year or less: 1.24 Type II Utility Bonds having a remaining term to maturity of more than one year but not more than two years: 1.31 Type II Utility Bonds having a remaining term to maturity of more than two years but not more than three years: 1.38 9 Type II Utility Bonds having a remaining term to maturity of more than three years but not more than four years: 1.44 Type II Utility Bonds having a remaining term to maturity of more than four years but not more than five years: 1.50 Type II Utility Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.60 Type II Utility Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.70 Type II Utility Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.76 Type II Utility Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.84 Type II Utility Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 1.87 Type III Utility Bonds having a remaining term to maturity of one year or less: 1.29 Type III Utility Bonds having a remaining term to maturity of more than one year but not more than two years: 1.38 Type III Utility Bonds having a remaining term to maturity of more than two years but not more than three years: 1.44 Type III Utility Bonds having a remaining term to maturity of more than three years but not more than four years: 1.51 Type III Utility Bonds having a remaining term to maturity of more than four years but not more than five years: 1.57 Type III Utility Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.67 Type III Utility Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.77 10 Type III Utility Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.84 Type III Utility Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.92 Type III Utility Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 1.95 Type IV Utility Bonds having a remaining term to maturity of one year or less: 1.36 Type IV Utility Bonds having a remaining term to maturity of more than one year but not more than two years: 1.44 Type IV Utility Bonds having a remaining term to maturity of more than two years but not more than three years: 1.50 Type IV Utility Bonds having a remaining term to maturity of more than three years but not more than four years: 1.57 Type IV Utility Bonds having a remaining term to maturity of more than four years but not more than five years: 1.63 Type IV Utility Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.74 Type IV Utility Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.83 Type IV Utility Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.92 Type IV Utility Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 2.02 Type IV Utility Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 2.03 Type I Utility Stocks 2.00 11 Discount Factor (Fixed (Adjustable Rate FHLMC or FNMA Certificate Mortgages) Mortgage) - ------------------------- ---------- ----------- FHLMC or FNMA Certificates with interest rates less than 6% but equal to or greater than 5%: 1.71 1.68 FHLMC or FNMA Certificates with interest rates less than 7% but equal to or greater than 6%: 1.66 1.68 FHLMC or FNMA Certificates with interest rates less than 8% but equal to or greater than 7%: 1.61 1.68 FHLMC or FNMA Certificates with interest rates less than 9% but equal to or greater than 8%: 1.57 1.68 FHLMC or FNMA Certificates with interest rates less than 10% but equal to or greater than 9%: 1.52 1.68 FHLMC or FNMA Certificates with interest rates less than 11% but equal to or greater than 10%: 1.49 1.68 FHLMC or FNMA Certificates with interest rates less than 12% but equal to or greater than 11%: 1.45 1.68 FHLMC or FNMA Certificates with interest rates less than 13% but equal to or greater than 12%: 1.43 1.68 FHLMC or FNMA Certificates with interest rates equal to or greater than 13%: 1.40 1.68 12 Discount GNMA Certificates Factor - ----------------- -------- GNMA Certificates with interest rates less than 6% but equal to or greater than 5%: 1.63 GNMA Certificates with interest rates less than 7% but equal to or greater than 6%: 1.57 GNMA Certificates with interest rates less than 8% but equal to or greater than 7%: 1.52 GNMA Certificates with interest rates less than 9% but equal to or greater than 8%: 1.48 GNMA Certificates with interest rates less than 10% but equal to or greater than 9%: 1.45 GNMA Certificates with interest rates less than 11% but equal to or greater than 10%: 1.43 GNMA Certificates with interest rates less than 12% but equal to or greater than 11%: 1.40 GNMA Certificates with interest rates less than 13% but equal to or greater than 12%: 1.38 GNMA Certificates with interest rates equal to or greater than 13%: 1.36 GNMA Certificates with adjustable interest rates: 1.64 FHLMC Multifamily Securities: (2) FHLMC and FNMA Certificates with variable interest rates: (4) GNMA Graduated Payment Securities (seasoned): (3) Conventional Mortgage Pass-Through Certificates: (5) U.S. Government Obligations having a remaining term to maturity of up to one year: 1.09 U.S. Government Obligations having a remaining term to maturity of more than one year but not more than two years: 1.15 U.S. Government Obligations having a remaining term to maturity of more than two years but not more than three years: 1.20 13 U.S. Government Obligations having a remaining term to maturity of more than three years but not more than four years: 1.27 U.S. Government Obligations having a remaining term to maturity of more than four years but not more than five years: 1.32 U.S. Government Obligations having a remaining term to maturity of more than five years but not more than seven years: 1.41 U.S. Government Obligations having a remaining term to maturity of more than seven years but not more than 10 years: 1.49 U.S. Government Obligations having a remaining term to maturity of more than 10 years but not more than 15 years: 1.56 U.S. Government Obligations having a remaining term to maturity of more than 15 years but not more than 20 years: 1.64 U.S. Government Obligations having a remaining term to maturity of more than 20 years but not more than 30 years: 1.65 Cash and Short Term Money Market Instruments: 1.00 - ----------------------- (1) In the case of Eligible Portfolio Property rated by S&P but not by Moody's, the Discount Factor Supplied by Moody's shall be the Discount Factor Supplied by Moody's applicable to Eligible Portfolio Property with a corresponding maturity but of the next lower rating category (e.g., a bond rated AAA by S&P but not rated by Moody's shall have a Discount Factor Supplied by Moody's equal to a bond of comparable maturity rated Aa by Moody's). (2) The applicable Discount Factor set forth under "FHLMC or FNMA Certificates" above. (3) The same Discount Factor shall apply in the case of GNMA Graduated Payment Securities as applies to GNMA Certificates with fixed interest rates determined at the point the certificates become seasoned. (4) The Discount Factor determined therefor in writing by Moody's. (5) The Discount Factor determined therefor in writing by Moody's. In the event such asset is not rated Aa or better by Moody's, such asset shall have a Discounted Value of zero.
14 Notwithstanding the foregoing, for so long as is required by Moody's to maintain its then-current credit rating of the RP, the Discount Factor Supplied by Moody's with respect to Eligible Portfolio Property sold pursuant to a reverse repurchase agreement with a remaining term to maturity of more than 25 days on the date of determination of the Discounted Value of such Eligible Portfolio Property shall be the then-current discount factor provided by Moody's to the Corporation in writing for the purpose of such determination. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial Discount Factor Supplied by Moody's listed above applied to calculate the Discounted Value of any item of Eligible Portfolio Property or may specify from time to time a Discount Factor Supplied by Moody's for any asset constituting Eligible Portfolio Property if the Board of Directors determines and Moody's advises the Corporation in writing that such adjustment, modification, alteration, change or specification will not adversely affect Moody's then-current rating of the RP. "Discounted Value," with respect to any asset held by the Corporation as of any date, means the quotient of the Market Value of such asset divided by the applicable Discount Factor Supplied by S&P (provided that, in the event the Corporation has written a call option on such asset, the Discounted Value of such asset shall be zero) or the quotient of the Market Value of such asset divided by the applicable Discount Factor Supplied by Moody's (provided that, in the event the Corporation has written a call option on such asset, the Discounted Value of such asset shall mean the quotient of the lower of the Market Value of such asset and the exercise price of such call option divided by the applicable Discount Factor Supplied by Moody's), as the case may be, provided that in no event shall the Discounted Value of any asset constituting Eligible Portfolio Property as of any date exceed the unpaid principal balance or face amount of such asset as of that date. With respect to the calculation of the Discounted Value of any Utility Bond included in the Corporation's Eligible Portfolio Property, such calculation shall be made using the criteria set forth in the definitions of Utility Bonds and Market Value. With respect to the calculation of the Discounted Value of any Utility Stock included in the Corporation's Eligible Portfolio Property, such calculation shall be made using the criteria set forth in the definitions of Utility Stocks and Market Value. With respect to the calculation of the aggregate Discounted Value of the Corporation's Eligible Portfolio Property for comparison with the RP Basic Maintenance Amount, such aggregate Discounted Value shall be the aggregate Discounted Value calculated using the Discount Factors Supplied by S&P or the aggregate Discounted Value calculated using the Discount Factors Supplied by Moody's whichever aggregate Discounted Value is lower; provided that, in calculating for such purpose the aggregate Discounted Value of the Corporation's Eligible Portfolio Property using the applicable Discount Factor Supplied by Moody's, the amount of Utility Stocks issued by public utility companies with nuclear facilities under construction (as determined by the Adviser) which may be included in such calculation shall be limited to five percent of the Market Value of the Corporation's Eligible Portfolio Property. Notwithstanding any other provision of these Articles Supplementary, any Utility Bond that has a remaining term to maturity of more than 30 years, and any asset as to which there is no Discount Factor Supplied by Moody's or Discount Factor Supplied by S&P either in these Articles Supplementary or in an amendment or 15 supplement hereof, shall have a Discounted Value for purposes of determining the aggregate Discounted Value of the Corporation's Eligible Portfolio Property calculated using the Discount Factor Supplied by Moody's or S&P, as the case may be, of zero. "Divided Coverage Amount," as of any Valuation Date, means (a) the aggregate amount of cash dividends that will accumulate on shares of RP to (but not including) the Dividend Payment Date that follows such Valuation Date less (b) the Combined value of any Deposit Securities irrevocably deposited by the Corporation for the payment of cash dividends on the RP. "Dividend Coverage Assets," as of any date of determination, means Deposit Securities with maturity dates not later than the day preceding the next Dividend Payment Date; provided, that, if the applicable date of determination is a Dividend Payment Date, any Deposit Securities to be applied to the dividends payable on the RP on such date shall not be included in Dividend Coverage Assets. "Dividend Payment Date" means the day after the last day of the applicable Dividend Period; provided that, if any such date shall not be a Business Day, the Dividend Payment Date shall be the Business Day next succeeding such day. "Dividend Period" means, with respect to any share of RP, the Initial Dividend Period for such share and thereafter a period which shall commence on each (but not the final) Dividend Payment Date for such share (which, except during a Non-Payment Period, shall be a Settlement Date for such share). Each such subsequent Dividend Period for such share will comprise, beginning with and including the day upon which it commences, 49 consecutive days (or such other number of consecutive days as are specified by the Board of Directors in the event of a change in law altering the Minimum Holding Period, as provided herein). Notwithstanding the foregoing, any adjustment of the remarketing schedule by the Remarketing Agent which includes an adjustment of a Settlement Date shall lengthen or shorten the related Dividend Period by causing it to end on and include the day before the Settlement Date as so adjusted. "Dividend Reset Date" means any date on which the Remarketing Agent (i) determines the Applicable Dividend Rate for the ensuing Dividend Period, (ii) notifies holders, purchasers and tendering holders of shares of RP by telephone, telex or otherwise of the results of the Remarketing and (iii) announces such Applicable Dividend Rate. "Dividends-Received Deduction" means the deduction allowed to corporate holders of certain preferred stock with respect to dividends received on such stock by Section 243(a)(1) of the Code, or any successor thereto. "Eligible Portfolio Property" shall include Utility Bonds, Utility Stocks, cash, U.S. Government Obligations, Short Term Money Market Instruments, FNMA Certificates, FHLMC Certificates, FHLMC Multifamily Securities, GNMA Certificates, GNMA Multifamily Securities, GNMA Graduated Payment Securities, Conventional Mortgage Pass-Through Certificates and any other assets held by the Corporation that has been assigned a Discount Factor by the Rating Agencies and is included within the definition of 16 Eligible Portfolio Property set forth herein or pursuant to an amendment or supplement hereto. "Exchange Date" has the meaning set forth in paragraph 11, of this Part I. "Exchange Event" has the meaning set forth in paragraph 11 of this Part I. "FHLMC" means the Federal Home Loan Mortgage Corporation created by Title III of the Emergency Home Finance Act of 1970, and includes any successor thereto. "FHLMC Certificate" means a mortgage participation certificate in physical or book-entry form, the timely payment of interest on and the ultimate collection of principal of which is guaranteed by FHLMC, and which evidences a proportional undivided interest in, or participation interest in, specified pools of fixed-, variable- or adjustable-rate, level payment fully amortizing mortgage loans secured by first-priority mortgages on one- to four-family residences. "FHLMC Multifamily Security" means a "Plan B Multifamily Security" in physical or book-entry form, the timely payment of interest on and the ultimate collection of principal of which is guaranteed by FHLMC, and which evidences a proportional undivided interest in, or participation interest in, specified pools of fixed-, variable- or adjustable-rate level payment fully amortizing mortgage loans secure by first-priority mortgages on multi-family residences, the inclusion of which in the Eligible Portfolio Property will not, in and of itself, impair or cause the RP to fail to retain the ratings assigned to the RP by the Rating Agencies, as evidenced by letters to such effect delivered to the Corporation by the Rating Agencies. "FNMA" means the Federal National Mortgage Association, a United States Government-sponsored private corporation established pursuant to Title VIII of the Housing and Urban Development Act of 1968, and includes any successor thereto. "FNMA Certificate" means a mortgage pass-through certificate in physical or book-entry form, the full and timely payment of principal of and interest on which is guaranteed by FNMA, and which evidences a proportional undivided interest in specified pools of fixed-, variable- or adjustable-rate, level payment fully amortizing mortgage loans secured by first-priority mortgages on single-family and multi-family residences. "GNMA" means the Government National Mortgage Association, and includes any successor thereto. "GNMA Certificate" means a fully modified pass-through certificate in physical or book-entry form, the full and timely payment of principal of and interest on which is guaranteed by GNMA and which evidences a proportional undivided interest in specified pools of fixed-, variable- or adjustable-rate, level payment fully amortizing mortgage loans secured by first-priority mortgages on single-family and multi-family residences. 17 "GNMA Graduated Payment Security" means a fully modified pass-through certificate in physical or book-entry form, the full and timely payment of principal of and interest on which is guaranteed by GNMA, which obligation is backed by the full faith and credit of the United States, and which evidences a proportional undivided interest in specified pools of graduated payment mortgage loans with payments that increase annually at a predetermined rate for up to the first five or ten years of the mortgage loan and that are secured by first-priority mortgages on one- to four-unit residences. "Holder" means, with respect to any share of RP, unless the context otherwise requires, the person whose name appears on the stock transfer books of the Corporation as the registered holder of such share. "Independent Accountant" means a nationally recognized accountant, or firm of accountants, that is with respect to the Corporation an independent public accountant or firm of independent public accountants under the Securities Act of 1933, as amended. "Initial Dividend Period" means, with respect to any share of RP, the period commencing on and including the Date of Original Issue of such share and ending on the day prior to the Initial Dividend Payment Date. "Interest Equivalent" means a yield on a 360-day basis of a discount basis security which is equal to the yield on an equivalent interest-bearing security. "Market Value" means, initially, the amount determined with respect to specific assets of the Corporation in the manner set forth below: (a) as to any Utility Bond, (i) the product of (A) the unpaid principal balance of such Utility Bond as of the Reporting Date, and (B)(1) if the Utility Bond is traded on a national securities exchange or quoted on the NASDAQ System, the last sales price reported on the date of valuation or (2) if there was no reported sales price on the date of valuation or if the Utility Bond is not traded on a national securities exchange or quoted on the NASDAQ System, the lower of two bid prices for such Utility Bond provided by two nationally recognized securities dealers with a minimum capitalization of $25 million or by one such securities dealer and any other source (provided that the utilization of such source would not adversely affect the ratings of the RP) to the custodian of the Corporation's assets, at least one of which shall be provided in writing or by telecopy, telex, other electronic transcription, computer obtained quotation reducible to written form or similar means, and in turn provided to the Corporation by any such means by such custodian (provided that evidence of the bid quotes furnished by such custodian shall be provided to the Paying Agent and the Remarketing Agent by the Corporation with the related RP Basic Maintenance Report), plus (ii) accrued interest on such Utility Bond, or, if two bid prices cannot be obtained, such item of Eligible Portfolio Property shall have a Market Value of zero; 18 (b) as to any Utility Stock, (i) if the Utility Stock is traded on a national securities exchange or quoted on the NASDAQ System, the last sales price reported on the date of valuation or, (ii) if there was no reported sales price on the date of valuation, the lower of two bid prices for such Utility Stock provided by two nationally recognized securities dealers with a minimum capitalization of $25 million or by one such securities dealer and any other source (provided that the utilization of such source would not adversely affect the then-current ratings of the RP) to the custodian of the Corporation's assets, at least one of which shall be provided in writing or by telecopy, telex, other electronic transcription, computer obtained quotation reducible to written form or similar means, and in turn provided to the Corporation by any such means by such custodian (provided that evidence of the bid quotes furnished by such custodian shall be provided to the Remarketing Agent by the Corporation with the related RP Basic Maintenance Report), or, if two bid prices cannot be obtained, such item of Eligible Portfolio Property shall have a Market Value of zero; (c) the product of (i) as to GNMA Certificates, GNMA Graduated Payment Securities, GNMA Multifamily Securities, FNMA Certificates, FHLMC Certificates and FHLMC Multifamily Securities, the aggregate unpaid principal amount of the mortgage loans evidenced by each such certificate or security, as the case may be, which may include amounts shown on the most recent report related to the certificate or security received by the Corporation prior to the Reporting Date, and as to U.S. Government Obligations and Short Term Money Market Instruments (other than demand deposits, federal funds, bankers' acceptances and next Business Day's repurchase agreements), the face amount or aggregate principal amount of such U.S. Government Obligations or Short Term Money Market Instruments, as the case may be, and (ii) the lower of the bid prices for the same kind of certificates, securities or instruments, as the case may be, having, as nearly as practicable, comparable interest rates and maturities provided by two nationally recognized securities dealers having minimum capitalization of $25 million or by one such securities dealer and any other source (provided that the utilization of such source would not adversely affect the then-current ratings of the RP) to the custodian of the Corporation's assets, at least one of which shall be provided in writing or by telecopy, telex, other electronic transcription, computer obtained quotation reducible to written form or similar means, and in turn provided to the Corporation by any such means by such custodian (provided that evidence of the bid quotes furnished by such custodian shall be delivered to the Remarketing Agent with the related RP Basic Maintenance Report), or, if two bid prices cannot be obtained, such item of Eligible Portfolio Property will have a Market Value of zero; (d) as to Conventional Mortgage Pass-Through Certificates, the product of (i) the outstanding aggregate principal balance of the mortgage loans underlying such certificates as determined by the Corporation by any method which the Corporation believes reliable, which may include amounts based on verbal reports of the servicers of the related mortgage loans to the Corporation, as of the applicable Reporting Date and (ii) the dollar value of the lower of two bid prices per dollar of outstanding principal amount as 19 of such applicable Reporting Date for such certificates, provided by two nationally recognized securities dealers having minimum capitalization of $25 million or by one such securities dealer and any other source (provided that the utilization of such source would not adversely affect the then-current ratings of the RP) to the custodian of the Corporation's assets, at least one of which shall be provided in writing or by telecopy, telex, other electronic transcription, computer obtained quotation reducible to written form or similar means, and in turn provided to the Corporation by any such means by such custodian (provided that evidence of the bid quotes furnished by such custodian shall be delivered to the Remarketing Agent with the related RP Basic Maintenance Report), or, if two bid prices cannot be obtained, such item of Eligible Portfolio Property shall have a Market Value of zero; and (e) as to cash, demand deposits, federal funds, bankers' acceptances and next Business Day's repurchase agreements included in Short Term Money Market Instruments, the face value thereof. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial method of calculation of the Market Value of an asset constituting Eligible Portfolio Property described above and the Board of Directors may specify from time to time the method for calculating the Market Value of any asset identified as Eligible Portfolio Property if the Board of Directors of the Corporation determines and the Rating Agencies advise the Corporation in writing that such adjustment, modification, alteration, change or specification will not adversely affect their then-current ratings of the RP. "Master Purchaser's Letter" means a letter substantially in the form of Appendix B to the Corporation's prospectus relating to the shares of RP, or such other form as may be approved by the Remarketing Agent, which is required to be executed by each purchaser of shares of RP. "Maximum Dividend Rate" for any Dividend Period at any Dividend Reset Date shall apply to a cash dividend, and be the Applicable Percentage of the applicable "AA" Composite Commercial Paper Rate. The Applicable Percentage shall vary with the lower of the credit rating or ratings assigned to the shares of RP by Moody's and S&P (or if Moody's or S&P or both shall not make such rating available, the equivalent of either or both of such ratings by a Substitute Rating Agency or two Substitute Rating Agencies or, in the event that only one such rating shall be available, such rating) on each Dividend Reset Date as follows: 20 Credit Ratings Applicable Percentage - ------------------------------------------ --------------------- Moody's S&P ------- --- "aa3" or higher AA- or higher 110% "a3" to "a1" A- to A+ 125% "baa3" to "baa1" BBB- to BBB+ 150% Below "baa3" Below BBB- 200% The Remarketing Agent shall round each applicable Maximum Dividend Rate to the nearest one-thousandth (0.001) of one percent per annum, with any such number ending in five ten-thousandths (0.005) of one percent being rounded upwards to the nearest one-thousandth (0.001) of one percent. The Remarketing Agent shall not round the applicable "AA" Composite Commercial Paper Rate as part of their calculation of any Maximum Dividend Rate. "Minimum Holding Period" means 46 days or such other minimum holding period required for corporate taxpayers to be entitled to the Dividends-Received Deduction as provided in Section 246(c) of the Code or any successor thereto. "Minimum Liquidity Level is met" means, as of any date of determination, that the aggregate Market Value of the Dividend Coverage Assets equals or exceeds the Dividend Coverage Amount. "Moody's" means Moody's Investors Service, Inc.; and includes any successor thereto. "1940 Act" means the Investment Company Act of 1940, as amended from time to time. "NASDAQ System" has the meaning set forth under "Type I Utility Stocks" below. "1940 Act RP Asset Coverage" means asset coverage, as defined in section 18(h) of the 1940 Act, of at least 200% of the aggregate liquidation preference with respect to all outstanding senior securities of the Corporation which are stock, including all outstanding shares of RP and Other RP (or such other asset coverage as may be specified in or under the 1940 Act as the minimum asset coverage for senior securities which are stock of a closed-end investment company as a condition of paying dividends on its common stock). "1940 Act Cure Date," with respect to the failure by the Corporation to maintain the 1940 Act RP Asset Coverage (as required by paragraph 7 of this Part I) as of the last day of each month, means the last Business Day of the following such month. 21 "Non-Payment Period" means any period beginning on and including the day on which the Corporation shall fail to (i) declare, prior to 12:00 noon, New York City time, on the second Business Day preceding any Dividend Payment Date for any shares of RP, for payment on such Dividend Payment Date to the Beneficial Owners of such shares of RP 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 such shares of RP payable on such Dividend Payment Date or (ii) deposit, irrevocably in trust, in same-day funds, with the Paying Agent by 12:00 noon, New York City time, (A) on any Dividend Payment Date the full amount of any declared cash dividend (whether or not earned) payable on such Dividend Payment Date or (B) on any redemption date for any shares of RP, the redemption price of such shares of $100,000 per share plus the full amount of any cash dividends thereon (whether or not earned or declared) accumulated but unpaid to such redemption date after a Notice of Redemption with respect to such shares of RP has been given pursuant to paragraph 4(e) of Part I hereof, 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 Beneficial Owners in same-day funds; provided that a Non-Payment Period shall not end during the first seven days thereof unless the Corporation shall have given at least three days' written notice to the Paying Agent, the Remarketing Agent and the Securities Depository and thereafter shall not end unless the Corporation shall have given at least fourteen days' written notice to the Paying Agent, the Remarketing Agent, the Securities Depository and all Beneficial Owners. "Non-Payment Period Rate" means, initially, 200% of the applicable "AA" Composite Commercial Paper Rate, provided that the Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial Non-Payment Period Rate if the Board of Directors determines and the Rating Agencies advise the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect their then-current ratings on the RP. "Notice of Redemption" means any notice with respect to the redemption of shares of RP pursuant to paragraph 4 of this Part I. "Other RP" means the remarketed preferred stock of the Corporation, other than the RP. "Paying Agent" means Bankers Trust Company, or any successor company or entity, which has entered into a Paying Agent Agreement with the Corporation to act for the Corporation, among other things, as the transfer agent, registrar, dividend and redemption price disbursing agent, settlement agent and agent for certain notifications in connection with the shares of RP in accordance with such agreement. "Paying Agent Agreement" means an agreement to be entered into between the Corporation and the Paying Agent. "Permitted Tax Liens" means liens for general and special taxes and assessments on the property in question. "Preferred Stock" means the preferred stock of the Corporation, and includes RP and Other RP. 22 "Projected Dividend Amount" for the RP and the Other RP shall mean, initially, if the date of determination is a Valuation Date, the amount of cash dividends, based on the number of shares of RP and the Other RP outstanding on such Valuation Date, projected to accumulate on such shares from such Valuation Date until the 70th day after such Valuation Date, at the following dividend rates: (a) If the Valuation Date is the Date of Original Issue or a Dividend Payment Date (which terms, for purposes of this definition, shall refer to the equivalent date in the case of Other RP), (i) for the Dividend Period beginning on the Date of Original Issue or such Dividend Payment Date and ending on (but not including) the first following Dividend Payment Date, the Applicable Dividend Rate (which terms, for purposes of this definition, shall refer to the equivalent date in the case of Other RP) in effect on such Valuation Date, and (ii) for the period beginning on (and including) the first following Dividend Payment Date and ending on (and including) the 70th day following such Valuation Date, the product of 2.32 and (x) the Maximum Dividend Rate (which terms, for purposes of this definition, shall refer to the equivalent date in the case of Other RP) on the Date of Original Issue (in the case of the Date of Original Issue) or (y) the Maximum Dividend Rate as of the last occurring Settlement Date or, in the case of Other RP, the equivalent date (in the case of any Dividend Payment Date); and (b) If such Valuation Date is not the Date of Original Issue or a Dividend Payment Date, (i) for the period beginning on such Valuation Date and ending on (but not including) the first following Dividend Payment Date, the Applicable Dividend Rate in effect on such Valuation Date, and (ii) for the period beginning on (and including) the first following Dividend Payment Date and ending on (but not including) the sooner of the second following Dividend Payment Date or the 71st day following such Valuation Date, the product of 2.32 and (x) the Maximum Dividend Rate on the Date of Original Issue (in the case of a Valuation Date occurring prior to the first Settlement Date) or (y) the Maximum Dividend Rate on the last occurring Settlement Date or, in the case of Other RP, the equivalent date (in the case of any other Valuation Date) and (iii) for the period, if any, beginning on (and including) the second following Dividend Payment Date and ending on (but not including) the 71st day following such Valuation Date, the product of 3.20 and the rate specified in clause (x) or (y) above. If the date of determination is not a Valuation Date, then the Projected Dividend Amount on such date of determination shall equal the Projected Dividend Amount therefor on the immediately preceding Valuation Date, adjusted to reflect any decrease in the number of shares of RP and Other RP outstanding. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial bases for the calculation of the Projected Dividend Amount if the Board of Directors determines and the Rating Agencies shall have advised the Corporation in writing that such adjustment, modification, alteration or change would not adversely affect their then-current ratings of the RP. "Quarterly Valuation Date" means, for so long as any shares of RP are outstanding, the last Business Day of March, June, September and 23 December of each year, commencing December 31, 1988, or, if such day is not a Valuation Date, the next preceding Valuation Date. "Rating Agencies" means S&P and Moody's for so long as S&P and Moody's issue ratings for the RP, and, at such time as S&P and/or Moody's no longer issues a rating for the RP, the Substitute Rating Agency or Substitute Rating Agencies, as the case may be. "Remarketing" means each periodic operation of the process for remarketing shares of RP as described in Part II hereof. "Remarketing Agent" means MLPF&S and any additional or successor companies or entities which have entered into an agreement with the Corporation to carry out the remarketing procedures for the purpose of determining the Applicable Dividend Rates. "Reporting Date," with respect to any price referred to in the definition of the Market Value of an item of Eligible Portfolio Property, shall mean the date as of which the Market Value of such item of Eligible Portfolio Property is to be determined or, if no such price is available as provided above under "Market Value" for such date, the next closest prior date as of which such price is so available; provided that, no such price shall be deemed to be available as of a Reporting Date if such price is not available as of a date within five Business Days next preceding the date as of which the determination of such Market Value is to be made. "Required Documentation," with respect to a mortgage loan underlying a Conventional Mortgage Pass-Through Certificate means: (a) the mortgage note or other evidence of indebtedness secured by the mortgage endorsed without recourse in blank or other trustee or other custodian and accompanied by an assignment thereof; (b) the mortgage, deed of trust, deed to secure debt or similar security instruments encumbering real property or related documentation, with evidence of recording or filing thereof, in each case accompanied by assignments thereof, executed in blank or to the trustee or other custodian, in recordable form as may be appropriate in the jurisdiction where the property is located and evidence that such assignment has been recorded in the name of the trustee or other custodian, and such trustee or other custodian receives an opinion of counsel (containing only such exceptions as may be permissible under the indenture or other agreement pursuant to which the mortgage loan is pledged to the trustee in connection with the related Conventional Mortgage Pass-Through Certificate) to the effect that, notwithstanding that the assignment of the mortgage has not been recorded, the actions taken with respect to the mortgage loan are sufficient to permit the trustee or other custodian to avail itself of all protection available under applicable law against the claims of any present or future creditors of the issuer, and are sufficient to prevent any other sale, transfer, assignment, pledge or hypothecation of the mortgage and the related mortgage note by the issuer from being enforceable, or will create a valid assignment of and a valid and perfected lien upon and security interest in a mortgage and related mortgage note, which lien and security interest is (except for the trustee's lien securing certain obligations of the 24 issuer to the trustee as provided in the indenture pursuant to which the mortgage loan is pledged to the trustee in connection with the related Conventional Mortgage Pass-Through Certificate) prior in right to all other security interests therein created or perfected under the Uniform Commercial Code (as in effect in the jurisdiction where the property is located); (c) in the case of mortgage notes covered by private mortgage insurance, evidence that such mortgage notes are so insured; and (d) a copy of the title insurance policy or an opinion or certificate of counsel stating that the mortgage constitutes a first lien on the premises described in such mortgage (which opinion or certificate may be subject to exceptions for Permitted Tax Liens and other matters to which like properties are commonly subject which neither individually nor in the aggregate materially interfere with the benefits of the security interest intended to be provided by such mortgage and standard exceptions and exclusions from mortgage title insurance policies). "Right" has the meaning set forth in paragraph 3(1) of this Part I. "RP" means either the Remarketed Preferred Stock, Series A; the Remarketed Preferred Stock, Series B; the Remarketed Preferred Stock, Series C; the Remarketed Preferred Stock, Series D; or the Remarketed Preferred Stock, Series E. "RP Basic Maintenance Amount" means, initially, as of any date, the sum of (i) the aggregate liquidation preference of the shares of RP outstanding and shares of Other RP outstanding, (ii) to the extent no covered in (i), the aggregate amount of accumulated but unpaid cash dividends with respect to the shares of RP outstanding and shares of Other RP outstanding, (iii) any Rights due and payable and any equivalent rights to receive cash with respect to Other RP which are due and payable, (iv) the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding, (v) an amount equal to accrued but unpaid interest on the principal amount of the Corporation's loan from the Aid Association For Lutherans then outstanding, (vi) the aggregate principal amount of, and an amount equal to accrued but unpaid interest on, any other then outstanding indebtedness of the Corporation for money borrowed, (vii) the aggregate Projected Dividend Amount, (viii) redemption premium, if any, and (ix) the greater of $200,000 or an amount equal to projected expenses of the Corporation for the next three month period. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial elements comprising the RP Basic Maintenance Amount if the Board of Directors determines and the Rating Agencies advise the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect their then-current ratings on the RP. "RP Basic Maintenance Cure Date," with respect to the failure by the Corporation to maintain the RP Basic Maintenance Amount (as required by paragraph 8 of this Part I) as of each Valuation Date, means the eighth Business Day following such Valuation Date. 25 "RP Basic Maintenance Report" means a report signed by the President, the Treasurer, any Senior Vice President or any Vice President of the Corporation which sets forth, as of the related Valuation Date, the assets of the Corporation, the Market Value and the Discounted Value thereof (seriatum and in the aggregate), and the RP Basic Maintenance Amount. "S&P" means Standard & Poor's Corporation, and includes any successor thereto. "Securities Depository" means The Depository Trust Company, a securities depository, or any successory company or other entity selected by the Corporation for the shares of RP that agrees to follow the procedures required to be followed by such securities depository in connection with the shares of RP. "Service" means the Internal Revenue Service. "Settlement Date" means any date on which (i) a new Dividend Period begins, and (ii) shares of RP which have been tendered and sold in a Remarketing are delivered through the Securities Depository. "Short Term Money Market Instruments" means the following kinds of instruments, if on the date of purchase or other acquisition by the Corporation of any such instrument the remaining term to maturity thereof is not more than 30 days: (a) demand deposits in, certificates of deposit of, bankers' acceptances issued by, or federal funds sold to, any depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation (or any successor thereto) or the Federal Savings and Loan Insurance Corporation (or any successor thereto), provided that, at the time of the Corporation's investment therein, the commercial paper or other unsecured short-term debt obligations of such depository institution are rated at least A-1+ by S&P and Prime-1 by Moody's; (b) repurchase obligations with respect to a U.S. Government Obligation, FNMA Certificate, FHLMC Certificate or GNMA Certificate entered into with a depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation (or any successor thereto) or the Federal Savings and Loan Insurance Corporation (or any successor thereto) and the commercial paper or other unsecured short-term debt obligations of which are rated at least A-1+ by S&P and Prime-1 by Moody's, which must be repurchased within one Business Day from the date such repurchase obligation was entered into; and (c) commercial paper rated at the time of the Corporation's investment therein at least A-1+ by S&P and Prime-1 by Moody's. "Substitute Commercial Paper Dealers" means such Substitute Commercial Paper Dealer or Dealers as the Corporation may from time to time appoint or, in lieu of any thereof, their respective affiliates or successors. 26 "Substitute Rating Agency" and "Substitute Rating Agencies" mean a nationally recognized statistical rating organization or two nationally recognized statistical rating organizations, respectively, selected by the Corporation to act as the substitute rating agency or substitute rating agencies, as the case may be, to determine the credit ratings of the shares of RP. "Tender and Dividend Reset" means the process pursuant to which shares of RP may be tendered or deemed tendered in a Remarketing or held and become subject to the new Applicable Dividend Rate determined by the Remarketing Agency in such Remarketing. "Tender Date" means any date on which (i) each holder of shares of RP must provide to the Remarketing Agent irrevocable telephonic notice of intent to tender shares of RP in a Remarketing, and (ii) such Remarketing formally commences. "Type A Utility Bonds" as of any date means Utility Bonds rated A- or higher by S&P. "Type B Utility Bonds" as of any date means (a) Utility Bonds held by the Corporation at such date and continuously since at least September 30, 1988 which are rated from BBB- to BBB+ by S&P or (b) Utility Bonds rated BBB- to BBB+ by S&P provided that the Utility Bonds rated BBB- shall be limited to twenty-five percent of the Market Value of the Corporation's Eligible Portfolio Property. "Type I Utility Bonds" as of any date means Utility Bonds rated Aaa by Moody's. "Type II Utility Bonds" as of any date means Utility Bonds rated Aa3 to Aa1 by Moody's. "Type III Utility Bonds" as of any date means Utility Bonds rated A3 to A1 by Moody's. "Type IV Utility Bonds" as of any date means Utility Bonds rated Baa3 to Baa1 by Moody's. "Type A Utility Stocks" as of any date means Utility Stocks which are traded on the New York Stock Exchange, Inc. or the American Stock Exchange, Inc., are currently paying cash dividends, and have been issued by public utility companies having debt obligations outstanding with implied senior debt ratings from S&P of A- or higher. "Type B Utility Stocks" as of any date means (a) Utility Stocks which are traded on the New York Stock Exchange, Inc. or the American Stock Exchange, Inc., are currently paying cash dividends, are held by the Corporation at such date and continuously since at least September 30, 1988 and have been issued by public utility companies having debt obligations outstanding with implied senior debt ratings from S&P of BBB- to BBB+ or (b) Utility Stocks which are traded on the New York Stock Exchange, Inc. or the American Stock Exchange, Inc., are currently paying cash dividends and have been issued by public utility companies having debt obligations outstanding with implied senior debt ratings from S&P from BBB- to BBB+ provided that Utility Stocks issued by public utility companies having debt 27 obligations outstanding with implied senior debt ratings from S&P of BBB- shall be limited to twenty-five percent of the Market Value of the Corporation's Eligible Portfolio Property. "Type I Utility Stocks" as of any date means Utility Stocks which are traded on the New York Stock Exchange, Inc. or the American Stock Exchange, Inc. or are quoted on the National Association of Securities Dealers Automated Quotation ("NASDAQ") System and have been issued by public utility companies having debt obligations outstanding with senior or subordinated debt ratings from Moody's of Baa3 or higher. "U.S. Government Obligations" means direct obligations of the United States, provided that such direct obligations are entitled to the full faith and credit of the United States and that any such obligations, other than United States Treasury Bills, provide for the periodic payment of interest and the full payment of principal at maturity or call for redemption. "Utility Bonds" means, initially, corporate debt obligations issued by state regulated public utility companies rated from BBB- to AAA by S&P and from Baa3 to Aaa by Moody's, which corporate debt obligations (a) provide for the periodic payment of interest thereon in cash in U.S. dollars, (b) do not provide for conversion or exchange into equity capital at any time over their respective lives, (c) have been registered under the Securities Act of 1933, as amended, and (d) have not had notice given in respect thereof that any such corporate debt obligations are the subject of an offer by the issuer thereof of exchange or tender for cash, securities or any other type of consideration. In addition, so long as the shares of RP are rate by S&P or Moody's, no corporate debt obligation held by the Corporation shall be deemed a Utility Bond (i) if it fails to meet the criteria in column (1) below or (ii) to the extent (but only to the proportionate extent) the acquisition or holding thereof by the Corporation causes the Corporation to exceed any applicable limitation set forth in column (2) below in the event the shares of RP are rated by S&P or column (2), (3) or (4) below in the event the shares to RP are rated by Moody's as of any relevant date of determination (provided that, in the event that the Corporation shall exceed any such limitation, the Corporation shall designate, in its sole discretion, the particular Utility Bond(s) and/or portions thereof which shall be deemed to have caused the Corporation to exceed such limitation): 28
Column (1) Column(2) Column(3) Column(4) Maximum Percent Maximum of Market Percent of Value Market Value of Corpora- of Corpora- tion's Assets tion's Assets, Including S&P and Maximum Percent Including Eli- Eligible Moody's of Market Value gible Portfolio Portfolio Rating of of Eligible Property, Property, Utility Minimum Portfolio Issued by Issued Bonds or Original Property Issuers in any by Issuers Debt Obli- Issue Size of Issued by any One Industry Regulated by gations (1) Each Issue(2) One Issuer(3) Category(4) any One (5) - ---------- ---------------- ---------------- -------------- ------------ ($ in millions) S&P Moody's --- ------- $100 10.0% 100.0% 100.0% 100.0% 100 10.0 20.0 60.0 20.0 100 10.0 10.0 50.0 10.0 100 5.0 4.0 50.0 7.0 - -------------------------- (1) Rating designations include (+) or (-) modifiers to the S&P rating where appropriate. Rating designations include modifiers of 1 to 3 to the Moody's rating where appropriate. (2) This restriction is applicable only to Utility Bonds. (3) The referenced S&P percentages represent maximum percentages only for the related S&P rating category. The referenced Moody's percentages represent maximum cumulative totals only for the Moody's rating category and each lower Moody's rating category. (4) The referenced percentages represent maximum cumulative totals only for the related Moody's rating category and each lower Moody's rating category. There are two industry categories -- telecommunications and all other utilities. (5) Referenced percentages represent maximum cumulative totals only for the related Moody's and each lower Moody's rating category.
The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the assets (and/or the characteristics thereof) included initially within the definition of Utility Bonds for purposes of determining compliance with the RP Basic Maintenance Amount if the Board of Directors determines and the Rating Agencies advise the 29 Corporation in writing that such adjustment, modification, alteration or change will not adversely affect their then-current ratings of the RP. "Utility Stocks" means, initially, common stocks issued by state regulated public utility companies having debt obligations outstanding with senior debt ratings of BBB to AAA from S&P or subordinated debt ratings of BBB- to AAA from S&P and senior or subordinated debt ratings of Baa3 to Aaa from Moody's, which debt obligations have been registered under the Securities Act of 1933, as amended ("Debt Obligations"). In addition, so long as the shares of RP are rated by S&P or Moody's, no common stock held by the Corporation shall be deemed a Utility Stock to the extent (but only to the proportionate extent) the acquisition or holding thereof by the Corporation causes the Corporation to exceed any applicable limitation set forth in column (2) of the table set forth in "Utility Bonds" above in the event the shares of RP are rated by S&P or column (2), (3) or (4) of such table in the event the shares of RP are rated by Moody's as of any relevant date of a termination (provided that, in the event that the Corporation shall exceed any such limitation, the Corporation shall designate, in its sole discretion, the particular Utility Stock(s) and/or portions thereof which shall be deemed to have caused the Corporation to exceed such limitation). The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the assets (and/or the characteristics thereof) initially included within the definition of Utility Stocks for purposes of determining compliance with the RP Basic Maintenance Amount if the Board of Directors determines and the Rating Agencies advise the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect their then-current ratings of the RP. "Valuation Date" means (i) the fifteenth day of each month or, if such day is not a Business Day, the next succeeding Business Day, and (ii) the last Business Day of each month (or, in the case of the first Valuation Date, a date selected by the Corporation within fifteen days after the Original Issue Date). "Voting Period" has the meaning set forth in paragraph 6(b) of this Part I. 2. Fractional Shares. No fractional shares of RP shall be issued or recognized by the Corporation. 3. Dividends. (a) The Holders as of 12:00 noon, New York City time, on the Business Day preceding the applicable Dividend Payment Dates, shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available transfer, cumulative dividends each consisting of (i) cash at the Applicable Dividend Rate and (ii) a Right to receive cash determined as set forth in paragraph 3(1) below and payable as set forth therein. The Board of Directors shall designate, in accordance with the applicable provisions of the Code, the cash dividends on the shares of RP so declared and paid or payable and on the shares of Other RP declared and payable for any fiscal year as qualifying for the Dividends-Received Deduction in an amount equal to the lesser of (i) the amount of the Corporation's income for such fiscal year which qualifies for the Dividends-Received Deduction, or (ii) the amount of such cash dividends. 30 (b) Dividends on shares of RP shall accumulate from their Date of Original Issue and will be payable, when, as and if declared by the Board of Directors, on each Dividend Payment Date. (c) Each declared dividend, including each Right, shall be payable on the applicable Dividend Payment Date to the Holder or Holders of such shares of RP as set forth in paragraph 3(a). Dividends on any share in arrears for any past Dividend Payment Date may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holder of such share on a date not exceeding five Business Days preceding the payment date thereof, as may be fixed by the Board of Directors. Any dividend payment made on any share of RP shall first be credited against the earliest dividends accumulated but unpaid (whether or not earned) with respect to such share. (d) Neither Holders nor Beneficial Owners of shares of RP shall be entitled to any dividends on the shares of RP, whether payable in cash, property or stock, in excess of full cumulative dividends (including Rights) thereon. Except as provided in paragraph 3(h) or 3(l) of this Part I, neither Holders nor Beneficial Owners of shares of RP shall be entitled to any interest, or other additional amount, on any dividend payment (including Rights) on any share of RP which may be in arrears. (e) Except as otherwise provided herein, the Applicable Dividend Rate on each share of RP for each Dividend Period with respect to such share shall be equal to the rate per annum that results from implementation of the remarketing procedures described in Part II hereof. (f) The amount of cash dividends for shares of RP payable (if declared) on each Dividend Payment Date shall be computed by the Corporation by multiplying the Applicable Dividend Rate in effect with respect to cash dividends payable on such share on such Dividend Payment Date by a fraction the numerator of which shall be the number of days such share was outstanding from and including its Date of Original Issue or the preceding Dividend Payment Date on which a cash dividend was paid, as the case may be, to and including the last day of such Dividend Period, and the denominator of which shall be 360, and then multiplying the percentage so obtained by $100,000. (g) No later than by 12:00 noon, New York City time, on each Dividend Payment Date, the Corporation shall deposit in same-day funds with the Paying Agent the full amount of any dividend declared and payable on such Dividend Payment Date on any share of RP. For the purposes of the foregoing, payment in New York Clearing House (next-day) funds at any time on any Business Day shall be considered equivalent to payment in same-day funds on the next Business Day at the same time, 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 form of funds before 12:00 noon, New York City time, on the next Business Day. (h) The Applicable Dividend Rate for each Dividend Period commencing during a Non-Payment Period shall be equal to the Non-Payment Period Rate. (i) So long as any shares of RP are outstanding, the Corporation shall not, subject to the requirements of the 1940 Act and Maryland law, without the affirmative vote or consent of the holders of at least 31 two-thirds of the votes of the shares of RP outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as one class): (a) authorize, create or issue, or increase the authorized or issued amount, of any class or series of stock ranking prior to the RP with respect to payment of dividends or the distribution of assets on liquidation, or (b) amend, alter or repeal the provisions of the Corporation's Charter including these Articles Supplementary, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of such shares of RP or the Holders thereof; provided that, any increase in the amount of the authorized RP or the creation and issuance of other series of Preferred Stock, or any increase in the amount of authorized shares of such series or of any other series remarketed preferred stock, in each case ranking on a parity with or junior to the RP, will not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers unless such issuance would cause the Corporation not to satisfy the 1940 Act RP Asset Coverage or the RP Basic Maintenance Amount. Unless a higher percentage is provided for under the Charter, the affirmative vote of the holders of a majority of the outstanding shares of Preferred Stock, including RP, voting together as a single class, will be required to approve any plan of reorganization adversely affecting such shares or any action requiring a vote of security holders under Section 13(a) of the 1940 Act. The class vote of holders of shares of Preferred Stock, including RP, described above will in each case be in addition to a separate vote of the requisite percentage of shares of Common Stock and shares of Preferred Stock, including RP, necessary to authorize the action in question. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of RP shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption. (j) Except during a Non-Payment Period, by 1:00 p.m. on the Tender Date at the end of the Initial Dividend Period and by 1:00 p.m. on the Tender Date at the end of each subsequent Dividend Period, the Beneficial Owner of a share of RP may elect to tender such share or to hold such share for the next Dividend Period. If the Beneficial Owner of such share of PR fails to elect to tender or hold such share by 1:00 p.m. on such Tender Date, such Beneficial Owner shall continue to hold such share at the Applicable Dividend Rate determined in such Remarketing for the next Dividend Period; provided that, if there is no Remarketing Agent, the Remarketing Agent does not conduct a Remarketing or the Remarketing Agent is unable to remarket in such Remarketing all shares of RP tendered to it at a price of $100,000 per share, then such Beneficial Owner shall hold such share for the next Dividend Period and the Applicable Dividend Rate therefor shall be the Maximum Dividend Rate. (k) In the event of a change in law altering the Minimum Holding Period, the Board of Directors may increase or decrease the period of time between Dividend Payment Dates so as to adjust uniformly the number of days in any Dividend Period commencing after the date of such change in law to equal or exceed the then current Minimum Holding Period; provided that, the number of days for any Dividend Period as so adjusted shall not exceed 98 and shall be evenly divisible by seven (except as required from time to time by adjustments in the remarketing schedule as provided herein). Upon 32 any such adjustment by the Board of Directors, the Corporation shall notify the Remarketing Agent and the Paying Agent, and the Paying Agent shall in turn notify the Securities Depository, of such adjustment; provided that, during a Non-Payment Period, the Corporation also shall notify the Beneficial Owners of shares of RP directly of such adjustment. (l) Each dividend shall consist of (i) cash at the Applicable Dividend Rate and (ii) a right (a "Right") to receive cash (as determined below). Each Right shall thereafter be independent of the share or shares of RP on which the dividend was paid. The Corporation shall cause to be maintained a record of each Right received by the respective Holders. The Corporation shall not be required to recognize any transfer of a Right. If all or any part of the cash dividends on the shares of RP during any fiscal year does not qualify for the Dividends-Received Deduction ("Nonqualifying Distributions") because (i) the Corporation does not have income for such fiscal year eligible for the Dividends-Received Deduction at least equal to the dividends paid on the RP and the Other RP for such year, or (ii) the Corporation does not properly designate dividends on the RP as being eligible for the Dividends-Received Deduction, the applicable Rights shall entitle the holders thereof ("Right Holders") to additional cash (as set forth below), and the Corporation will, within 270 days after the end of such fiscal year, provide notice thereof to the Paying Agent. The Paying Agent will mail a copy of such notice to each Right Holder at the address specified in such Right Holder's Master Purchaser's Letter as promptly as practicable after its receipt of such notice from the Corporation. The Corporation will within 30 days after such notice is given to the Paying Agent pay to the Paying Agent (who will then distribute to Right Holders), out of funds legally available therefor, cash in satisfaction of the applicable Rights in an amount specified below with respect to all Nonqualifying Distributions made during such fiscal year. Cash payable pursuant to a Right shall be paid to the Right Holder thereof in an amount which, when taken together with the aggregate Nonqualifying Distributions paid to such Right Holder during any fiscal year, would cause such Right Holder's net yield in dollars (after Federal income tax consequences) from the aggregate of both the Nonqualifying Distributions and the cash receivable pursuant to such Right to be equal to the net yield in dollars (after Federal income tax consequences) which would have been received by such Right Holder if the amount of the aggregate Nonqualifying Distributions would have qualified for the Dividends-Received Deduction in the hands of such Right Holder. Such cash receivable on such Right shall be calculated without consideration being given to the time value of money and using the applicable maximum marginal corporate Federal tax rate in effect at the time such Right was declared. The Corporation may estimate the amount payable in respect of any Right and pay all or any portion of such estimated amount prior to the end of the fiscal year in which such Right was declared. If, for any fiscal year, all cash dividends paid at the Applicable Dividend Rate on the shares of RP are eligible in full for the Dividends-Received Deduction, then the amount payable to holders of Rights applicable to that year shall be zero. 4. Redemption. Shares of RP shall be redeemable by the Corporation as provided below: 33 (a) To the extent permitted under the 1940 Act and Maryland law, the Corporation at its option, upon giving a Notice of Redemption, may redeem shares of RP, in whole or in part, on the next succeeding scheduled Dividend Payment Date, out of funds legally available therefor, at a redemption price equal to $100,000 per share plus an amount equal to cash dividends thereon (whether or not earned or declared) accumulated but unpaid to the date fixed for redemption. (b) The Corporation shall redeem, out of funds legally available therefor, at a redemption price of $100,000 per share plus an amount equal to cash dividends thereon (whether or not earned or declared) accumulated but unpaid to the date of redemption, shares of RP to the extent permitted under the 1940 Act and Maryland law, on a date fixed by the Board of Directors, if the Corporation fails to maintain the RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage and such failure is not cured on or before the RP Basic Maintenance Cure Date or the 1940 Act Cure Date (herein referred to respectively as the "Cure Date"), as the case may be. The number of shares to be redeemed shall be equal to the lesser of (i) the minimum number of shares of RP the redemption of which, if deemed to have occurred immediately prior to the opening of business on the Cure Date, together with all shares of other Preferred Stock subject to redemption or retirement, would result in the satisfaction of the RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage, as the case may be, on such Cure Date (provided that, if there is no such minimum number of shares the redemption of which would have such result, all shares of RP then outstanding shall be redeemed), and (ii) the maximum number of shares of RP that can be redeemed out of funds expected to be legally available therefor on such redemption date. In determining the number of shares of RP required to be redeemed in accordance with the foregoing, the Corporation shall locate the amount required to achieve the RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage, as the case may be, pro rata among the RP and the Other RP. The Corporation shall effect such redemption not later than 41 days after such Cure Date, except that if the Corporation does not have funds legally available for the redemption of all of the required number of shares of RP which are subject to mandatory redemption or the Corporation otherwise is unable to effect such redemption on or prior to such Cure Date, the Corporation shall redeem those shares of RP which it was unable to redeem on the earliest practicable date on which it is able to effect such redemption. (c) Subject to paragraph 4(d) of this Part I, if fewer than all the outstanding shares of RP are to be redeemed pursuant to this paragraph 4, the number of shares of RP so to be redeemed shall be a whole number of shares and shall be determined by the Board of Directors, and the Corporation shall give a Notice of Redemption as provided in paragraph 4(e) of this Part I. Unless certificates representing shares of RP are held by Holders other than the Securities Depository or its nominee, the Securities Depository, upon receipt of such notice, shall determine by lot the number of shares of RP to be redeemed from the account of each Agent Member (which may include an Agent Member holding shares for its own account, including the Remarketing Agent) and notify the Paying Agent of such determination. The Paying Agent, upon receipt of such notice, shall in turn determine by lot the number of shares of RP to be redeemed from the accounts of the Beneficial Owners of the shares of RP whose Agent Members have been selected by the Securities Depository and give notice of such determination to the Remarketing Agent. In doing so, the Paying Agent may determine that 34 shares of RP shall be redeemed from the accounts of some Beneficial Owners, which may include the Remarketing Agent, without shares of RP being redeemed from the accounts of other Beneficial Owners. (d) Notwithstanding paragraph 4(c) of this Part I, if certificates representing shares of RP are held by Holders other than the Securities Depository or its nominee, then the number of shares of RP to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be selected by the Corporation by lot. (e) Any Notice of Redemption shall be given by the Corporation to the Paying Agent, the Securities Depository (and any other Holder) and the Remarketing Agent, by telephone, not later than 3:00 p.m., New York City time (and later confirmed in writing) on (A) in the case of optional redemption pursuant to paragraph 4(a) of this Part I (i) the Settlement Date in the case of a partial redemption of the shares of RP, (ii) the Tender Date in the case of a redemption in whole of the shares of RP or (iii) during a Non-Payment Period, the later of the Dividend Payment Date and the seventh day, in each case prior to the earliest date upon which any such redemption shall occur and (B) in the case of mandatory redemption pursuant to paragraph 4(b) of this Part I, on the fifth Business Day prior to the redemption date. In the case of a partial redemption of the shares of PR, the Paying Agent shall use reasonable efforts to provide telephonic notice to each Beneficial Owner of shares of RP called for redemption not later than the close of business on the Business Day on which the Paying Agent determines the shares to be redeemed, as described in paragraph 4(c) if this Part I (or, during a Non-Payment Period, not later than the close of business on the Business Day immediately following the day on which the Paying Agent receives a Notice of Redemption from the Corporation). In the case of a redemption in whole of the shares of RP, the Paying Agent shall use reasonable efforts to provide telephonic notice to each Beneficial Owner not later than the close of business on the Business Day immediately following the day on which it receives a Notice of Redemption from the Corporation. In any case described in clause (i) or (iii) of the first sentence of this paragraph 4(e), such telephonic notice shall be confirmed promptly in writing not later than the close of business on the third Business Day preceding the redemption date by notice sent by the Paying Agent to each Beneficial Owner of shares of RP called for redemption, the Remarketing Agent and the Securities Depository. (f) Every Notice of Redemption and other redemption notice shall state: (i) the redemption date; (ii) the number of shares of RP to be redeemed; (iii) the redemption price; (iv) that dividends on the shares of RP to be redeemed shall cease to accumulate as of such redemption date; and (v) the provision pursuant to which such shares are being redeemed. In addition, notice of redemption given to a Beneficial Owner shall state the CUSIP number, if any, of the shares of RP to be redeemed and the manner in which the Beneficial Owners of such shares may obtain payment of the redemption price. No defect in the Notice of Redemption or other redemption notice or in the transmittal or the mailing thereof shall affect the validity of the redemption proceedings, except as required by applicable law. The Paying Agent shall use its reasonable efforts to cause the publication of a redemption notice in an Authorized Newspaper within two Business Days of the date of the Notice of Redemption, but failure so to publish such notification shall not affect the validity or effectiveness of any such redemption proceedings. Shares of RP the Beneficial Owners of 35 which shall have been given Notice of Redemption shall not be subject to transfer outside a Remarketing. (g) On any redemption date, the Corporation shall deposit, irrevocably in trust, in same-day funds, with the Paying Agent, by 12:00 noon, New York City time, the price to be paid on such redemption date of any shares of RP plus an amount equal to cash dividends thereon accumulated but unpaid to such redemption date (whether or not earned or declared). For the purposes of the foregoing, payment in New York Clearing House (next-day) funds at any time on any Business Day shall be considered equivalent to payment in same-day funds on the next Business Day at the same time, 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 before 12:00 noon, New York City time, on the next Business Day. (h) In connection with any redemption, upon the giving of a Notice of Redemption and the deposit of the funds necessary for such redemption with the Paying Agent in accordance with this paragraph 4, all rights of the Holders of shares of RP so called for redemption shall cease and terminate, except the right of the Holders thereof to receive the redemption price thereof, inclusive of an amount equal to cash dividends (whether or not earned or declared) accumulated but unpaid to the redemption date but without any interest or other additional amount (except as provided in paragraph 3(h) or 3(l) of this Part I), and such shares shall no longer be deemed outstanding for any purpose. The Corporation shall be entitled to receive from the Paying Agent, promptly after the date fixed for redemption, any cash deposited with the Paying Agent as aforesaid in excess of the sum of (i) the aggregate redemption price of the shares of RP called for redemption on such date and (ii) all other amounts to which Holders of shares of RP called for redemption may be entitled. Any funds so deposited with the Paying Agent which are unclaimed at the end of ninety days from such redemption date shall, to the extent permitted by law, be repaid to the Corporation, after which time the Holders of shares of RP so called for redemption shall look only to the Corporation for payment of the redemption price and all other amounts to which they may be entitled. The Corporation shall be entitled to receive, from time to time after the date fixed for redemption, any interest on the funds so deposited. (i) To the extent that any redemption for which Notice of Redemption has been given is not made by reason of the absence of legally available funds therefor, such redemption shall be made as soon as practicable to the extent such funds become available. Failure to redeem shares of RP shall be deemed to exist at any time after the date specified for redemption in a Notice of Redemption when the Corporation shall have failed, for any reason whatsoever, to deposit funds with the Paying Agent pursuant to paragraph 4(g) of this Part I with respect to any shares for which such Notice of Redemption has been given. Notwithstanding the fact that the Corporation shall not have redeemed shares of RP for which a Notice of Redemption has been given, dividends may be declared and paid on shares of RP and shall include those shares of RP for which a Notice of Redemption has been given. (j) Notwithstanding the foregoing, (i) no share of RP may be redeemed pursuant to paragraph 4(a) of this Part I unless the full amount of accumulated but unpaid cash dividends to the date fixed for redemption 36 for each such share of RP called for redemption shall have been declared, and (ii) no share of RP may be redeemed unless all outstanding shares of RP are simultaneously redeemed, nor may any shares of RP be purchased or otherwise acquired by the Corporation except in accordance with a purchase offer made on substantially equivalent terms by the Corporation for all outstanding shares of RP, unless, in each such instance, cash dividends on all outstanding shares of RP through the end of their most recently ended Dividend Period (or, if such transaction is on a Dividend Payment Date, through the Dividend Period ending on the day prior to such Dividend Payment Date) shall have been paid or declared and sufficient funds for the payment thereof deposited with the Payment Agent. (k) Except as set forth in this paragraph 4 with respect to redemptions and subject to paragraph 4(j) hereof, nothing contained herein shall limit any legal right of the Corporation or any affiliate to purchase or otherwise acquire any share of RP at any price. Any shares of RP which have been redeemed, purchased or otherwise acquired by the Corporation or any affiliate thereof may be resold. In lieu of redeeming shares called for redemption, the Corporation shall have the right to arrange for other purchasers to purchase from Beneficial Owners all shares of RP to be redeemed pursuant to this paragraph 4 by their paying to such Beneficial Owners on or before the close of business on the redemption date an amount equal to not less than the redemption price payable by the Corporation on the redemption of such shares, and the obligation of the Corporation to pay such redemption price shall be satisfied and discharged to the extent such payment is so made by such purchasers. (l) Notwithstanding any of the foregoing provisions of this paragraph 4, the Remarketing Agent may, in its sole discretion modify the procedures set forth above with respect to notification of redemption, provided that, any such modification does not adversely affect any Holder or Beneficial Owner of shares of RP. 5. Liquidation. (a) Upon a liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the Holders shall be entitled, whether from capital or surplus, before any assets of the Corporation shall be distributed among or paid over to holders of Common Stock or any other class or series of stock of the Corporation junior to the RP as to liquidation payments, to be paid the amount of $100,000 per share of RP, plus an amount equal to all accumulated but unpaid dividends thereon (whether or not earned or declared) to and including the date of final distribution. After any such payment, the Holders shall not be entitled to any further participation in any distribution of assets of the Corporation. (b) If, upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation shall be insufficient to make such full payments to the Holders and the holders of any Preferred Stock ranking as to liquidation, dissolution or winding up on a parity with the RP, then such assets shall be distributed among the Holders and such parity holders ratably in accordance with the respective amounts which would be payable on such shares of RP and any other such Preferred Stock if all amounts thereon where paid in full. (c) Neither the consolidation nor the merger of the Corporation with or into any corporation or corporations nor a reorganization of the 37 Corporation alone nor the sale or transfer by the Corporation of all or substantially all of its assets shall be deemed to be a dissolution or liquidation of the Corporation. 6. Voting Rights. (a) General. Each Holder of shares of RP shall be entitled to one vote for each share held on each matter submitted to a vote of stockholders of the Corporation and, except as otherwise provided in the 1940 Act, the Charter or the Bylaws or as described below, the holders of shares of Preferred Stock, including RP, and of shares of Common Stock shall vote together as one class. Prior to the issuance of any RP, the Board of Directors by resolution shall designate two existing directors representing holders of Preferred Stock. At the first meeting of stockholders for which the record date is a date on which shares of Preferred Stock are outstanding, the holders of Preferred Stock entitled to vote at such meeting shall have the right as a class, to the exclusion of the holders of the common stock, to elect two directors of the Corporation who shall serve for the unexpired terms of the directors originally designated by the Board of Directors as directors representing holders of Preferred Stock; except that, if such meeting is an annual meeting of stockholders at which the term of one of such designated directors expires, the director so elected to succeed the designated director shall be elected for a term expiring at the time of the third succeeding annual meeting of stockholders, or thereafter when his successor is elected and qualified. Thereafter, the holders of Preferred Stock shall have the right as a class, to the exclusion of the holders of the common stock, to elect directors to succeed either of the directors representing the Preferred Stock whose terms are expiring or whose seats on the Board of Directors are vacant. Subject to paragraph 6(b) hereof, the holders of a majority of the shares of Common Stock shall elect the balance of the directors. (b) Right to Elect Majority of Board of Directors. During any period in which any one or more of the conditions described below shall exist (such period being referred to herein as a "Voting Period"), the number of directors constituting the Board of Directors shall be automatically increased by the smallest number that, when added to the number of directors then constituting the Board of Directors, shall (together with the two directors elected by the holders of Preferred Stock, including RP, pursuant to paragraph 6(a)) constitute a majority of such increased number, and the holders of a majority of Preferred Stock, including RP, shall be entitled, voting as a single class on a one-vote-per-share basis (to the exclusion of the holders of all other securities and classes of capital stock of the Corporation), to elect the smallest number of additional directors of the Corporation that shall constitute a majority of the total number of directors of the Corporation so increased. A Voting Period shall commence if at the close of business on any Dividend Payment Date accumulated dividends (whether or not earned or declared, and whether or not funds are then legally available in an amount sufficient therefor) on the outstanding shares of RP 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 Paying Agent for the payment of such accumulated dividends. Upon the termination of a Voting Period, the voting rights described in this paragraph 6(b) shall cease, subject always, however, to the revesting of such voting rights in the holders of Preferred Stock, including RP, upon the further occurrence of any of the events described in this paragraph 6(b). 38 (c) Voting Procedures. ----------------- (i) As soon as practicable after the accrual of any right of the holders of Preferred Stock, including RP, to elect a majority of directors, the Corporation shall notify the Paying Agent and Paying Agent shall call a special meeting of the holders of Preferred Stock, including RP, and shall mail a notice of such special meeting to such holders not less than 10 nor more than 20 days after the date of mailing of such notice. If the Corporation fails to send such notice to the Paying Agent or if the Paying Agent does not call such a special meeting, it may be called by any holder of Preferred Stock, including RP, on like notice. The record date for determining the holders of Preferred Stock, including RP, 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, the holders of Preferred Stock, including RP, voting together as a class (to the exclusion of the holders of all other securities and classes of capital stock of the Corporation), shall be entitled to elect the number of directors prescribed in paragraph 6(b) above on a one-vote-per-share basis. At any such meeting or adjournment thereof in the absence of a quorum, a majority of the holders of Preferred Stock, including RP, present in person or by proxy, shall have the power to adjourn the meeting without notice, other than an announcement at the meeting, until a quorum is present; provided, however, that no such meeting may be adjourned to a date more than 120 days from the original record date without notice. (ii) For purposes of determining any rights of the Holders to vote on any matter, whether such right is created by these Articles Supplementary, by statute or otherwise, no Holder shall be entitled to vote and no share of RP shall be deemed to be "outstanding" for the purpose of voting or determining the number of shares required to constitute a quorum, if, prior to or concurrently with the time of determination of shares entitled to vote or shares deemed outstanding for quorum purposes, as the case may be, sufficient funds for the redemption of such shares have been deposited in trust with the Paying Agent for that purpose and the requisite Notice of Redemption with respect to such shares shall have been given as provided in paragraph 4 of this Part I. No share of RP held by the Corporation or any affiliate of the Corporation shall have any voting rights or be deemed to be outstanding for voting purposes. (iii) The terms of office of all persons who are directors of the Corporation at the time of a special meeting of holders of Preferred Stock, including RP, to elect directors shall continue, notwithstanding the election at such meeting by such holders of the number of directors that they are entitled to elect, and the persons so elected by such holders, together with the incumbent directors elected by the holders of the Common Stock, shall constitute the duly elected directors of the Corporation. (iv) Simultaneously with the expiration of a Voting Period, the terms of office of the additional directors elected by the holders of Preferred Stock, including RP, shall terminate, the incumbent directors who shall have been elected by the holders of the Common Stock (or by the Board of Directors at a time which was not during a Voting Period) and the two incumbent directors the holders of Preferred Stock, including RP, have the 39 right to elect in any event shall constitute the directors of the Corporation and the voting rights of such holders to elect additional directors shall cease. (v) The directors elected by the holders of Preferred Stock, including RP, shall (subject to the provisions of any applicable law) be subject to removal only by the vote of the holders of a majority of the shares of Preferred Stock, including RP, outstanding. Any vacancy on the Board of Directors occurring by reason of such removal or otherwise may be filled only by vote of the holders of at least a majority of shares of Preferred Stock, including RP, outstanding, and if not so filled such vacancy shall (subject to the provisions of any applicable law) be filled by a majority of the remaining directors (or the remaining director) who were elected by such holders. Any other vacancy on the Board of Directors during a Voting Period shall be filled by a vote of the holder or holders of Common Stock. (d) Exclusive Remedy. Unless otherwise required by law, the Holders of shares of RP shall not have any relative rights or preferences or other special rights other than those specifically set forth herein. The Holders of shares of RP shall have no preemptive rights. In the event that the Corporation fails to pay any dividends on the shares of RP, the exclusive remedy of the Holders shall be the right to vote for directors pursuant to the provisions of this paragraph 6. In no event shall the Holders of shares of RP have any right to sue for, or bring a proceeding with respect to, such dividends or redemptions or damages for the failure to receive the same. 7. 1940 Act RP Asset Coverage. The Corporation shall maintain, as of the last Business Day of each month in which any share of RP is outstanding, the 1940 Act RP Asset Coverage. 8. Asset and Liquidity Coverage. ---------------------------- (a) RP Basic Maintenance Amount. (i) The Corporation shall maintain, on each Valuation Date, Eligible Portfolio Property having an aggregate Discounted Value at least equal to the RP Basic Maintenance Amount. (ii) On or before 5:00 p.m., New York City time, on the third Business Day after each Valuation Date, the Corporation shall complete and deliver to the Remarketing Agent and the Paying Agent an RP Basic Maintenance Report, which will be deemed to have been delivered to the Remarketing Agent and the Paying Agent if the Remarketing Agent and the Paying Agent receive a copy or telecopy, telex or other electronic transcription thereof and on the same day the Corporation mails to the Remarketing Agent and the Paying Agent for delivery on the next Business Day the full RP Basic Maintenance Report. A failure by the Corporation to deliver an RP Basic Maintenance Report under this paragraph 8(a)(ii) without the prior consent of the Remarketing Agent and the Paying Agent shall be deemed to be delivery of an RP Basic Maintenance Report indicating the Discounted Value for all assets of the Corporation is less than the RP Basic Maintenance Amount, as of the relevant Valuation Date. 40 (iii) Within ten Business Days after the date of delivery to the Remarketing Agent and the Paying Agent of an RP Basic Maintenance Report in accordance with paragraph 8(a)(ii) above relating to a Quarterly Valuation Date, the Independent Accountant will confirm in writing to the Remarketing Agent and the Paying Agent (A) the mathematical accuracy of the calculations reflected in such Report, (B) that, in such Report, the Corporation determined in accordance with these Articles Supplementary the assets of the Corporation which constitute Eligible Portfolio Property at such Quarterly Valuation Date, (C) that, in such Report, the Corporation determined in accordance with these Articles Supplementary whether the Corporation had, at such Quarterly Valuation Date, Eligible Portfolio Property of an aggregate Discounted Value at least equal to the RP Basic Maintenance Amount, (D) with respect to the S&P rating on Utility Bonds and Senior Debt Obligations, issuer name, issue size and coupon rate listed in such Report, that information has been traced and agrees with the information listed in The Standard & Poor's Bond Guide (in the event such information does not agree or such information is not listed in The Standard & Poor's Bond Guide, the Independent Accountant will inquire of S&P what such information is, and provide a listing in their letter of such differences, if any), (E) with respect to the Moody's ratings on Utility Bonds and Senior Debt Obligations, issuer name, issue size and coupon rate listed in such Report, that information has been traced and agrees with the information listed in Moody's Bond Record (in the event such information does not agree or such information is not listed in Moody's Bond Record, the Independent Accountant will inquire of Moody's what such information is, and provide a listing in their letter of such differences), and (F) with respect to the lower of two bid prices (or alternative permissible factors used in calculating the Market Value) provided by the custodian of the Corporation's assets to the Corporation for purposes of valuing securities in the Corporation's portfolio, the Independent Accountant has traced the price used in such Report to the lower of the two bid prices listed in the Report provided by such custodian and verified that such information agrees (in the event such information does not agree, the Independent Accountant will provide a listing in its letter of such differences) (such confirmation is herein called the "Accountant's Confirmation"). If any Accountant's Confirmation delivered pursuant to this paragraph 8(a)(iii) shows that an error was made in the RP Basic Maintenance Report for a Quarterly Valuation Date, or shows that a lower aggregate Discounted Value for the aggregate of all Eligible Portfolio Property of the Corporation was determined by the Independent Accountant, the calculation or determination made by such Independent Accountant shall be final and conclusive and shall be binding on the Corporation, and the Corporation shall accordingly amend the RP Basic Maintenance Report to the Remarketing Agent and Paying Agent promptly following receipt by the Remarketing Agent and the Paying Agent of such Accountant's Confirmation. (b) Liquidity Coverage. ------------------ (i) As of each Valuation Date as long as any share of RP is outstanding, the Corporation shall determine (A) the Market Value of the Dividend Coverage Assets owned by the Corporation as of that Valuation Date, (B) the Dividend Coverage Amount on that Valuation Date, and (C) whether the Minimum Liquidity Level is met as of that Valuation Date. The calculations of the Dividend Coverage Assets, the Dividend Coverage Amount and whether the Minimum Liquidity Level is met shall be set forth in a 41 certificate (a "Certificate of Minimum Liquidity") dated as of the Valuation Date. The RP Basic Maintenance Report and the Certificate of Minimum Liquidity may be combined in one certificate. The Corporation shall cause the Certificate of Minimum Liquidity to be delivered to the Remarketing Agent and the Paying Agent not later than the close of business on the third Business Day after the Valuation Date. The Minimum Liquidity Level shall be deemed to be met as of any date of determination if the Corporation has timely delivered a Certificate of Minimum Liquidity relating to such date, which states that the same has been met and which is not manifestly inaccurate. In the event that a Certificate of Minimum Liquidity is not delivered to the Remarketing Agent and the Paying Agent when required, the Minimum Liquidity Level shall be deemed not to have been met as of the applicable date. (ii) If the Minimum Liquidity Level is not met as of any Valuation Date, then the Corporation shall purchase or otherwise acquire Dividend Coverage Assets (with the proceeds from the liquidation of Eligible Portfolio Property or otherwise) to the extent necessary so that the Minimum Liquidity Level is met as of the fifth Business Day following such Valuation Date. The Corporation shall, by such fifth Business Day, provide to the Paying Agent and the Remarketing Agent a Certificate of Minimum Liquidity setting forth the calculations of the Dividend Coverage Assets and the Dividend Coverage Amount and showing that the Minimum Liquidity Level is met as of such fifth Business Day together with a report of the custodian of the Corporation's assets confirming the amount of the Corporation's Dividend Coverage Assets as of such fifth Business Day. 9. Restrictions on Certain Distributions. For so long as any share of RP is outstanding, the Corporation shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or options, warrants or rights to subscribe for or purchase, Common Stock or other stock, if any, ranking junior to the shares of RP as to dividends or upon liquidation) in respect of the Common Stock or any other stock of the Corporation ranking junior to or on a parity with the shares of RP as to dividends or upon liquidation, or call for redemption, redeem, purchase or otherwise acquire for consideration any shares of the Common Stock or any other such junior stock (except by conversion into or exchange for stock of the Corporation ranking junior to the shares of RP as to dividends and upon liquidation) or any other such parity stock (except by conversion into or exchange for stock of the Corporation ranking junior to or on a parity with the shares of RP as to dividends and upon liquidation), unless (A) immediately after such transaction, the RP Basic Maintenance Amount and the 1940 Act RP Asset Coverage would be achieved, (B) full cumulative dividends on shares of RP and shares of Other RP 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 Paying Agent, (C) any Right required to be paid under paragraph 3(l) of this Part I on or before the date of such declaration or payment has been paid and (D) the Corporation has redeemed the full number of shares of RP required to be redeemed by any provision for mandatory redemption contained herein. 10. Notice. All notices or communications, unless otherwise specified in the Bylaws of the Corporation or these Articles Supplementary, shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid. Notice shall be deemed given on the 42 earlier of the date received or the date seven days after which such notice is mailed. 11. Exchange Provisions. (a) Upon receipt by the Corporation of an opinion of legal counsel, in form and substance satisfactory to the Board of Directors, that dividends on the Corporation's Remarketed Preferred Stock, Series I will not be considered preferential under section 562(c) of the Code, which opinion may, but is not required to, rely upon a ruling on the matter by the Service, the Board of Directors may, but is not required to, adopt a resolution authorizing (such authorization shall be referred to herein as an "Exchange Event") that, on the first Dividend Payment Date for the RP which is at least 45 days after the occurrence of an Exchange Event and as of which the conditions described below have been satisfied (the "Exchange Date"), the RP will be exchanged automatically, and without any action or choice on the part of Holders thereof, on a share-for-share basis for the Corporation's Remarketed Preferred Stock, Series I. However, shares of RP will not be exchanged for shares of the Corporation's Remarketed Preferred Stock, Series I unless Moody's and S&P shall have issued on or before the Exchange Date ratings on the Corporation's Remarketed Preferred Stock, Series I equivalent to the ratings on the RP, provided that, if Moody's or S&P shall not make a rating available, such exchange will take place if a Substitute Rating Agency or Agencies shall have issued a rating or ratings which is/are equivalent to such then-current rating or ratings on the Exchange Date. Holders of outstanding shares of RP will receive one share of the Corporation's Remarketed Preferred Stock, Series I for each share of RP held and exchanged by them on the Exchange Date. (b) The Fund will cause the publication of an exchange notice in an Authorized Newspaper, and cause the Paying Agent to mail an exchange notice to each Holder, not less than 10 nor more than 30 days prior to the Exchange Date. Such notice will state: (i) the Exchange Date, (ii) that on the Exchange Date all shares of Original RP will be exchanged automatically, and without any action or choice on the part of the Holders, on a share-for-share basis for the Corporation's Remarketed Preferred Stock, Series I, (iii) that the Initial Dividend Period for the Corporation's Remarketed Preferred Stock, Series I issuable in exchange for the RP will be a 49-day Dividend Period commencing on the Exchange Date, and (iv) that dividends on shares of RP will cease to accumulate on the Exchange Date. (c) On the Exchange Date, the RP will cease to accumulate dividends, the shares of RP will no longer be deemed outstanding, the rights of the Holders (except the right to receive accumulated but unpaid dividends to the Exchange Date) will cease, and the person or persons entitled to receive the Corporation's Remarketed Preferred Stock, Series I upon the exchange will be treated for all purposes as the holder or holders of such Remarketed Preferred Stock, Series I. 12. Borrowings. For so long as the shares of RP are rated by S&P, the aggregate amount of borrowings by the Corporation (including guarantees made by the Corporation) shall be limited to an amount equal to 10% of the value of the Corporation's assets; provided, further, that the Corporation shall not incur any such borrowings subsequent to the issuance of the RP unless S&P advises the Corporation in writing that such borrowings will not adversely affect its then-current rating on the RP. 43 13. Options and Futures Transactions. For so long as the shares of RP are rated by either Moody's or S&P, the Corporation will not purchase or sell futures contracts or related options or engage in reverse repurchase agreement transactions unless Moody's and/or S&P, as the case may be, advise the Corporation in writing that such action or actions will not adversely affect their then-current ratings on the RP. 14. Other Restrictions. For so long as the shares of RP are rated by S&P, the Corporation may not (i) engage in transactions involving repurchase obligations which do not constitute Short Term Money Market Instruments, (ii) engage in transactions involving short sales of portfolio securities or (iii) overdraw any bank accounts of the Corporation, unless, in each case, S&P advises the Corporation in writing that such action or actions will not adversely affect its then-current ratings on the RP. PART II. -------- REMARKETING PROCEDURES 1. Remarketing Schedule. Each Remarketing shall take place over a three-day period consisting of the Tender Date, the Dividend Reset Date and the Settlement Date. Such dates or the method of establishing such dates shall be determined by the Board of Directors from time to time. 2. Procedure for Tendering. (a) Each share of RP is subject to Tender and Dividend Reset only at the end of each Dividend Period applicable to such shares and may be tendered in a Remarketing only on the Tender Date immediately prior to the end of the current Dividend Period with respect thereto. By 12:00 noon, New York City time, on each such Tender Date, the Remarketing Agent shall, after canvassing the market and considering prevailing market conditions at the time for shares of RP and similar securities, provide Beneficial Owners non-binding indications of Applicable Dividend Rates for the next succeeding 7-day Dividend Period, 49-day Dividend Period and any Optional Dividend Period or designated Special Dividend Period provided that if the next Dividend Period has been designated a Special Dividend Period, the Remarketing Agent will provide to holders thereof a non-binding indication of the Applicable Dividend Rate only for such Special Dividend Period. The actual Applicable Dividend Rate for such Dividend Period may be greater than or less than the rate per annum indicated in such non-binding indications (but not greater than the applicable Maximum Dividend Rate). By 1:00 p.m., New York City time, on such Tender Date, each Beneficial Owner of shares of RP subject to Tender and Dividend Reset must notify the Remarketing Agent of its desire, on a share-by-share basis, either to tender such share of RP at a price of $100,000 per share or to continue to hold such share of RP and elect either a 7-day Dividend Period, a 49-day Dividend Period or a specific available Optional Dividend Period or, if applicable, accept a designated Special Dividend Period, at the new Applicable Dividend Rate for the selected or designated, as the case may be, Dividend Period. Any notice given to the Remarketing Agent to tender or hold shares for a particular Dividend Period shall be irrevocable and shall not be conditioned upon the level at which the Applicable Dividend Rate is established. Any such notice may not be waived by the Remarketing Agent, except that prior to 4:00 p.m., New York City time, on the Dividend Reset Date, the Remarketing Agent may, in its 44 sole discretion (i) at the request of a Beneficial Owner that has tendered one or more shares of RP to the Remarketing Agent, contingently waive such Beneficial Owner's tender and thereby enable such Beneficial Owner to continue to hold the share or shares for a 7-day Dividend Period, 49-day Dividend Period or available Optional Dividend Period or a designated Special Dividend Period as agreed to by such Beneficial Owner and the Remarketing Agent at such time, so long as such tendering Beneficial Owner has indicated to the Remarketing Agent that it would accept the new Applicable Dividend Rate for such Dividend Period, such waiver to be contingent upon the Remarketing Agent's ability to remarket all shares of RP tendered in such Remarketing, and (ii) at the request of a Beneficial Owner that has elected to hold one or more of its shares of RP, waive such Beneficial Owner's election with respect thereto. (b) The right of each Beneficial Owner to tender shares of RP in a Remarketing therefor shall be limited to the extent that (i) the Remarketing Agent conducts a Remarketing pursuant to the terms of the Remarketing Agreement, (ii) shares tendered have not been called for redemption and (iii) the Remarketing Agent is able to find a purchaser or purchasers for tendered shares of RP at an Applicable Dividend Rate for the next Dividend Period that is not in excess of the Maximum Dividend Rate. 3. Determination of Applicable Dividend Rates. (a) Between 1:00 p.m., New York City time, on each Tender Date and 4:00 p.m., New York City time, on the succeeding Dividend Reset Date, the Remarketing Agent shall determine (i) unless the Board of Directors has designated such next Dividend Period as a Special Dividend Period with respect to all shares subject to Tender and Dividend Reset, the allocation of tendered shares of RP among a 7-day Dividend Period, a 49-day Dividend Period and each available Optional Dividend Period, if any, and any Special Dividend Period provided that, if the Remarking Agent is unable to remarket on such Dividend Reset Date all such tendered shares in a Remarketing allocate no shares to any Optional Dividend Period of more than 98 days and no share will be assigned to any Special Dividend Period of more than 98 days), and (ii) the Applicable Dividend Rates to the nearest one-thousandth (0.001) of one percent per annum for the next 7-day Dividend Period, the next 49-day Dividend Period and the next Optional Dividend Period or Periods, or the next designated Special Dividend Period, as the case may be. The Applicable Dividend Rates for such Dividend Periods, except as otherwise required herein, shall be the rate per annum which the Remarketing Agent determines, in its sole judgment, to be the lowest rates, giving effect to such allocation, that will enable it to remarket on behalf of the Beneficial Owners thereof all shares of RP tendered to it at a price of $100,000 per share. (b) If no Applicable Dividend Rate shall have been established on a Dividend Reset Date in a Remarketing for a 7-day Dividend Period, a 49-day Dividend Period, or any Optional Dividend Period or Periods or Special Dividend Period, or for any or all of the foregoing, for any reason (other than because there is no Remarketing Agent or the Remarketing Agent is not required to conduct a Remarketing pursuant to the terms of the Remarketing Agreement), then the Remarketing Agent, except during a Non-Payment Period, in its sole discretion, shall, after taking into account market conditions as reflected in the prevailing yields of fixed and variable rate taxable and tax-exempt debt securities and the prevailing dividend yields of fixed and variable rate preferred stock, if necessary, 45 determine the Applicable Dividend Rate or Rates, as the case may be, that would be the initial dividend rate or rates fixed in an offering on such Dividend Reset Date, assuming in each case a comparable dividend period or periods, issuer and security. If there is no Remarketing because there is no Remarketing Agent or the Remarketing Agent is not required to conduct a Remarketing pursuant to the Remarketing Agreement, then, except during a Non-Payment Period, the Applicable Dividend Rate for each subsequent Dividend Period for which no Remarketing takes place because of the foregoing shall be the applicable Maximum Dividend Rate for a 7-day Dividend Period and the next succeeding Dividend Period shall be a 7-day Dividend Period. In a Remarketing, the Applicable Dividend Rates for different Dividend Periods need not be equal. (c) In determining such Applicable Dividend Rate or Rates, the Remarketing Agent shall, after taking into account market conditions as reflected in the prevailing yields of fixed and variable rate taxable and tax-exempt debt securities and the prevailing dividend yields of fixed and variable rate preferred stock, in providing non-binding indications of the Applicable Dividend Rates to Beneficial Owners and potential purchasers of shares of RP, (i) consider the number of shares of RP tendered and the number of shares of RP potential purchasers are willing to purchase and (ii) contact by telephone or otherwise current and potential Beneficial Owners of shares of RP and ascertain the dividend rates at which they would be willing to hold shares of RP. (d) The Applicable Dividend Rate or Rates, as well as the allocation of tendered shares of RP, shall be determined as aforesaid by the Remarketing Agent in its sole discretion (except as otherwise provided in these Articles Supplementary with respect to Applicable Dividend Rates that shall be the Non-Payment Period Rate and Maximum Dividend Rate) and shall be conclusive and binding on Holders and Beneficial Owners. (e) As a condition precedent to purchasing shares of RP in any offering, in any Remarketing or outside any Remarketing, each purchaser of shares of RP shall sign and deliver a Master Purchaser's Letter, the sufficiency of any Master Purchaser's Letter to be determined by the Remarketing Agent in its sole discretion. (f) Except during a Non-Payment Period, the Applicable Dividend Rate for any Dividend Period shall not be more than the applicable Maximum Dividend Rate. 4. Allocation of Shares; Failure to Remarket at $100,000 Per Share. (a) If the Remarketing Agent is unable to remarket by 4:00 p.m., New York City time, on any Dividend Reset Date all shares of RP tendered to it in the related Remarketing at a price of $100,000 per share (i) each Beneficial Owner that tendered shares of RP for sale shall sell a number of shares of RP on a pro rata basis, to the extent practicable, or by lot, as determined by the Remarketing Agent in its sole discretion based on the number of orders to purchase shares of RP in such Remarketing; and (ii) the next Dividend Period shall be a 7-day Dividend Period for all tendered (or deemed tendered) but unsold shares and for all other shares the Beneficial Owners of which shall have elected or been deemed to have elected to hold such shares for a Dividend Period of more than 98 days; and (iii) the Applicable Dividend Rates for the next 7-day Dividend Period (including the 7-day Dividend Period referred to in the preceding clause (ii)), next 46 49-day Dividend Period and, if applicable, next Optional Dividend Period or Periods of 98 or fewer days or Special Dividend Period of 98 or fewer days shall be the applicable Maximum Dividend Rates for such Dividend Periods. (b) If the allocation procedures described above would result in the sale of a fraction of a share of RP, the Remarketing Agent shall, in its sole discretion, round up or down the number of shares of RP sold by each Beneficial Owner on such Dividend Reset Date so that each share sold by a Beneficial Owner shall be a whole share of RP and the total number of shares sold equals the total number of shares bought on such Dividend Reset Date. 5. Notification of Results; Settlement. (a) By telephone at approximately 4:30 p.m., New York City time, on each Dividend Reset Date the Remarketing Agent shall advise each Beneficial Owner of tendered shares and each purchaser thereof (or the Agent Member thereof) (i) of the number of shares such Beneficial Owner or purchaser is to sell or purchase and (ii) to give instructions to its Agent Member to deliver such shares against payment therefor or to pay the purchase price against delivery as appropriate. The Remarketing Agent will also advise each Beneficial Owner or purchaser that is to continue to hold, or to purchase, shares for the Dividend Periods beginning on the Business Day following such Dividend Reset Date of the Applicable Dividend Rate for such shares. (b) In accordance with the Securities Depository's normal procedures, on the Settlement Date, the transactions described above with respect to each share of RP shall be executed through the Securities Depository, if the Securities Depository or its nominee holds or is to hold the certificates relating to the shares to be purchased, and the accounts of the respective Agent Members of the Securities Depository shall be debited and credited and shares delivered by book entry as necessary to effect the purchases and sales of shares of RP and the changes in types of Dividend Periods as determined in the related Remarketing. Purchasers of shares of RP shall make payment to the Paying Agent in same-day funds against delivery to other purchasers or their nominees of one or more certificates representing shares of RP, or, if the Securities Depository or its nominee holds or is to hold the certificates relating to the shares to be purchased, through their Agent Members in same-day funds to the Securities Depository against delivery through their Agent Members by book entry of shares of RP or as otherwise required by the Securities Depository. The Securities Depository shall make payment in accordance with its normal procedures. (c) If any Beneficial Owner selling shares of RP in a Remarketing fails to deliver such shares, the Agent Member of such selling Beneficial Owner and of any other person that was to have purchased shares of RP in such Remarketing may deliver to any such other person a number of whole shares of RP that is less than the number of shares that otherwise was to be purchased by such person. In such event, the number of shares of RP to be so delivered shall be determined by such Agent Member. Delivery of such lesser number of shares of RP shall constitute good delivery. (d) The Remarketing Agent, the Paying Agent and the Securities Depository each will use its reasonable commercial efforts to meet the timing requirements set forth in paragraphs (a) and (b) above; provided that, in the event that there is a delay in the occurrence of any delivery 47 or other event connected with a Remarketing, the Remarketing Agent, the Paying Agent and the Securities Depository each will use its reasonable commercial efforts to accommodate such delay in furtherance of the Remarketing. (e) Notwithstanding any of the foregoing provisions of this paragraph 5, the Remarketing Agent may, in its sole discretion, modify the settlement procedures set forth above with respect to settlement, provided any such modification does not adversely affect the Beneficial Owners or the Holders of RP or the Corporation. 6. Purchase of Shares of RP by Remarketing Agent. The Remarketing Agent may purchase for its own account shares of RP in a Remarketing, provided that it purchases all tendered (or deemed tendered) shares of RP not sold in such Remarketing to other purchasers and that the Applicable Dividend Rate established with respect to such shares in such Remarketing are no higher than the Applicable Dividend Rate or Rates that would have been established if the Remarketing Agent had not purchased such shares. Except as provided in the previous sentence, the Remarketing Agent shall not be obligated to purchase any shares of RP that would otherwise remain unsold in a Remarketing. If the Remarketing Agent owns any shares of RP subject to a Remarketing immediately prior to a Remarketing and if all other shares subject to such Remarketing and tendered for sale by other Beneficial Owners of shares of RP have been sold in such Remarketing, then the Remarketing Agent may sell such number of its shares in such Remarketing as there are outstanding orders to purchase that have not been filled by such shares tendered for sale by other Beneficial Owners. Neither the Corporation, the Paying Agent nor the Remarketing Agent shall be obligated in any case to provide funds to make payment to a Beneficial Owner upon such Beneficial Owner's tender of its shares of RP in a Remarketing. 7. Applicable Dividend Rate During a Non-Payment Period. So long as a Non-Payment Period shall continue, paragraphs 1, 2, 3, 4, 5, and 6 of this Part II shall not be applicable to any of the shares of RP and the shares of RP shall not be subject to Tender and Dividend Reset. 8. Transfers. As a condition precedent to purchasing shares of RP in any offering, in any Remarketing or outside any Remarketing, each purchaser of shares of RP shall be required to sign and deliver a Master Purchaser's Letter, the sufficiency of any Master Purchaser's Letter to be determined by the Remarketing Agent in its sole discretion, in which such purchaser shall agree, among other things, (i) unless the Corporation has elected, during a Non-Payment Period, to waive this requirement, to have its ownership of such shares of RP maintained in book entry form by the Securities Depository, in the account of a designated Agent Member which, in turn, shall maintain records of such purchaser's beneficial ownership, (ii) to be conclusively bound by the remarketing procedures, including the Remarketing Agent's determination of the Applicable Dividend Rates, pursuant to the remarketing procedures, (iii) that its notice to tender shares of RP in a Remarketing will constitute an irrevocable offer, except as set forth in such Master Purchaser's Letter, to sell the shares specified in such notice and authorization to the Remarketing Agent to sell, transfer or otherwise dispose of such shares as set forth herein and (v) unless the Corporation shall have elected, during a Non-Payment Period, to waive this requirement, to sell, transfer or otherwise dispose of any 48 share of RP held by it only pursuant to orders placed in a Remarketing therefor or to a person that has signed and delivered a Master Purchaser's Letter as provided herein, and, in the case of any transfer other than pursuant to a Remarketing, to ensure that an Agent Member advises the Remarketing Agent of such transfer. The Agent Member shall be authorized and instructed to disclose to the Remarketing Agent and/or the Paying Agent such information with respect to such purchaser's beneficial ownership as the Remarketing Agent or Paying Agent shall request. 9. Miscellaneous. To the extent permitted by applicable law, the Board of Directors of the Corporation may interpret or adjust the provisions hereof to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification which does not adversely affect the rights of Holders or Beneficial Owners of shares of RP and if such inconsistency or ambiguity reflects an incorrect provision hereof then the Board of Directors may authorize the filing of a Certificate of Amendment or a Certificate of Correction, as the case may be. 10. Securities Depository; Stock Certificates. (a) If there is a Securities Depository, an appropriate number of certificates for all of the shares of RP shall be issued to the Securities Depository and registered in the name of the Securities Depository or its nominee. Additional certificates may be issued as necessary to represent shares of RP having Optional Dividend Periods or Special Dividend Periods. All such certificates shall bear a legend to the effect that such certificates are issued subject to the provisions contained in these Articles Supplementary and each Master Purchaser's Letter. Unless the Corporation shall have elected, during a Non-Payment Period, to waive this requirement, the Corporation will also issue stop-transfer instructions to the Paying Agent for the shares of RP. 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 Dividend Rate applicable to all shares of RP shall be the Non-Payment Period Rate or there is no Securities Depository, the Corporation may at its option issue one or more new certificates with respect to such shares (without the legend referred to in paragraph 10(a) of this Part II) registered in the names of the Beneficial Owners or their nominees and rescind the stop-transfer instruction referred to in paragraph 10(a) of this Part II with respect to such shares. 49 IN WITNESS WHEREOF, DUFF & PHELPS SELECTED UTILITIES INC. has caused these presents to be signed in its name and on its behalf by its President, and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledged said instrument to be the corporate act of the Corporation, and stated under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on November 15, 1988. DUFF & PHELPS SELECTED UTILITIES INC. By /s/ Charles V. Hansen ------------------------- Chairman, President Attest: /s/ Calvin J. Pedersen - ----------------------- Secretary EX-99.A.5 CHARTER 7 ex-99a5.txt Exhibit a.5 DUFF & PHELPS SELECTED UTILITIES INC. Articles Supplementary creating one series of Remarketed Preferred Stock DUFF & PHELPS SELECTED UTILITIES INC., a Maryland corporation having its principal Maryland office in the City of Baltimore (the "Corporation"), certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Board of Directors of the Corporation by article fifth of its Charter, the Board of Directors has classified its preferred stock and has authorized the issuance of a series of 5,000 shares of its authorized preferred stock, par value $.001 per share, liquidation preference $100,000 per share, designated Remarketed Preferred Stock, Series I. SECOND: The preferences, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, of the shares of such series of preferred stock are as follows: DESIGNATION This series of 5,000 shares of preferred stock, par value $.001 per share, liquidation preference $100,000 per share plus premium, if any, resulting from the designation of a Premium Call Period (as herein defined), plus accumulated but unpaid dividends, if any, thereon (whether or not earned or declared), is designated "Remarketed Preferred Stock, Series I" and is referred to below as "RP". 1/ Each share of RP shall be issued on a date to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; have an Initial Dividend Payment Date (as herein defined) to be determined by the Board of Directors of the Corporation or a duly authorized committee thereof; and have such other redemption provisions, preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Corporation's Charter applicable to preferred stock of the Corporation, as are set forth in Part I and Part II of these Articles Supplementary. Except as to Dates of Original Issue (as defined herein), Dividend Periods (as defined herein), Dividend Payment Dates (as defined herein), and redemption dates, if any, each share of RP shall be identical to every other share of RP. - ----------------------- 1/ Registered trademark of Merrill Lynch & Co., Inc. PART I. ------ 1. Definitions. Unless the context or use indicates another or different meaning or intent, the following terms shall have the following meanings, whether used in the singular or plural: "`AA' Composite Commercial Paper Rate," on any date, means (i) the Interest Equivalent of the rate on commercial paper placed for the number of days specified in the succeeding sentence on behalf of issuers whose corporate bonds are rated "AA" by S&P and "Aa" by Moody's, or the equivalent of such rating by another nationally recognized statistical rating organization, as such rate is made available by the Federal Reserve Bank of New York on a discount basis or otherwise for the Business Day immediately preceding such date, or (ii) if the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the Interest Equivalent of such rates on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers to the Remarketing Agent for the close of business on the Business Day immediately preceding such date. In respect of any Dividend Period (or other period) of 98 or fewer days (determined without regard to any adjustment in the remarketing schedule in respect of non-Business Days, as provided herein), the "AA" Composite Commercial Paper Rate shall be as follows: if the number of days in such Dividend Period is (i) less than 8, the Interest Equivalent of the 5-day rate, (ii) 8 or more but less than 20, the Interest Equivalent of the 15-day rate, (iii) 20 or more but less than 49, the Interest Equivalent of the 30-day rate, (iv) 49 or more but less than 70, the Interest Equivalent of the 60-day rate, (v) 70 or more but less than 85, the arithmetic average of the Interest Equivalent of the 60-day and 90-day rates and (vi) 85 or more but less than 99, the Interest Equivalent of the 90-day rate. If any Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Dealers or, if none of the Commercial Paper Dealers quotes such a rate, by any Substitute Commercial Paper Dealer or Dealers selected by the Corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer. "Accountant's Confirmation" has the meaning set forth in paragraph 8(a)(iii) of this Part I. "Adviser" means Duff & Phelps Investment Management Co., the Corporation's investment adviser. "Agent Member" means designated member of the Securities Depository 2 that will maintain records for a Beneficial Owner of shares of RP that has identified such Agent Member in its Master Purchaser's Letter and that will be authorized and instructed to disclose information to the Remarketing Agent and the Paying Agent with respect to such Beneficial Owner. "Applicable Dividend Rate" means, with respect to the initial Dividend Period, the rate of cash dividend per annum established by the Board of Directors and, for each subsequent Dividend Period for each share of RP, means the rate of cash dividend per annum that (i) except for a Dividend Period commencing during a Non-Payment Period will be equal to the lower of the rate of cash dividend per annum that the Remarketing Agent advises results on the Dividend Reset Date preceding the first day of such Dividend Period from implementation of the remarketing procedures set forth in Part II hereof and the Maximum Dividend Rate or (ii) for each Dividend Period commencing during a Non-Payment Period, will be equal to the Non-Payment Period Rate. "Applicable Percentage" has the meaning set forth under "Maximum Dividend Rate" below. "Authorized Newspaper" means a newspaper of general circulation in the English language generally published on Business Days in The City of New York. "Beneficial Owner" means a person that has signed a Master Purchaser's Letter and is listed as the beneficial owner of one or more shares of RP in the records of the Paying Agent or, with respect to any share not registered in the name of the Securities Depository on the stock transfer books of the Corporation, the person in whose name such share is so registered. "Board of Directors" means the Board of Directors of the Corporation. "Business Day" means a day on which the New York Stock Exchange, Inc. is open for trading, and is not a day on which banks in The City of New York are authorized or obligated by law to close. "Certificate of Minimum Liquidity" has the meaning set forth in paragraph 8(b)(i) of this Part I. "Charter" means the Articles of Incorporation, as amended, of the Corporation, including these Articles Supplementary, on file in the State Department of Assessments and Taxation of the State of Maryland. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") and such other Commercial Paper Dealer or Dealers as the Corporation may from time to time appoint, or, in lieu of any thereof, their respective affiliates or successors. "Common Stock" means the common stock, par value $.001 per share, of the Corporation. 3 "Conventional Mortgage Pass-Through Certificate" means an instrument publicly issued in bearer or registered form, that is one of a class or series or by its terms is divisible into a class or series, and that is of a type commonly dealt in on securities exchanges or markets or commonly recognized in any area in which it is issued or dealt in as a medium for investment, evidencing (directly or indirectly) a proportional undivided interest in specified pools of whole loans that are secured by a valid first lien on each mortgagor's fee or leasehold interest in related mortgaged property (except for Permitted Tax Liens and other matters to which like properties are company subject which neither individually nor in the aggregate materially interfere with the benefits of the security intended to be provided by such mortgages or deeds of trust, and standard exceptions and exclusions in title insurance policies) on one- to four-unit primary residences (including, without limitation, owner-occupied attached or detached single-unit residences, one- to four-unit primary residences, condominiums, second/vacation homes and non-owner occupied residences) and with respect to which the Required Documentation is required to be held by a trustee or independent custodian, which mortgage loans are serviced pursuant to servicing agreements with servicers that have either expressed the intention to advance funds to meet deficiencies (to the extent such servicers reasonably believe such advances are recoverable) or provided for alternative credit enhancement in lieu thereof, and which instruments (a) have been rated AA or better by S&P or Aa or better by Moody's or (b) do not qualify pursuant to clause (a) above, but the inclusion of which in the Eligible Portfolio Property will not, in and of itself, impair, or cause the RP to fail to retain, the then-current ratings assigned to the RP by the Rating Agencies, as evidenced by letters to the Corporation to such effect from the Rating Agencies which letters shall be delivered to the Remarketing Agent and the Paying Agent at the time each such Conventional Mortgage Pass-Through Certificate is to be included in the Eligible Portfolio Property; provided that, a Conventional Mortgage Pass-Through Certificate shall be eligible for inclusion in the Eligible Portfolio Property as of any Valuation Date only if it continues to satisfy as of such Valuation Date the requirements of at least one of clauses (a) or (b) above, as the Corporation may confirm verbally or in writing, directly or indirectly, or by reference to publications of the Rating Agencies, by confirmation from a nationally recognized securities dealer having a minimum capitalization of $25 million or by such other means as the Rating Agencies shall approve. The Remarketing Agent and the Paying Agent shall be entitled to rely on the representation of the Corporation contained in the RP Basic Maintenance Report with respect to any Valuation Date that, as of such Valuation Date, the Corporation has confirmed that the Conventional Mortgage Pass-Through Certificates included in the Corporation's Eligible Portfolio Property are within the scope of this paragraph. "Corporation" means Duff & Phelps Selected Utilities Inc., a Maryland corporation and the issuer of the shares of RP. "Date of Original Issue" means, with respect to any share of RP, the date on which the Corporation originally issues such share. "Debt Obligations" has the meaning set forth under "Utility Stocks" below. "Deposit Securities" means cash, U.S. Government Obligations and Short Term Money Market Instruments. Except for purposes of determining compliance with the RP Basic Maintenance Amount, each Deposit Security shall be deemed to have a value equal to its principal or face amount payable at maturity plus any interest payable thereon after delivery of such Deposit Security but only if payable on or prior to the applicable payment date in advance of which the relevant deposit is made. "Discount Factor" means Discount Factor Supplied by Moody's or Discount Factor supplied by S&P, as the case may be. 4 "Discount Factor Supplied By S&P" means, initially, for any asset held by the Corporation, the number set forth opposite such type of asset in the following table (it being understood that any asset held by the Corporation and not listed in the following table or in an amendment or supplement thereto shall have a Discounted Value of zero):
Discount Factor(1) ------------------- Type A Utility Bonds: 1.80 Type B Utility Bonds: 1.85 Type A Utility Stocks: 2.25 Type B Utility Stocks: 2.35 GNMA Certificates with fixed interest rates: 1.40 GNMA Certificates with adjustable interest rates: 1.40 FHLMC and FNMA Certificates with fixed interest rates: 1.50 FHLMC and FNMA Certificates with adjustable interest rates: 1.50 FHLMC Multifamily Securities: 1.50 FHLMC and FNMA Certificates with variable interest rates: 1.50 GNMA Graduated Payment Securities: 1.60 Conventional Mortgage Pass-Through Certificates 2 1.55 U.S. Government Obligations having a remaining term to maturity of 90 days or less: 1.00 U.S. Government Obligations having a remaining term to maturity of more than 90 days but not more than five years: 1.28 U.S. Government Obligations having a remaining term to maturity of more than five years but not more than 10 years: 1.35 U.S. Government Obligations having a remaining term to maturity of more than 10 years but not more than 15 years: 1.40 U.S. Government Obligations having a remaining term to maturity of more than 15 years but not more than 30 years: 1.50 Cash and Short Term Money Market Instruments: 1.00 - -------------------- (1) In the case of Eligible Portfolio Property rated by Moody's but not rated by S&P, the Discount Factor Supplied by S&P shall be the Discount Factor determined therefor in writing by S&P. Absent such written notification, the asset shall have a Discounted Value of zero. (2) In the event such asset is not rated AA or better by S&P, such asset shall have a Discounted Value of zero.
5 Notwithstanding the foregoing, for so long as is required by S&P to maintain its then-current credit rating of the RP, the Discount Factor Supplied by S&P with respect to Eligible Portfolio Property sold pursuant to a reverse repurchase agreement with a remaining term to maturity of more than 25 days on the date of determination of the Discounted Value of such Eligible Portfolio Property shall be the then-current Discount Factor provided by S&P to the Corporation in writing for the purpose of such determination. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial Discount Factor Supplied by S&P listed above applied to calculate the Discounted Value of any item of Eligible Portfolio Property or may specify from time to time a Discount Factor Supplied by S&P for any asset constituting Eligible Portfolio Property if the Board of Directors determines and S&P advises the Corporation in writing that such adjustment, modification, alteration, change or specification will not adversely affect S&P's then-current rating of the RP. "Discount Factor Supplied By Moody's" means, initially, for any asset held by the Corporation, the number set forth opposite such type of asset in the following table (it being understood that any asset held by the Corporation and not listed in the following table or in an amendment or supplement thereto shall have a Discounted Value of zero): Discount Factor(1) ------------------ Type I Utility Bonds having a remaining term to maturity of one year or less: 1.20 Type I Utility Bonds having a remaining term to maturity of more than one year but not more than two years: 1.27 Type I Utility Bonds having a remaining term to maturity of more than two years but not more than three years: 1.32 Type I Utility Bonds having a remaining term to maturity of more than three years but not more than four years: 1.38 Type I Utility Bonds having a remaining term to maturity of more than four years but not more than five years: 1.4__ Type I Utility Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.53 Type I Utility Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.61 6 Type I Utility Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.69 Type I Utility Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.76 Type I Utility Bonds having a remaining term to maturity of more than 20 years but less than 30 years: 1.79 Type II Utility Bonds having a remaining term to maturity of one year or less: 1.24 Type II Utility Bonds having a remaining term to maturity of more than one year but not more than two years: 1.31 Type II Utility Bonds having a remaining term to maturity of more than two years but not more than three years: 1.38 Type II Utility Bonds having a remaining term to maturity of more than three years but not more than four years: 1.44 Type II Utility Bonds having a remaining term to maturity of more than four years but not more than five years: 1.50 Type II Utility Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.60 Type II Utility Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.70 Type II Utility Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.76 7 Type II Utility Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.84 Type II Utility Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 1.87 Type III Utility Bonds having a remaining term to maturity of one year or less: 1.29 Type III Utility Bonds having a remaining term to maturity of more than one year but not more than two years: 1.38 Type III Utility Bonds having a remaining term to maturity of more than two years but not more than three years: 1.44 Type III Utility Bonds having a remaining term to maturity of more than three years but not more than four years: 1.51 Type III Utility Bonds having a remaining term to maturity of more than four years but not more than five years: 1.57 Type III Utility Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.67 Type III Utility Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.77 8 Type III Utility Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.84 Type III Utility Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.92 Type III Utility Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 1.95 Type IV Utility Bonds having a remaining term to maturity of one year or less: 1.36 Type IV Utility Bonds having a remaining term to maturity of more than one year but not more than two years: 1.44 Type IV Utility Bonds having a remaining term to maturity of more than two years but not more than three years: 1.50 Type IV Utility Bonds having a remaining term to maturity of more than three years but not more than four years: 1.57 Type IV Utility Bonds having a remaining term to maturity of more than four years but not more than five years: 1.63 Type IV Utility Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.74 Type IV Utility Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.83 Type IV Utility Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.92 Type IV Utility Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 2.02 Type IV Utility Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 2.03 Type I Utility Stocks 2.00 9 Discount Discount Factor Factor (Fixed (Adjustable Rate Rate FHLMC or FNMA Certificates Mortgages) Mortgages) - -------------------------- ----------- ----------- FHLMC or FNMA Certificates with interest rates less than 6% but equal to or greater than 5%: 1.71 1.68 FHLMC or FNMA Certificates with interest rates less than 7% but equal to or greater than 6%: 1.66 1.68 FHLMC or FNMA Certificates with interest rates less than 8% but equal to or greater than 7%: 1.61 1.68 FHLMC or FNMA Certificates with interest rates less than 9% but equal to or greater than 8%: 1.57 1.68 FHLMC or FNMA Certificates with interest rates less than 10% but equal to or greater than 9%: 1.52 1.68 FHLMC or FNMA Certificates with interest rates less than 11% but equal to or greater than 10%: 1.49 1.68 FHLMC or FNMA Certificates with interest rates less than 12% but equal to or greater than 11%: 1.45 1.68 FHLMC or FNMA Certificates with interest rates less than 13% but equal to or greater than 12%: 1.43 1.68 FHLMC or FNMA Certificates with interest rates equal to or greater than 13%: 1.40 1.68 Discount Factor -------- GNMA Certificates with interest rates less than 6% but equal to or greater than 5%: 1.63 GNMA Certificates with interest rates less than 7% but equal to or greater than 6%: 1.57 GNMA Certificates with interest rates less than 8% but equal to or greater than 7%: 1.52 GNMA Certificates with interest rates less than 9% but equal to or greater than 8%: 1.48 GNMA Certificates with interest rates less than 10% but equal to or greater than 9%: 1.45 10 GNMA Certificates with interest rates less than 11% but equal to or greater than 10%: 1.43 GNMA Certificates with interest rates less than 12% but equal to or greater than 11%: 1.40 GNMA Certificates with interest rates less than 13% but equal to or greater than 12%: 1.38 GNMA Certificates with interest rates equal to or greater than 13%: 1.36 GNMA Certificates with adjustable interest rates: 1.64 FHLMC Multifamily Securities: (2) FHLMC and FNMA Certificates with variable interest rates: (4) GNMA Graduated Payment Securities (seasoned): (3) Conventional Mortgage Pass-Through Certificates: (5) U.S. Government Obligations having a remaining term to maturity of up to one year: 1.09 U.S. Government Obligations having a remaining term to maturity of more than one year but not more than two years: 1.1__ U.S. Government Obligations having a remaining term to maturity of more than two years but not more than three years: 1.20 U.S. Government Obligations having a remaining term to maturity of more than three years but not more than four years: 1.27 U.S. Government Obligations having a remaining term to maturity of more than four years but not more than five years: 1.32 U.S. Government Obligations having a remaining term to maturity of more than five years but not more than seven years: 1.41 U.S. Government Obligations having a remaining term to maturity of more than seven years but not more than 10 years: 1.49 U.S. Government Obligations having a remaining term to maturity of more than 10 years but not more than 15 years: 1.56 11 U.S. Government Obligations having a remaining term to maturity of more than 15 years but not more than 20 years: 1.64 U.S. Government Obligations having a remaining term to maturity of more than 20 years but not more than 30 years: 1.65 Cash and Short Term Money Market Instruments: 1.00 - ------------------ (1) In the case of Eligible Portfolio Property rated by S&P but not by Moody's, the Discount Factor Supplied by Moody's shall be the Discount Factor Supplied by Moody's applicable to Eligible Portfolio Property with a corresponding maturity but of the next lower rating category (e.g., a bond rated AAA by S&P but not rated by Moody's shall have a Discount Factor Supplied by Moody's equal to a bond of comparable maturity rated Aa by Moody's). (2) The applicable Discount Factor set forth under "FHLMC or FNMA Certificates" above. (3) The same Discount Factor shall apply in the case of GNMA Graduated Payment Securities as applies to GNMA Certificates with fixed interest rates determined at the point the certificates become seasoned. (4) The Discount Factor determined therefor in writing by Moody's. (5) The Discount Factor determined therefor in writing by Moody's. In the event such asset is not rated Aa or better by Moody's, such asset shall have a Discounted Value of zero. Notwithstanding the foregoing, for so long as is required by Moody's to maintain its then-current credit rating of the RP, the Discount Factor Supplied by Moody's with respect to Eligible Portfolio Property sold pursuant to a reverse repurchase agreement with a remaining term to maturity of more than 25 days on the date of determination of the Discounted Value of such Eligible Portfolio Property shall be the then-current discount factor provided by Moody's to the Corporation in writing for the purpose of such determination. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial Discount Factor Supplied by Moody's listed above applied to calculate the Discounted Value of any item of Eligible Portfolio Property or may specify from time to time a Discount Factor Supplied by Moody's for any asset constituting Eligible Portfolio Property if the Board of Directors determines and Moody's advises the Corporation in writing that such adjustment, modification, alteration, change or specification will not adversely affect Moody's then-current rating of the RP. 12 "Discounted Value," with respect to any asset held by the Corporation as of any date, means the quotient of the Market Value of such asset divided by the applicable Discount Factor Supplied by S&P (provided that, in the event the Corporation has written a call option on such asset, the Discounted Value of such asset shall be zero) or the quotient of the Market Value of such asset divided by the applicable Discount Factor Supplied by Moody's (provided that, in the event the Corporation has written a call option on such asset, the Discounted Value of such asset shall mean the quotient of the lower of the Market Value of such asset and the exercise price of such call option divided by the applicable Discount Factor Supplied by Moody's), as the case may be, provided that in no event shall the Discounted Value of any asset constituting Eligible Portfolio Property as of any date exceed the unpaid principal balance or face amount of such asset as of the date. With respect to the calculation of the Discounted Value of any Utility Bond included in the Corporation's Eligible Portfolio Property, such calculation shall be made using the criteria set forth in the definitions of Utility Bonds and Market Value. With respect to the calculation of the Discounted Value of any Utility Stock included in the Corporation's Eligible Portfolio Property, such calculation shall be made using the criteria set forth in the definitions of Utility Stocks and Market Value. With respect to the calculation of the aggregate Discounted Value of the Corporation's Eligible Portfolio Property for comparison with the RP Basic Maintenance Amount, such aggregate Discounted Value shall be the aggregate Discounted Value calculated using the Discount Factors Supplied by S&P or the aggregate Discounted Value calculated using the Discount Factors Supplied by Moody's whichever aggregate Discounted Value is lower; provided that, in calculating for such purpose the aggregate Discounted Value of the Corporation's Eligible Portfolio Property using the applicable Discount Factor Supplied by Moody's, the amount of Utility Stocks issued by public utility companies with nuclear facilities under construction (as determined by the Adviser) which may be included in such calculation shall be limited to five percent of the Market Value of the Corporation's Eligible Portfolio Property. Notwithstanding any other provision of these Articles Supplementary, any Utility Bond that has a remaining term to maturity of more than 30 years, and any asset as to which there is no Discount Factor Supplied by Moody's or Discount Factor Supplied by S&P either in these Articles Supplementary or in an amendment or supplement hereof, shall have a Discounted Value for purposes of determining the aggregate Discounted Value of the Corporation's Eligible Portfolio Property calculated using the Discount Factor Supplied by Moody's or S&P, as the case may be, of zero. "Dividend Coverage Amount," as of any Valuation Date, means (a) the aggregate amount of cash dividends that will accumulate on shares of RP to (but not including) the respective Dividend Payment Dates therefor that follow such Valuation Date less (b) the combined value of any Deposit Securities irrevocably deposited by the Corporation for the payment of cash dividends on the RP. "Dividend Coverage Assets," as of any date of determination, means Deposit Securities with maturity dates not later than the day preceding the next Dividend Payment Dates for all shared of RP; provided that, if the applicable date of determination is a Dividend Payment Date, any Deposit Securities to be applied to the dividends payable on the RP on such date shall not be included in the Dividend Coverage Assets. 13 "Dividend Payment Date" means (i) with respect to any Optional Dividend Period or Special Dividend Period of more than 91 but fewer than 365 days, the 92nd day thereof, the 183rd day thereof, if any, the 274th day thereof, if any, and the day after the last day thereof; (ii) with respect to any Optional Dividend Period of 365 or more days or Special Dividend Period of 365 or more days, the third Wednesday of each January, April, July and October therein and the day after the last day thereof; and (iii) with respect to any other Dividend Period, the day after the last day thereof; provided that, if any such date shall not be a Business Day, the Dividend Payment Date shall be the Business Day next succeeding such day. "Dividend Period" means, with respect to any share of RP, the Initial Dividend Period for such share and thereafter a period which shall commence on each (but not the final) Dividend Payment Date for such share (which, except during a Non-Payment Period, shall be a Settlement Date for such share). Each such subsequent Dividend Period for such share will comprise, beginning with and including the day upon which it commences, 7 consecutive days in the case of a 7-day Dividend Period; 49 consecutive days (or such other number of consecutive days as are specified by the Board of Directors in the event of a change in law altering the Minimum Holding Period, as provided herein) in the case of a 49-day Dividend Period; or such number of consecutive days as shall be designated by the Board of Directors in the case of any Optional Dividend Period or Special Dividend Period at the time such Optional Dividend Period is made available or the Board of Directors designates a Special Dividend Period, as the case may be. Notwithstanding the foregoing, any adjustment of the remarketing schedule by the Remarketing Agent which includes an adjustment of a Settlement Date shall lengthen or shorten the related Dividend Periods by causing them always to end on and include the day before the Settlement Date as so adjusted. "Dividend Reset Date" means any date on which the Remarketing Agent (i) determines the Applicable Dividend Rates for the ensuing Dividend Periods, (ii) notifies holders, purchasers and tendering holders of shares of RP by telephone, telex or otherwise of the results of the Remarketing and (iii) announces such Applicable Dividend Rates. "Dividends-Received Deduction" means the deduction allowed to corporate holders of certain preferred stock with respect to dividends received on such stock by Section 243(a)(1) of the Code, or any successor thereto. "Eligible Portfolio Property" shall include Utility Bonds, Utility Stocks, cash, U.S. Government Obligations, Short Term Money Market Instruments, FNMA Certificates, FHLMC Certificates, FHLMC Multifamily Securities, GNMA Certificates, GNMA Multifamily Securities, GNMA Graduated Payment Securities, Conventional Mortgage Pass-Through Certificates and any other asset held by the corporation that has been assigned a Discount Factor by the Rating Agencies and is included within the definition of Eligible Portfolio Property set forth herein or pursuant to an amendment or supplement hereto. "FHLMC" means the Federal Home Loan Mortgage Corporation created by Title III of the Emergency Home Finance Act of 1970, and includes any successor thereto. 14 "FHLMC Certificate" means a mortgage participation certificate in physical or book-entry form, the timely payment of interest on and the ultimate collection of principal of which is guaranteed by FHLMC, and which evidences a proportional undivided interest in, or participation interest in, specified pools of fixed-, variable- or adjustable-rate, level payment fully amortizing mortgage loans secured by first-priority mortgages on one- to four-family residences. "FHLMC Multifamily Security" means a "Plan B Multifamily Security" in physical or book-entry form, the timely payment of interest on and the ultimate collection of principal of which is guaranteed by FHLMC, and which evidences a proportional undivided interest in, or participation interest in, specified pools of fixed-, variable- or adjustable-rate level payment fully amortizing mortgage loans secured by first-priority mortgages on multi-family residences, the inclusion of which in the Eligible Portfolio Property will not, in and of itself, impair or cause the RP to fail to retain the ratings assigned to the RP by the Rating Agencies, as evidenced by letters to such effect delivered to the Corporation by the Rating Agencies. "FNMA" means the Federal National Mortgage Association, a United States Government-sponsored private corporation established pursuant to Title VIII of the Housing and Urban Development Act of 1968, and includes any successor thereto. "FNMA Certificate" means a mortgage pass-through certificate in physical or book-entry form, the full and timely payment of principal of and interest on which is guaranteed by FNMA, and which evidences a proportional undivided interest in specified pools of fixed-, variable- or adjustable-rate, level payment fully amortizing mortgage loans secured by first-priority mortgages on single-family and multi-family residences. "49-day Dividend Period" means (i) a Dividend Period designated as such by a Beneficial Owner of a share of RP or (ii) any Dividend Period commencing after the first day of, and during, a Non-Payment Period, and, in all such cases, generally containing 49 days. "GNMA" means the Government National Mortgage Association, and includes any successor thereto. "GNMA Certificate" means a fully modified pass-through certificate in physical or book-entry form, the full and timely payment of principal of and interest on which is guaranteed by GNMA and which evidences a proportional undivided interest in specified pools of fixed-, variable- or adjustable-rate, level payment fully amortizing mortgage loans secured by first-priority mortgages on single-family and multi-family residences. "GNMA Graduated Payment Security" means a fully modified pass-through certificate in physical or book-entry form, the full and timely payment of principal of and interest on which is guaranteed by GNMA, which obligation is backed by the full faith and credit of the United States, and which evidences a proportional undivided interest in specified pools of graduated payment mortgage loans with payments that increase annually at a predetermined rate for up to the first five or ten years of the mortgage loan and that are secured by first-priority mortgages on one- to four-unit residences. 15 "Holder" means, with respect to any share of RP, unless the context otherwise requires, the person whose name appears on the stock transfer books of the Corporation as the registered holder of such share. "Independent Accountant" means a nationally recognized accountant, or firm of accountants, that is with respect to the Corporation an independent public accountant or firm of independent public accountants under the Securities Act of 1933, as amended. "Initial Dividend Period" means, with respect to any share of RP, a 49-day Dividend Period commencing on and including the Date of Original Issue of such share and ending on the day prior to the Initial Dividend Payment Date. "Interest Equivalent" means a yield on a 360-day basis of a discount basis security which is equal to the yield on an equivalent interest-bearing security. "Market Value" means, initially, the amount determined with respect to specific assets of the Corporation in the manner set forth below: (a) as to any Utility Bond, (i) the product of (A) the unpaid principal balance of such Utility Bond as of the Reporting Date, and (B) (1) if the Utility Bond is traded on a national securities exchange or quoted on the NASDAQ System, the last sales price reported on the date of valuation or (2) if there was no reported sales price on the date of valuation or if the Utility Bond is not traded on a national securities exchange or quoted on the NASDAQ System, the lower of two bid prices for such Utility Bond provided by two nationally recognized securities dealers with a minimum capitalization of $25 million or by one such securities dealer and any other source (provided that the utilization of such source would not adversely affect the ratings of the RP) to the custodian of the Corporation's assets, at least one of which shall be provided in writing or by telecopy, telex, other electronic transcription, computer obtained quotation reducible to written form or similar means, and in turn provided to the Corporation by any such means by such custodian (provided that evidence of the bid quotes furnished by such custodian shall be provided to the Paying Agent and the Remarketing Agent by the Corporation with the related RP Basic Maintenance Report), plus (ii) accrued interest on such Utility Bond, or, if two bid prices cannot be obtained, such item of Eligible Portfolio Property shall have a Market Value of zero; (b) as to any Utility Stock, (i) if the Utility Stock is traded on a national securities exchange or quoted on the NASDAQ System, the last sales price reported on the date of valuation or (ii) if there was no reported sales price on the date of valuation, the lower of two bid prices for such Utility Stock provided by two nationally recognized securities dealers with a minimum capitalization of $25 million or by one such securities dealer and any other source (provided that the utilization of such source would not adversely affect the then-current ratings of the RP) to the custodian of the Corporation's assets, at least one of which shall be provided in writing or by telecopy, telex, other electronic transcription, computer obtained quotation reducible to written form or similar 16 means, and in turn provided to the Corporation by any such means by such custodian (provided that evidence of the bid quotes furnished by such custodian shall be provided to the Remarketing Agent by the Corporation with the related RP Basic Maintenance Report), or, if two bid prices cannot be obtained, such item of Eligible Portfolio Property shall have a Market Value of zero; (c) the product of (i) as to GNMA Certificates, GNMA Graduated Payment Securities, GNMA Multifamily Securities, FNMA Certificates, FHLMC Certificates and FHLMC Multifamily Securities, the aggregate unpaid principal amount of the mortgage loans evidenced by each such certificate or security, as the case may be, which may include amounts shown on the most recent report related to the certificate or security received by the Corporation prior to the Reporting Date, and as to U.S. Government Obligations and Short Term Money Market Instruments (other than demand deposits, federal funds, bankers' acceptances and next Business Day's repurchase agreements), the face amount or aggregate principal amount of such U.S. Government Obligations or Short Term Money Market Instruments, as the case may be, and (ii) the lower of the bid prices for the same kind of certificates, securities or instruments, as the case may be, having, as nearly as practicable, comparable interest rates and maturities provided by two nationally recognized securities dealers having minimum capitalization of $25 million or by one such securities dealer and any other source (provided that the utilization of such source would not adversely affect the then-current ratings of the RP) to the custodian of the Corporation's assets, at least one of which shall be provided in writing or by telecopy, telex, other electronic transcription, computer obtained quotation reducible to written form or similar means, and in turn provided to the Corporation by any such means by such custodian (provided that evidence of the bid quotes furnished by such custodian shall be delivered to the Remarketing Agent with the related RP Basic Maintenance Report), or, if two bid prices cannot be obtained, such item of Eligible Portfolio Property will have a Market Value of zero; (d) as to Conventional Mortgage Pass-Through Certificates, the product of (i) the outstanding aggregate principal balance of the mortgage loans underlying such certificates as determined by the Corporation by any method which the Corporation believes reliable, which may include amounts based on verbal reports of the servicers of the related mortgage loans to the Corporation, as of the applicable Reporting Date and (ii) the dollar value of the lower of two bid prices per dollar of outstanding principal amount as of such applicable Reporting Date for such certificates, provided by two nationally recognized securities dealers having minimum capitalization of $25 million or by one such securities dealer and any other source (provided that the utilization of such source would not adversely affect the then-current ratings of the RP) to the custodian of the Corporation's assets, at least one of which shall be provided in writing or by telecopy, telex, other electronic transcription, computer obtained quotation reducible to written form or similar means, and in turn provided to the Corporation by any such means by such custodian (provided that evidence of the bid quotes furnished by such custodian shall be delivered to the Remarketing Agent with the related RP Basic Maintenance Report), or, if two bid 17 prices cannot be obtained, such item of Eligible Portfolio Property shall have a Market Value of zero; and (e) as to cash, demand deposits, federal funds, bankers' acceptances and next Business Day's repurchase agreements included in Short Term Money Market Instruments, the face value thereof. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial method of calculation of the Market Value of an asset constituting Eligible Portfolio Property described above and the Board of Directors may specify from time to time the method for calculating the Market Value of any asset identified as Eligible Portfolio Property if the Board of Directors determines and the Rating Agencies advise the Corporation in writing that such adjustment, modification, alteration, change or specification will not adversely affect their then-current ratings of the RP. "Master Purchaser's Letter" means a letter substantially in the form of Appendix B to the Corporation's prospectus relating to the shares of RP, or such other form as may be approved by the Remarketing Agent, which is required to be executed by each purchaser of shares of RP. "Maximum Dividend Rate" for any 7-day Dividend Period, 49-day Dividend Period or Optional Dividend Period of 98 or fewer days or Special Dividend Period of 98 or fewer days at any Dividend Reset Date shall apply to a cash dividend, and be the Applicable Percentage of the applicable "AA" Composite Commercial Paper Rate. The Applicable Percentage shall vary with the lower of the credit rating or ratings assigned to the shares of RP by Moody's and S&P (or if Moody's or S&P or both shall not make such rating available, the equivalent of either or both of such ratings by a Substitute Rating Agency or two Substitute Rating Agencies or, in the event that only one such rating shall be available, such rating) on each Dividend Reset Date as follows: Credit Ratings Applicable Percentage ---------------------------------------- --------------------- Moody's S&P ------- --- "aa3" or higher AA- or higher 110% "a3" to "a1" A- to A+ 125% "baa3" to "baa1" BBB- to BBB+ 150% Below "baa3" Below BBB- 200% The applicable Maximum Dividend Rate or Rates for any Optional Dividend Period of more than 98 days or Special Dividend Period of more than 98 days at any Dividend Reset Date shall be a fixed or variable rate or rates determined from time to time by formula or other means as designated by the Board of Directors in respect of such Optional Dividend Period or Special Dividend Period. The Remarketing Agent shall round each applicable Maximum Dividend Rate to the nearest one-thousandth (0.001) of one percent per annum, with any such number ending in five ten-thousandths (0.0005) of one 18 percent being rounded upwards to the nearest one-thousandth (0.001) of one percent. The Remarketing Agent shall not round the applicable "AA" Composite Commercial Paper Rate as part of their calculation of any Maximum Dividend Rate. "Minimum Holding Period" means 46 days or such other minimum holding period required for corporate taxpayers to be entitled to the Dividends-Received Deduction as provided in Section 246(c) of the Code or any successor thereto. "Minimum Liquidity Level is Met" means, as of any date of determination, that the aggregate Market Value of the Dividend Coverage Assets equals or exceeds the Dividend Coverage Amount. "Moody's" means Moody's Investors Service, Inc., and includes any successor thereto. "1940 Act" means the Investment Company Act of 1940, as amended from time to time. "NASDAQ System" has the meaning set forth under "Type I Utility Stocks" below. "1940 Act RP Asset Coverage" means asset coverage, as defined in section 18(h) of the 1940 Act, of at least 200% of the aggregate liquidation preference with respect to all outstanding senior securities of the Corporation which are stock, including all outstanding shares of RP and Other RP (or such other asset coverage as may be specified in or under the 1940 Act as the minimum asset coverage for senior securities which are stock of a closed-end investment company as a condition of paying dividends on its common stock). "1940 Act Cure Date," with respect to the failure by the Corporation to maintain the 1940 Act RP Asset Coverage (as required by paragraph 7 of this Part I) as of the last day of each month, means the last Business Day of the following such month. "Non-Call Period" has the meaning set forth under "Specific Redemption Provisions" below. "Non-Payment Period" means any period beginning on and including the day on which the Corporation shall fail to (i) declare, prior to 12:00 noon, New York City time, on the second Business Day preceding any Dividend Payment Date for any shares of RP, for payment on such Dividend Payment Date to the Beneficial Owners of such shares of RP 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 such shares of RP payable on such Dividend Payment Date or (ii) deposit, irrevocably in trust, in same-day funds, with the Paying Agent by 12:00 noon, New York City time, (A) on any Dividend Payment Date for any shares of RP the full amount of any declared cash dividend on such shares (whether or not earned) payable on such Dividend Payment Date or (B) on any redemption date for any shares of RP, the redemption price of such shares of $100,000 per share plus the full amount of any cash dividends thereon (whether or not earned or declared) accumulated but unpaid to such redemption date after a Notice of Redemption with respect to such shares of RP has been given pursuant to paragraph 4(e) 19 of Part I hereof, 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 Beneficial Owners in same-day funds; provided that a Non-Payment Period shall not end during the first seven days thereof unless the Corporation shall have given at least three days' written notice of the Paying Agent, the Remarketing Agent and the Securities Depository and thereafter shall not end unless the Corporation shall have given at least fourteen days' written notice to the Paying Agent, the Remarketing Agent, the Securities Depository and all Beneficial Owners. "Non-Payment Period Rate" means, initially, 200% of the applicable "AA" Composite Commercial Paper Rate, provided that the Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial Non-Payment Period Rate if the Board of Directors determines and the Rating Agencies advise the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect their then-current ratings on the RP. "Notice of Redemption" means any notice with respect to the redemption of shares of RP pursuant to paragraph 4 of this Part I. "Optional Dividend Period" means a Dividend Period established by the Board of Directors pursuant to paragraph 3(1) of this Part I. "Other RP" means the remarketed preferred stock of the Corporation, other than the RP. "Paying Agent" means Bankers Trust Company, or any successor company or entity, which has entered into a Paying Agent Agreement with the Corporation to act for the Corporation, among other things, as the transfer agent, registrar, dividend and redemption price disbursing agent, settlement agent and agent for certain notifications in connection with the shares of RP in accordance with such agreement. "Paying Agent Agreement" means an agreement to be entered into between the Corporation and the Paying Agent. "Permitted Tax Liens" means liens for general and special taxes and assessments on the property in question. "Preferred Stock" means the preferred stock of the Corporation, and includes RP and Other RP. "Premium Call Period" has the meaning set forth under "Specific Redemption Provisions" below. "Projected Dividend Amount" for the RP and the Other RP shall mean, initially, if the date of determination is a Valuation Date, the amount of cash dividends, based on the number of shares of RP and the Other RP outstanding on such Valuation Date, projected to accumulate on such shares from such Valuation Date until the 70th day after such Valuation Date, at the following dividend rates: (a) If the Valuation Date is the Date of Original Issue or a Dividend Payment Date (which terms, for purposes of this definition, 20 shall refer to the equivalent dates in the case of Other RP), (i) for the Dividend Period beginning on the Date of Original Issue or such Dividend Payment Date and ending on (but not including) the first following Dividend Payment Date, the Applicable Dividend Rate (which term, for the purposes of this definition, shall refer to the equivalent rate in the case of Other RP) in effect on such Valuation Date, and (ii) for the period beginning on (and including) the first following Dividend Payment Date and ending on (and including) the 70th day following such Valuation Date, the product of 2.32 and (x) the Maximum Dividend Rate (which term, for the purposes of this definition, shall refer to the equivalent rate in the case of Other RP) on the Date of Original Issue (in the case of the Date of Original Issue) or (y) the Maximum Dividend Rate as of the last occurring Settlement Date or, in the case of Other RP, the equivalent date (in the case of any Dividend Payment Date); and (b) If such Valuation Date is not the Date of Original Issue or a Dividend Payment Date, (i) for the period beginning on such Valuation Date and ending on (but not including) the first following Dividend Payment Date, the Applicable Dividend Rate in effect on such Valuation Date, and (ii) for the period beginning on (and including) the first following Dividend Payment Date and ending on (but not including) the sooner of the second following Dividend Payment Date or the 71st day following such Valuation Date, the product of 2.32 and (x) the Maximum Dividend Rate on the Date of Original Issue (in the case of a Valuation Date occurring prior to the first Settlement Date) or (y) the Maximum Dividend Rate on the last occurring Settlement Date or, in the case of Other RP, the equivalent date (in the case of any other Valuation Date) and (iii) for the period, if any, beginning on (and including) the second following Dividend Payment Date and ending on (but not including) the 71st day following such Valuation Date, the product of 3.20 and the rate specified in clause (x) or (y) above. If the date of determination is not a Valuation Date, then the Projected Dividend Amount on such date of determination shall equal the Projected Dividend Amount therefor on the immediately preceding Valuation Date, adjusted to reflect any decrease in the number of shares of RP and Other RP outstanding. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial bases for the calculation of the Projected Dividend Amount if the Board or Directors determines and the Rating Agencies shall have advised the Corporation in writing that such adjustment, modification, alteration or change would not adversely affect their then-current ratings of the RP. "Quarterly Valuation Date" means, for so long as any shares of RP are outstanding, the last Business Day of March, June, September and December of each year, commencing December 31, 1988, or, if such day is not a Valuation Date, the next preceding Valuation Date. "Rating Agencies" means S&P and Moody's for so long as S&P and Moody's issue ratings for the RP, and, at such time as S&P and/or Moody's no longer issues a rating for the RP, the Substitute Rating Agency or Substitute Rating Agencies, as the case may be. "Remarketing" means each periodic operation of the process for remarketing shares of RP as described in Part II hereof. 21 "Remarketing Agent" means MLPF&S and any additional or successor companies or entities which have entered into an agreement with the Corporation to carry out the remarketing procedures for the purpose of determining the Applicable Dividend Rates. "Reporting Date," with respect to any price referred to in the definition of the Market Value of an item of Eligible Portfolio Property, shall mean the date as of which the Market Value of such item of Eligible Portfolio Property is to be determined or, if no such price is available as provided above under "Market Value" for such date, the next closest prior date as of which such price is so available; provided that, no such price shall be deemed to be available as of a Reporting Date if such price is not available as of a date within five Business Days next preceding the date as of which the determination of such Market Value is to be made. "Required Documentation," with respect to a mortgage loan underlying a Convention Mortgage Pass-Through Certificate means: (a) the mortgage note or other evidence of indebtedness secured by the mortgage endorsed without recourse in blank or to the trustee or other custodian and accompanied by an assignment thereof; (b) the mortgage, deed of trust, deed to secure debt or similar security instruments encumbering real property or related documentation, with evidence of recording or filing thereof, in each case accompanied by assignments thereof, executed in blank or to the trustee or other custodian, in recordable form as may be appropriate in the jurisdiction where the property is located and evidence that such assignment has been recorded in the name of the trustee or other custodian, and such trustee or other custodian receives an opinion of counsel (containing only such exceptions as may be permissible under the indenture or other agreement pursuant to which the mortgage loan is pledged to the trustee in connection with the related Conventional Mortgage Pass-Through Certificate) to the effect that, notwithstanding that the assignment of the mortgage has not been recorded, the actions taken with respect to the mortgage loan are sufficient to permit the trustee or other custodian to avail itself of all protection available under applicable law against the claims of any present or future creditors of the issuer, and are sufficient to prevent any other sale, transfer, assignment, pledge or hypothecation of the mortgage and the related mortgage note by the issuer from being enforceable, or will create a valid assignment of and a valid and perfected lien upon and security interest in a mortgage and related mortgage note, which lien and security interest is (except for the trustee's lien securing certain obligations of the issuer to the trustee as provided in the indenture pursuant to which the mortgage loan is pledged to the trustee in connection with the related Conventional Mortgage Pass-Through Certificate) prior in right to all other security interests therein created or perfected under the Uniform Commercial Code (as in effect in the jurisdiction where the property is located); (c) in the case of mortgage notes covered by private mortgage insurance, evidence that such mortgage notes are so insured; and 22 (d) a copy of the title insurance policy or an opinion or certificate of counsel stating the mortgage constitutes a first lien on the premises described in such mortgage (which opinion or certificate may be subject to exceptions for Permitted Tax Liens and other matters to which like properties are commonly subject which neither individually nor in the aggregate materially interfere with the benefits of the security interest intended to be provided by such mortgage and standard exceptions and exclusions from mortgage title insurance policies). "Right" has the meaning set forth in paragraph 3(n) of this Part I. "RP" means the Remarketed Preferred Stock, Series I of the Corporation to be issued pursuant hereto. "RP Basic Maintenance Amount" means, initially, as of any date, the sum of (i) the aggregate liquidation preference of the shares of RP outstanding and shares of Other RP outstanding, (ii) to the extent not covered in (i) above, the aggregate amount of accumulated but unpaid cash dividends with respect to the shares of RP outstanding and shares of Other RP outstanding, (iii) any Rights due and payable and any equivalent rights to receive cash with respect to Other RP which are due and payable, (iv) the principal amount of the Corporation's loan from the Aid Association For Lutherans then outstanding, (v) an amount equal to accrued but unpaid interest on the principal amount of the Corporation's loan from the Aid Association For Lutherans then outstanding, (vi) the aggregate principal amount of, and an amount equal to accrued but unpaid interest on, any other then outstanding indebtedness of the Corporation for money borrowed, (vii) the aggregate Projected Dividend Amount, (viii) redemption premium, if any, and (ix) the greater of $200,000 or an amount equal to projected expenses of the Corporation for the next three month period. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial elements comprising the RP Basic Maintenance Amount if the Board of Directors determines and the Rating Agencies advise the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect their then-current ratings on the RP. "RP Basic Maintenance Cure Date," with respect to the failure by the Corporation to maintain the RP Basic Maintenance Amount (as required by paragraph 8 of this Part I) as of each Valuation Date, means the eighth Business Day following such Valuation Date. "RP Basic Maintenance Report" means a report signed by the President, the Treasurer, any Senior Vice President or any Vice President of the Corporation which sets forth, as of the related Valuation Date, the assets of the Corporation, the Market Value and the Discounted Value thereof (seriatum and in the aggregate), and the RP Basic Maintenance Amount. "S&P" means Standard & Poor's Corporation, and includes any successor thereto. "Securities Depository" means The Depository Trust Company, a securities depository, or any successor company or other entity selected by the Corporation for the shares of RP that agrees to follow the procedures required to be followed by such securities depository in connection with the shares of RP. 23 "Service" means the Internal Revenue Service. "Settlement Date" means any date on which (i) a new Dividend Period begins, and (ii) shares of RP which have been tendered and sold in a Remarketing are delivered through the Securities Depository. "7-day Dividend Period" means a Dividend Period designated as such by a Beneficial Owner and generally containing seven days. "Short Term Money Market Instruments" means the following kinds of instruments, if on the date of purchase or other acquisition by the Corporation of any such instrument the remaining term to maturity thereof is not more than 30 days: (a) demand deposits in, certificates of deposit of, bankers' acceptances issued by, or federal funds sold to, any depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation (or any successor thereto) or the Federal Savings and Loan Insurance Corporation (or any successor thereto), provided that, at the time of the Corporation's investment therein, the commercial paper or other unsecured short-term debt obligations of such depository institution are rated at least A-1+ by S&P and Prime-1 by Moody's; (b) repurchase obligations with respect to a U.S. Government Obligation, FNMA Certificate, FHLMC Certificate or GNMA Certificate entered into with a depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation (or any successor thereto) or the Federal Savings and Loan Insurance Corporation (or any successor thereto) and the commercial paper or other unsecured short-term debt obligations of which are rated at least A-1+ by S&P and Prime-1 by Moody's, which must be repurchased within one Business Day from the date such repurchase obligation was entered into; and (c) commercial paper rated at the time of the Corporation's investment therein at least A-1+ by S&P and Prime-1 by Moody's. "Special Dividend Period" means a Dividend Period established by the Board of Directors pursuant to paragraph 3(m) of this Part I. "Specific Redemption Provisions" means, with respect to any Optional Dividend Period of 365 or more days or Special Dividend Period of 365 or more days, either, or any combination of, (i) a period (a "Non-Call Period") determined by the Corporation, after consultation with the Remarketing Agent, during which the shares subject to such Dividend Period shall not be subject to redemption at the option of the Corporation and (ii) a period (a "Premium Call Period"), consisting of a number of whole years and determined by the Board of Directors, after consultation with the Remarketing Agent, during each year of which the shares subject to such Dividend Period shall be redeemable at the Corporation's option at a price per share equal to $100,000 plus accumulated but unpaid dividends plus a premium expressed as a percentage of $100,000, as determined by the Board or Directors after consultation with the Remarketing Agent. 24 "Substitute Commercial Paper Dealers" means such Substitute Commercial Paper Dealer or Dealers as the Corporation may from time to time appoint or, in lieu of any thereof, their respective affiliates or successors. "Substitute Rating Agency" and "Substitute Rating Agencies" mean a nationally recognized statistical rating organization or two nationally recognized statistical organizations, respectively, selected by the Corporation to act as the substitute rating agency or substitute rating agencies, as the case may be, to determine the credit ratings of the shares of RP. "Tender and Dividend Reset" means the process pursuant to which shares of RP may be tendered or deemed tendered in a Remarketing or held and become subject to the new Applicable Dividend Rate or Rates determined by the Remarketing Agent in such Remarketing. "Tender Date" means any date on which (i) a holder of shares of RP must provide to the Remarketing Agent irrevocable telephonic notice of intent to tender shares of RP in a Remarketing or to change Dividend Periods for shares, and (ii) such Remarketing formally commences. "Type A Utility Bonds" as of any date means Utility Bonds rated A- or higher by S&P. "Type B Utility Bonds" as of any date means (a) Utility Bonds held by the Corporation at such date and continuously since at least September 30, 1988 which are rated from BBB- to BBB+ by S&P or (b) Utility Bonds rated BBB- to BBB+ by S&P provided that the Utility Bonds rated BBB- shall be limited to twenty-five percent of the Market Value of the Corporation's Eligible Portfolio Property. "Type I Utility Bonds" as of any date means Utility Bonds rated Aaa by Moody's. "Type II Utility Bonds" as of any date means Utility Bonds rated Aa3 to Aa1 by Moody's. "Type III Utility Bonds" as of any date means Utility Bonds rated A3 to A1 by Moody's. "Type IV Utility Bonds" as of any date means Utility Bonds rated Baa3 to Baa1 by Moody's. "Type A Utility Stocks" as of any date means Utility Stocks which are traded on the New York Stock Exchange, Inc. or the American Stock Exchange, Inc., are currently paying cash dividends, and have been issued by public utility companies having debt obligations outstanding with implied senior debt ratings from S&P of A- or higher. "Type B Utility Stocks" as of any date means (a) Utility Stocks which are traded on the New York Stock Exchange, Inc. or the American Stock Exchange, Inc., are currently paying cash dividends, are held by the Corporation at such date and continuously since at least September 30, 1998 and have been issued by public utility companies having debt obligations outstanding with implied senior debt ratings from S&P of BBB- to BBB+ or 25 (b) Utility Stocks which are traded on the New York Stock Exchange, Inc. or the American Stock Exchange, Inc., are currently paying cash dividends and have been issued by public utility companies having debt obligations outstanding with implied senior debt ratings from S&P from BBB- to BBB+ provided that Utility Stocks issued by public utility companies having debt obligations outstanding with implied senior debt ratings from S&P of BBB- shall be limited to twenty-five percent of the Market Value of the Corporation's Eligible Portfolio Property. "Type I Utility Stocks" as of any date means Utility Stocks which are traded on the New York Stock Exchange, Inc. or the American Stock Exchange, Inc. or are quoted on the National Association of Securities Dealers Automated Quotation ("NASDAQ") System and have been issued by public utility companies having debt obligations outstanding with senior or subordinated debt ratings from Moody's of Baa3 or higher. "U.S. Government Obligations" means direct obligations of the United States, provided that such direct obligations are entitled to the full faith and credit of the United States and that any such obligations, other than United States Treasury Bills, provide for the periodic payment of interest and the full payment of principal at maturity or call for redemption. "Utility Bonds" means, initially, corporate debt obligations issued by state regulated public utility companies rated from BBB- to AAA by S&P and from Baa3 to Aaa by Moody's, which corporate debt obligations (a) provide for the periodic payment of interest thereon in cash in U.S. dollars, (b) do not provide for conversion or exchange into equity capital at any time over their respective lives, (c) have been registered under the Securities Act of 1933, as amended, and (d) have not had notice given in respect thereof that any such corporate debt obligations are the subject of an offer by the issuer thereof of exchange or tender for cash, securities or any other type of consideration. In addition, so long as the shares of RP are rated by S&P or Moody's, no corporate debt obligation held by the Corporation shall be deemed a Utility Bond (i) if it fails to meet the criteria in column (1) below or (ii) to the extent (but only to the proportionate extent) the acquisition or holding thereof by the Corporation causes the Corporation to exceed any applicable limitation set forth in column (2) below in the event the shares of RP are rated by S&P or column (2), (3) or (4) below in the event the shares to RP are rated by Moody's as of any relevant date of determination (provided that, in the event that the Corporation shall exceed any such limitation, the Corporation shall designate, in its sole discretion, the particular Utility Bond(s) and/or portions thereof which shall be deemed to have caused the Corporation to exceed such limitation): 26 Column (1) Column (2) Column (3) Column (4) Maximum Percent Maximum of Market Percent of Value Market Value of Corpora- Maximum of Corpora- tion's Assets Percent tion's Assets Including of Market Including Eligible Eligible S&P and Value of Portfolio Portfolio Moody's Eligible Property Property Rating of Minimum Portfolio Issued by Issued Utility Bonds Original Property Issuers in any by Issuers or Debt Issue Size of Issued by any One Industry Regulated by Obligations(1) Each Issue(2) One Issuer(3) Category(4) any One [Strategy] - -------------- ------------- ------------- ------------- ------------------ ($ in millions) S&P Moody's --- ------- AAA, Aaa...... $100 10.0% 100.0% 100.0% 100.0% AA1, Aa....... 100 10.0 20.0 60.0 20.0 Aa, A......... 100 10.0 10.0 50.0 10.0 BBB, Baa...... 100 5.0 4.0 50.0 2.0 - ------------------ (1) Rating designations include (+) or (-) modifiers to the S&P rating where appropriate. Rating designations include modifiers of 1 to 3 to the Moody's rating where appropriate. (2) This restriction is applicable only to Utility Bonds. (3) The referenced S&P percentages represent maximum percentages only for the related S&P rating category. The referenced Moody's percentages represent maximum cumulative totals only for the related Moody's rating category and each lower Moody's rating category. (4) The referenced percentages represent maximum cumulative totals only for the related Moody's rating category and each lower Moody's rating category. There are two Industry categories -- telecommunications and all other utilities. (5) The referenced percentages represent maximum cumulative totals only for the related Moody's rating category and each lower Moody's rating category. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the assets (and/or the characteristics thereof) included initially within the definition of Utility Bonds for purposes of 27 determining compliance with the RP Basic Maintenance Amount if the Board of Directors determines and the Rating Agencies advise the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect their then-current ratings of the RP. "Utility Stocks" means, initially, common stocks issued by state regulated public utility companies having debt obligations outstanding with senior debt ratings of BBB to AAA from S&P or subordinated debt ratings of BBB- to AAA from S&P and senior or subordinated debt ratings of Baa3 to Aaa from Moody's, which debt obligations have been registered under the Securities Act of 1933, as amended ("Debt Obligations"). In addition, so long as the shares of RP are rated by S&P or Moody's, no common stock held by the Corporation shall be deemed a Utility Stock to the extent (but only to the proportionate extent) the acquisition or holding thereof by the Corporation causes the Corporation to exceed any applicable limitation set forth in column (2) of the table set forth in "Utility Bonds" above in the event the shares of RP are rated by S&P or column (2), (3) or (4) of such table in the event the shares of RP are rated by Moody's as of any relevant date of determination (provided that, in the event that the Corporation shall exceed any such limitation, the Corporation shall designate, in its sole discretion, the particular Utility Stock(s) and/or portions thereof which shall be deemed to have caused the Corporation to exceed such limitation). The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the assets (and/or the characteristics thereof) initially included within the definition of Utility Stocks for purposes of determining compliance with the RP Basic Maintenance Amount if the Board of Directors determines and the Rating Agencies advise the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect their then-current ratings of the RP. "Valuation Date" means (i) the fifteenth day of each month or, if such day is not a Business Day, the next succeeding Business Day, and (ii) the last Business Day of each month (or, in the case of the first Valuation Date, a date selected by the Corporation within fifteen days after the Original Issue Date). "Voting Period" has the meaning set forth in paragraph 6(b) of this Part I. 2. Fractional Shares. No fractional shares of RP shall be issued or recognized by the Corporation. 3. Dividends. (a) The Holders as of 12:00 noon, New York City time, on the Business Day preceding the applicable Dividend Payment Dates, shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, cumulative dividends each consisting of (i) cash at the Applicable Dividend Rate and (ii) a Right to receive cash determined as set forth in paragraph 3(l) below and payable as set forth therein. Dividends on the shares of RP so declared and payable shall be paid, to the extent available and permitted by law, and in preference to and priority over any dividends declared and payable on the Common Stock, out of income of the Corporation which constitutes qualifying income for purposes of the Dividends-Received Deduction. 28 (b) Dividends on shares of RP shall accumulate from the applicable Date of Original Issue and will be payable, when, as and if declared by the Board of Directors, on each Dividend Payment Date applicable to each such share of RP. (c) Each declared dividend, including each Right, shall be payable on the applicable Dividend Payment Date to the Holder or Holders of such shares of RP as set forth in paragraph 3(a). Dividends on any share in arrears for any past Dividend Payment Date may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holder of such share on a date not exceeding five Business Days preceding the payment date thereof, as may be fixed by the Board of Directors. Any dividend payment made on any share of RP shall first be credited against the earliest dividends accumulated but unpaid (whether or not earned) with respect to such share. (d) Neither Holders nor Beneficial Owners of shares of RP shall be entitled to any dividends on the shares of RP, whether payable in cash, property or stock, in excess of full cumulative dividends (including Rights) thereon. The Board of Directors shall designate, in accordance with the applicable provisions of the Code, the cash dividends on the shares of RP so declared and paid or payable and on the shares of Other RP declared and paid or payable for any fiscal year as qualifying for the Dividends-Received Deduction in an amount equal to the lesser of (i) the amount of the Corporation's income for such fiscal year which qualifies for the Dividends-Received Deduction, or (ii) the amount of such cash dividends. (e) Except as otherwise provided herein, the Applicable Dividend Rate on each share of RP for each Dividend Period with respect to such share shall be equal to the rate per annum that results from implementation of the remarketing procedures described in Part II hereof. (f) The amount of cash dividends for shares of RP payable (if declared) on each Dividend Payment Date in respect of Dividend Periods of fewer than 365 days shall be computed by the Corporation by multiplying the Applicable Dividend Rate in effect with respect to cash dividends payable on such share on such Dividend Payment Date by a fraction the numerator of which shall be the number of days such share was outstanding from and including its Date of Original Issue or the preceding Dividend Payment Date on which a cash dividend was paid, as the case may be, to and including the last day of such Dividend Period, and the denominator of which shall be 360, and then multiplying the percentage so obtained by $100,000. The amount of cash dividends for each share of RP payable on each Dividend Payment Date in respect of an Optional Dividend Period of 365 or more days or a Special Dividend Period of 365 or more days shall be computed on the basis of a 360-day year of twelve 30-day months. In accordance with the remarketing procedures set forth in Part II hereof, there may exist at any given time a number of Dividend Payment Dates for all outstanding shares of RP, and dividends on any share shall be payable only on a Dividend Payment Date applicable to such share of RP. (g) No later than by 12:00 noon, New York City time, on each Dividend Payment Date, the Corporation shall deposit in same-day funds with the Paying Agent the full amount of any dividend declared and payable on such Dividend Payment Date on any share of RP. For the purposes of the 29 foregoing, payment in New York Clearing House (next-day) funds at any time on any Business Day shall be considered equivalent to payment in same-day funds on the next Business Day at the same time, 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 before 12:00 noon, New York City time, on the next Business Day. (h) The Applicable Dividend Rate for each Dividend Period commencing during a Non-Payment Period shall be equal to the Non-Payment Period Rate; any share of RP for which an Optional Dividend Period of more than 98 days or Special Dividend Period of more than 98 days would otherwise have commenced on the first day of a Non-Payment Period shall have, instead, a 7-day Dividend Period; and each Dividend Period commencing after the first day of, and during, a Non-Payment Period shall be a 49-day Dividend Period. (i) So long as any shares of RP are outstanding, the Corporation shall not, subject to the requirements of the 1940 Act and Maryland law, without the affirmative vote or consent of the holders of at least two-thirds of the votes of the shares of RP outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as one class): (a) authorize, create or issue, or increase the authorized or issued amount, of any class or series of stock ranking prior to the RP with respect to payment of dividends or the distribution of assets on liquidation, or (b) amend, alter or repeal the provisions of the Corporation's Charter including these Articles Supplementary, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of such shares of RP or the Holders thereof; provided that, any increase in the amount of the authorized RP or the creation and issuance of other series of Preferred Stock, or any increase in the amount of authorized shares of such series or of any other series of remarketed preferred stock, in each case ranking on a parity with or junior to the RP, will not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers unless such issuance would cause the Corporation not to satisfy the 1940 Act RP Asset Coverage or the RP Basic Maintenance Amount. Unless a higher percentage is provided for under the Charter, the affirmative vote of the holders of a majority of the outstanding shares of Preferred Stock, including RP, voting together as a single class, will be required to approve any plan of reorganization adversely affecting such shares or any action requiring a vote of security holders under Section 13(a) of the 1940 Act. The class vote of holders of shares of Preferred Stock, including RP, described above will in each case be in addition to a separate vote of the requisite percentage of shares of Common Stock and shares of Preferred Stock, including RP, necessary to authorize the action in question. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of RP shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption. (j) Except during a Non-Payment Period, by 1:00 p.m. on the Tender Date at the end of the Initial Dividend Period applicable to a share of RP and by 1:00 p.m. on the Tender Date at the end of each subsequent Dividend Period applicable to a share of RP, the Beneficial Owner of such 30 share may elect to tender such share or to hold such share. If the Beneficial Owner of such share of RP elects to hold such share, such Beneficial Owner may, unless the Board of Directors has designated a Special Dividend Period commencing on the Settlement Date next following such Tender Date and such share is subject to such Special Dividend Period, elect to hold such share of RP for a 7-day Dividend Period, a 49-day Dividend Period or any available Optional Dividend Period; provided that, in the event that (i) such Beneficial Owner elects an available Optional Dividend Period of more than 98 days with respect to such share or the Board of Directors has designated the next succeeding Dividend Period as a Special Dividend Period of more than 98 days and such share is subject to such Special Dividend Period and (ii) there is no Remarketing Agent, the Remarketing Agent does not conduct a Remarketing or the Remarketing Agent is unable to remarket in the Remarketing on the Dividend Reset Date following such Tender Date all shares of RP tendered (or deemed tendered) to it at a price of $100,000 per share, then the Dividend Period in respect of such share shall be a 7-day Dividend Period and the Applicable Dividend Rate shall be the Maximum Dividend Rate for a 7-day Dividend Period. If the Beneficial Owner of such share of RP fails to elect to tender or hold such share, or to elect a Dividend Period for such share, by 1:00 p.m. on such Tender Date, such Beneficial Owner shall continue to hold such share at the Applicable Dividend Rate determined in such Remarketing for a Dividend Period of the same type as the current Dividend Period for such share; provided that (i) if such current Dividend Period is an Optional Dividend Period of 98 or fewer days which is not available on such Tender Date, such Beneficial Owner shall hold such share for a 7-day Dividend Period, (ii) if such current Dividend Period is a 7-day Dividend Period, a 49-day Dividend Period or an Optional Dividend Period of 98 or fewer days which is available on such Tender Date but (a) there is no Remarketing Agent or the Remarketing Agent does not conduct a Remarketing, then such Beneficial Owner shall hold such share for a 7-day Dividend Period and the Applicable Dividend Rate shall be the Maximum Dividend Rate for a 7-day Dividend Period, or (b) the Remarketing Agent is unable to remarket in such Remarketing all shares of RP tendered (or deemed tendered) to it at a price of $100,000 per share, such Beneficial Owner will hold such share for the same Dividend Period as the then current Dividend Period with respect to such share and the applicable Dividend Rate therefor will be the applicable Maximum Dividend Rate, and (iii) if such current Dividend Period is an Optional Dividend Period of more than 98 days or a Special Dividend Period, or the succeeding Dividend Period has been designated by the Board of Directors as a Special Dividend Period and such share is subject to such Special Dividend Period, then such Beneficial Owner shall be deemed to have elected to tender such share. If such share of RP is tendered (or deemed tendered) but not sold in such Remarketing, the Beneficial Owner thereof shall hold such share at the applicable Maximum Dividend Rate for a 7-day Dividend Period. If such share of RP is tendered (or deemed tendered) and purchased in such Remarketing, the next Dividend Period for such share shall be the Dividend Period elected by the purchaser of such share in such Remarketing or the Special Dividend Period designated by the Board of Directors, as the case may be, at the Applicable Dividend Rate therefor, except that, if the Remarketing Agent is unable to remarket in such Remarketing all shares of RP tendered (or deemed tendered) to it at a price of $100,000 per share, no purchaser in such Remarketing shall be permitted to acquire shares having an Optional Dividend Period of more than 98 days or a Special Dividend Period of more than 98 days. 31 (k) In the event of a change in law altering the Minimum Holding Period, the Board of Directors may increase or decrease the period of time between Dividend Payment Dates so as to adjust uniformly the number of days in any 49-day Dividend Period commencing after the date of such change in law to equal or exceed the then current Minimum Holding Period; provided that, the number of days for any Dividend Period as so adjusted shall not exceed 98 and shall be evenly divisible by seven (except as required from time to time by adjustments in the remarketing schedule as provided herein). Upon any such adjustment by the Board of Directors, the Corporation shall notify the Remarketing Agent and the Paying Agent, and the Paying Agent shall in turn notify the Securities Depository, of such adjustment; provided that, during a Non-Payment Period, the Corporation also shall notify the Beneficial Owners of shares of RP directly of such adjustment. (l) Except during a Non-Payment Period, the Board of Directors may at any time and from time to time institute one or more Optional Dividend Periods with such number of days, and which shall be available for such period, as the Board of Directors shall specify; provided that (i) in respect of any Optional Dividend Period of more than 98 days, the Board of Directors shall also determine a Maximum Dividend Rate or Rates in respect of such period which rate or rates, as determined from time to time by formula or other means, may be fixed or variable and (ii) in respect of an Optional Dividend Period of 365 or more days, the Board of Directors, after consultation with the Remarketing Agent, may establish Specific Redemption Provisions. An Optional Dividend Period shall be available after seven days' written notice thereof and, if applicable, of the Maximum Dividend Rate or Rates and Specific Redemption Provisions, if any, in respect thereof shall have been given to the Remarketing Agent, the Paying Agent and the Securities Depository. The Corporation also shall publish promptly notice of any designation of an Optional Dividend Period, and related Maximum Dividend Rate or Rates and Specific Redemption Provisions, if any, at least once in an Authorized Newspaper, but the failure so to publish shall not affect the validity or effectiveness of any such designation or determination. After an Optional Dividend Period becomes available, such Optional Dividend Period shall be available in each Remarketing and, if elected by any Beneficial Owner of shares of RP, shall commence on each Settlement Date and continue until rescinded by the Board of Directors, which rescission shall be effective after seven days' written notice thereof shall have been given to the Remarketing Agent, the Paying Agent, the Securities Depository and Beneficial Owners. The existence or rescission of any Optional Dividend Period shall not affect any current Dividend Period or prevent the Board of Directors from establishing other Optional Dividend Periods of similar duration or in any way restrict the Maximum Dividend Rate or Rates or Specific Redemption Provisions which may be designated in connection with any other Optional Dividend Period. (m) The Board of Directors may at any time designate a subsequent Dividend Period with respect to all or any specified fewer number of shares of RP eligible for Tender and Dividend Reset on the Tender Date next preceding the commencement of such Dividend Period as a Special Dividend Period with such number of days as the Board of Directors shall specify; provided that (i) written notice of any such designation, of the Maximum Dividend Rate or Rates, if applicable, and Specific Redemption Provisions, if any, in respect thereof and of the consequences of failure to tender or to elect to hold shares, must be given at least seven days 32 prior to such Tender Date to the Remarketing Agent, the Paying Agent, the Securities Depository and the Beneficial Owners or shares of RP which are to be subject to such Special Dividend Period; (ii) no Special Dividend Period may commence for any share of RP during a Non-Payment Period: (iii) if such Special Dividend Period contains 365 or more days, (x) the shares of RP subject to such Special Dividend Period shall have an aggregate liquidation preference (exclusive of accumulated but unpaid dividends, premium, if any, and Rights, if any) of at least $35,000,000 or such greater or lesser amount as may be specified by the Board of Directors and (y) the shares, if any, and Rights, if any) of at least $35,000,000 or such greater or lesser amount as may be specified by the Board of Directors; (iv) in respect of any Special Dividend Period of more than 98 days, the Board of Directors shall also determine a Maximum Dividend Rate or Rates, which rate or rates, as determined from time to time by formula or other means, may be fixed or variable; and (v) in respect of any Special Dividend Period of 365 or more days, the Board of Directors, after consultation with the Remarketing Agent, may establish Specific Redemption Provisions. In the event the Board of Directors designates a Special Dividend Period with respect to less than all shares of RP eligible for Tender and Dividend Reset in the Remarketing prior to such Special Dividend Period, the shares subject to such Special Dividend Period will be selected by the Paying Agent by lot. The existence or rescission of any Special Dividend Period shall not affect any current Dividend period or prevent the Board of Directors from establishing other Special Dividend Periods of similar duration or in any way restrict the Maximum Dividend Rate or Rates or Specific Redemption Provisions which may be designated in connection with any other Special Dividend Period. If the Remarketing Agent is unable to remarket sufficient shares of RP at the commencement of a Special Dividend Period to satisfy the requirement described in clause (iii) of the preceding paragraph, then the Dividend Period in respect of any share of RP which otherwise would have been subject to such Special Dividend Period shall be a 7-day Dividend Period and an Applicable Dividend Rate shall be set by the Remarketing Agent in accordance with the remarketing procedures. (n) Each dividend shall consist of (i) cash at the Applicable Dividend Rate and (ii) a right (a "Right") to receive cash (as determined below). Each Right shall thereafter be independent of the share or shares of RP on which the dividend was paid. The Corporation shall cause to be maintained a record of each Right received by the respective Holders. The Corporation shall not be required to recognize any transfer of a Right. If all or any part of the cash dividends on the shares of RP during any fiscal year does not qualify for the Dividends-Received Deduction ("Nonqualifying Distributions") because (i) the Corporation does not have income for such fiscal year eligible for the Dividends-Received Deduction at least equal to the dividends paid on the RP and the Other RP for such year, or (ii) the Corporation does not properly designate dividends on the RP as being eligible for the Dividends-Received Deduction, the applicable Rights shall entitle the holders thereof ("Right Holders") to additional cash (as set forth below), and the Corporation will, within 270 days after the end of such fiscal year, provide notice thereof to the Paying Agent. The Paying Agent will mail a copy of such notice to each Right Holder at the address specified in such Right Holder's Master Purchaser's Letter as promptly as practicable after its receipt of such notice from the Corporation. The Corporation will within 30 days after such notice is given to the Paying 33 Agent pay to the Paying Agent (who will then distribute to Right Holders), out of funds legally available therefor, cash in satisfaction of the applicable Rights in an amount specified below with respect to all Nonqualifying Distributions made during such fiscal year. Cash payable pursuant to a Right shall be paid to the Right Holder thereof in an amount which, when taken together with the aggregate Nonqualifying Distributions paid to such Right Holder during any fiscal year, would cause such Right Holder's net yield in dollars (after Federal income tax consequences) from the aggregate of both the Nonqualifying Distributions and the cash receivable pursuant to a Right to be equal to the net yield in dollars (after Federal income tax consequences) which would have been received by such Right Holder if the amount of the aggregate Non-qualifying Distributions would have qualified for the Dividends-Received Deduction in the hands of such Right Holder. Such cash receivable on a Right shall be calculated without consideration being given to the time value of money and using the applicable maximum marginal corporate Federal tax rate in effect at the time such Right was declared. The Corporation may estimate the amount payable in respect of any Right and pay all or any portion of such estimated amount prior to the end of the fiscal year in which such Right was declared. If, for any fiscal year, all cash dividends paid at the Applicable Dividend Rate on the shares of RP are eligible in full for the Dividends-Received Deduction, then the amount payable to holders of Rights applicable to that year shall be zero. 4. Redemption. Shares of RP shall be redeemable by the Corporation as provided below: (a) To the extent permitted under the 1940 Act and Maryland law, the Corporation at its option, upon giving a Notice of Redemption, may redeem shares of RP, in whole or in part, on the next succeeding scheduled Dividend Payment Dates for those shares of RP called for redemption, out of funds legally available therefor, at a redemption price equal to $100,000 per share plus premium, if any, resulting from the designation of a Premium Call Period, plus an amount equal to cash dividends thereon (whether or not earned or declared) accumulated but unpaid to the date fixed for redemption; provided that (i) no share of RP will be subject to redemption at the option of the Corporation during a Non-Call Period to which it is subject and (ii) if any share of RP is subject to any Optional Dividend Period or Special Dividend Period containing at least as many days as the then Minimum Holding Period at the time such Optional Dividend Period or Special Dividend Period was selected and a redemption at such time would have the effect that a Beneficial Owner who purchased such share in the preceding Remarketing therefor would not satisfy such Minimum Holding period solely by reason of such redemption, such share shall be redeemed on a date specified by the Board of Directors at least five days in advance thereof when such condition shall not longer apply (which date may be after the date fixed for redemption of the other shares called for redemption), but shall not be later than the next succeeding Dividend Payment Date upon which such Beneficial Owner would not fail to satisfy such Minimum Holding Period for such share solely by reason of such redemption. 34 (b) The Corporation shall redeem, out of funds legally available therefor, at a redemption price of $100,000 per share plus an amount equal to premium, if any, resulting from the designation of a Premium Call Period, plus cash dividends thereon (whether or not earned or declared) accumulated but unpaid to the date of redemption, shares of RP to the extent permitted under the 1940 Act and Maryland law, on a date fixed by the Board of Directors, if the Corporation fails to maintain the RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage and such failure is not cured on or before the RP Basic Maintenance Cure Date or the 1940 Act Cure Date (herein referred to respectively as the "Cure Date"), as the case may be. The number of shares to be redeemed shall be equal to the lesser of (i) the minimum number of shares of RP the redemption of which, if deemed to have occurred immediately prior to the opening of business on the Cure Date, together with all shares of other Preferred Stock subject to redemption or retirement, would result in the satisfaction of the RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage, as the case may be, on such Cure Date (provided that, if there is no such minimum number of shares the redemption of which would have such result, all shares of RP then outstanding shall be redeemed), and (ii) the maximum number of shares of RP that can be redeemed out of funds expected to be legally available therefor on such redemption date. In determining the number of shares of RP required to be redeemed in accordance with the foregoing, the Corporation shall allocate the amount required to achieve the RP basic Maintenance Amount or the 1940 Act RP Asset Coverage, as the case may be, pro rata among the RP and the Other RP. The Corporation shall effect such redemption not later than 41 days after such Cure Date, except that if the Corporation does not have funds legally available for the redemption of all of the required number of shares of RP which are subject to mandatory redemption or the Corporation otherwise is unable to effect such redemption on or prior to such Cure Date, the Corporation shall redeem those shares of RP which it was unable to redeem on the earliest practicable date on which it is able to effect such redemption. Any share of RP shall be subject to mandatory redemption regardless of whether such share is subject to a Non-Call Period provided that shares of RP subject to a Non-Call Period will only be subject to redemption to the extent that the other shares of RP are not available to satisfy the number of shares required to be redeemed. In such event, such shares subject to a Non-Call Period will be selected for redemption in an ascending order of outstanding Non-Call Period (with shares with the lowest number of days remaining in the period to be called first) and by lot in the event of equal outstanding Non-Call Periods. However, if any share of RP is subject to any Optional Dividend Period or Special Dividend Period containing at least as many days as the then Minimum Holding Period at the time such Optional Dividend Period or Special Dividend Period was selected and a redemption at such time would have the effect that a person who purchased such share in the preceding Remarketing therefor would not satisfy such Minimum Holding Period solely by reason of such redemption, such share shall be redeemed on a date specified by the Corporation at least five days in advance thereof when such condition shall no longer apply (which date may be after the date fixed for redemption of the other shares called for redemption), but shall not be later than the next succeeding Dividend Payment Date upon which such person would not fail to satisfy such Minimum Holding Period for such share solely by reason of redemption. 35 (c) Subject to paragraph 4(d) of this Part I, if fewer than all the outstanding shares of RP are to be redeemed pursuant to this paragraph 4, the number of shares of RP so to be redeemed shall be a whole number of shares and shall be determined by the Board of Directors, and the Corporation shall give a Notice of Redemption as provided in paragraph 4(e) of this Part I provided that no share of RP will be subject to optional redemption on any Dividend Payment Date during a Non-Call Period to which it is subject and shares of RP subject to a Non-Call Period will be subject to mandatory redemption only on the basis described under paragraph 4(b) of this Part I. Unless certificates representing shares of RP are held by Holders other than the Securities Depository or its nominee, the Paying Agent, upon receipt of such notice, shall determine, from among shares eligible for redemption, the number of shares of RP to be redeemed pro rata from each current Dividend Period which is then eligible for redemption and shall give notice of such determination to the Securities Depository; the Securities Depository thereupon shall determine by lot on a Dividend Period basis pursuant to the allocation provided by the Paying Agent the number of shares of RP to be redeemed from the account of each Agent Member (which may include an Agent Member holding shares for its own account, including the Remarketing Agent) and notify the Paying Agent of such determination. The Paying Agent, upon receipt of such notice, shall in turn determine by lot the number of shares of RP from each Dividend Period to be redeemed from the accounts of the Beneficial Owners of the shares of RP whose Agent Members have been selected by the Securities Depository and give notice of such determination to the Remarketing Agent. In doing so, the Paying Agent may determine that shares of RP shall be redeemed from the accounts of some Beneficial Owners, which may include the Remarketing Agent, without shares of RP being redeemed from the accounts of other Beneficial Owners. (d) Notwithstanding paragraph 4(c) of this Part I, if the redemption of shares of RP is to take place during a Non-Payment Period with respect to such shares or certificates representing shares of RP are held by Holders other than the Securities Depository or its nominee, then the number of shares of RP to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be selected by the Corporation pro rata from among current Dividend Periods and by lot from among shares within each current Dividend Period. (e) Any Notice or Redemption shall be given by the Corporation to the Paying Agent, the Securities Depository (and any other Holder) and the Remarketing Agent, by telephone, not later than 3:00 p.m., New York City time (and later confirmed in writing) on (A) in the case of optional redemption pursuant to paragraph 4(a) of this Part I (i) the Settlement Date in the case of a partial redemption of the shares of RP, (ii) the Tender Date in the case of a redemption in whole of the shares of RP or (iii) during a Non-Payment Period, the later of the Dividend Payment Date and the seventh day, in each case prior to the earliest date upon which any such redemption shall occur and (B) in the case of mandatory redemption pursuant to paragraph 4(b) of this Part I, the fifth Business Day prior to the redemption date. In the case of a partial redemption of the shares of RP, the Paying Agent shall use reasonable efforts to provide telephonic notice to each Beneficial Owner of shares of RP called for redemption not later than the close of business on the Business Day on which the Paying Agent determines the shares to be redeemed, as described in paragraph 4(c) if this Part I (or, during a Non-Payment Period, not later than the close of business on the Business Day immediately following the day on which the 36 Paying Agent receives a Notice of Redemption from the Corporation). In the case of a redemption in whole of the shares of RP, the Paying Agent shall use reasonable efforts to provide telephonic notice to each Beneficial Owner not later than the close of business on the Business Day immediately following the day on which it receives a Notice of Redemption from the Corporation. In any case described in clause (i) or (iii) of the first sentence of this paragraph 4(e), such telephonic notice shall be confirmed promptly in writing not later than the close of business on the third Business Day preceding the redemption date by notice sent by the Paying Agent to each Beneficial Owner of shares of RP called for redemption, the Remarketing Agent and the Securities Depository. (f) Every Notice of Redemption and other redemption notice shall state: (i) the redemption date; (ii) the number of shares of RP to be redeemed; (iii) the redemption price; (iv) that dividends on the shares of RP to be redeemed shall cease to accumulate as of such redemption date; and (v) the provision pursuant to which such shares are being redeemed. In addition, notice of redemption given to a Beneficial Owner shall state the CUSIP number, if any, of the shares of RP to be redeemed and the manner in which the Beneficial Owners of such shares may obtain payment of the redemption price. No effect in the Notice of Redemption or other redemption notice or in the transmittal or the mailing hereof shall affect the validity of the redemption proceedings, except as required by applicable law. The Paying Agent shall use its reasonable efforts to cause the publication of a redemption notice in an Authorized Newspaper within two Business Days of the date of the Notice of Redemption, but failure so to publish such notification shall not affect the validity or effectiveness of any such redemption proceedings. Shares of RP the Beneficial Owners of which shall have been given Notice of Redemption shall not be subject to transfer outside of a Remarketing. (g) On any redemption date, the Corporation shall deposit, irrevocably in trust, in same-day funds, with the Paying Agent, by 12:00 noon, New York City time, the price to be paid on such redemption date (including premium, if any, resulting from the designation of a Premium-Call Period) of any share of RP plus an amount equal to cash dividends thereon accumulated but unpaid to such redemption date (whether or not earned or declared). For the purposes of the foregoing, payment in New York Clearing House (next-day) funds at any time on any Business Day shall be considered equivalent to payment in same-day funds on the next Business Day at the same time, 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 before 12:00 noon, New York City time, on the next Business Day. (h) In connection with any redemption, upon the giving of a Notice of Redemption and the deposit of the funds necessary for such redemption with the Paying Agent in accordance with this paragraph 4, all rights of the Holders of shares of RP so called for redemption shall cease and terminate, except the right of the Holders thereof to receive the redemption price thereof, inclusive of an amount equal to the premium, if any, resulting from the designation of a Premium-Call Period plus cash dividends (whether or not earned or declared) accumulated but unpaid to the redemption date but without any interest or other additional amount (except as provided in paragraph 3(h) or 3(n) of this Part I), and such shares shall no longer be deemed outstanding for any purpose. The Corporation 37 shall be entitled to receive from the Paying Agent, promptly after the date fixed for redemption, any cash deposited with the Paying Agent as aforesaid in excess of the sum of (i) the aggregate redemption price of the shares of RP called for redemption on such date and (ii) all other amounts to which Holders of shares of RP called for redemption may be entitled. Any funds so deposited with the Paying Agent which are unclaimed at the end of ninety days from such redemption date shall, to the extent permitted by law, be repaid to the Corporation, after which time the Holders of shares of RP so called for redemption shall look only to the Corporation for payment of the redemption price and all other amounts to which they may be entitled. The Corporation shall be entitled to receive, from time to time after the date fixed for redemption, any interest on the funds so deposited. (i) To the extent that any redemption for which Notice of Redemption has been given is not made by reason of the absence of legally available funds therefor, such redemption shall be made as soon as practicable to the extent such funds become available. Failure to redeem shares of RP shall be deemed to exist at any time after the date specified for redemption in a Notice of Redemption when the Corporation shall have failed, for any reason whatsoever, to deposit funds with the Paying Agent pursuant to paragraph 4(g) of this Part I with respect to any shares for which such Notice of Redemption has been given. Notwithstanding the fact that the Corporation shall not have redeemed shares of RP for which a Notice of Redemption has been given, dividends may be declared and paid on shares of RP and shall include those shares of RP for which a Notice of Redemption has been given. (j) Notwithstanding the foregoing, (i) no share of RP may be redeemed pursuant to paragraph 4(a) of this Part I unless the full amount of accumulated but unpaid cash dividends to the date fixed for redemption for each such share of RP called for redemption shall have been declared, and (ii) no share of RP may be redeemed unless all outstanding shares of RP are simultaneously redeemed, nor may any shares of RP be purchased or otherwise acquired by the Corporation except in accordance with a purchase offer made on substantially equivalent terms by the Corporation for all outstanding shares of RP, unless, in each such instance, cash dividends on all outstanding shares of RP through the end of their most recently ended Dividend Periods (or, if such transaction is on a Dividend Payment Date, through the Dividend Periods ending on the day prior to such Dividend Payment Date) shall have been paid or declared and sufficient funds for the payment thereof deposited with the Paying Agent. (k) Except as set forth in this paragraph 4 with respect to redemptions and subject to paragraph 4(j) hereof, nothing contained herein shall limit any legal right of the Corporation or any affiliate to purchase or otherwise acquire any share of RP at any price. Any shares of RP which have been redeemed, purchased or otherwise acquired by the Corporation or any affiliate thereof may be resold. In lieu of redeeming shares called for redemption, the Corporation shall have the right to arrange for other purchasers to purchase from Beneficial Owners all shares of RP to be redeemed pursuant to this paragraph 4 by their paying to such Beneficial Owners on or before the close of business on the redemption date an amount equal to not less than the redemption price payable by the Corporation on the redemption of such shares, and the obligation of the Corporation to pay such redemption price shall be satisfied and discharged to the extent such payment is so made by such purchasers. 38 (l) Notwithstanding any of the foregoing provisions of this paragraph 4, the Remarketing Agent may, in its sole discretion, modify the procedures set forth above with respect to notification of redemption, provided that, any such modification does not adversely affect any Holder or Beneficial Owner of shares of RP. 5. Liquidation. Upon a liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the Holders shall be entitled, whether from capital or surplus, before any assets of the Corporation shall be distributed among or paid over to holders of Common Stock or any other class or series of stock of the Corporation junior to the RP as to liquidation payments, to be paid the amount of $100,000 per share of RP, plus premium, if any, plus an amount equal to all accumulated but unpaid dividends thereon (whether or not earned or declared) to and including the date of final distribution. After any such payment, the Holders shall not be entitled to any further participation in any distribution of assets of the Corporation. (a) If, upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation shall be insufficient to make such full payments to the Holders and the holders of any Preferred Stock ranking as to liquidation, dissolution or winding up on a parity with the RP, then such assets shall be distributed among the Holders and such parity holders ratably in accordance with the respective amounts which would be payable on such shares of RP and any other such Preferred Stock if all amounts thereon were paid in full. (b) Neither the consolidation nor the merger of the Corporation with or into any corporation or corporations nor a reorganization of the Corporation alone nor the sale or transfer by the Corporation of all or substantially all of its assets shall be deemed to be a dissolution or liquidation of the Corporation. 6. Voting Rights. (a) General. Each Holder of shares of RP shall be entitled to one vote for each share held on each matter submitted to a vote of stockholders of the Corporation and, except as otherwise provided in the 1940 Act, the Charter or the Bylaws or as described below, the holders of shares of Preferred Stock, including RP, and of shares of Common Stock shall vote together as one class. Prior to the issuance of any RP, the Board of Directors by resolution shall designate two existing directors representing holders of Preferred Stock. At the first meeting of stockholders for which the record date is a date on which shares of Preferred Stock are outstanding, the holders of Preferred Stock entitled to vote at such meeting shall have the right as a class, to the exclusion of the holders of the common stock, to elect two directors of the Corporation who shall serve for the unexpired terms of the directors originally designated by the Board of Directors as directors representing holders of Preferred Stock; except that, if such meeting is an annual meeting of stockholders at which the term of one of such designated directors expires, the director so elected to succeed the designated director shall be elected for a term expiring at the time of the third succeeding annual meeting of stockholders, or thereafter when his successor is elected and qualified. Thereafter, the holders of Preferred Stock shall have the right as a class, to the exclusion of the holders of the common stock, to elect directors to succeed either of the directors representing the Preferred Stock whose terms are expiring or whose seats on the Board of Directors are vacant. 39 Subject to paragraph 6(b) hereof, the holders of a majority of the shares of Common Stock shall elect the balance of the directors. (b) Right to Elect Majority of Board of Directors. During any period in which any one or more of the conditions described below shall exist (such period being referred to herein as a "Voting Period"), the number of directors constituting the Board of Directors shall be automatically increased by the smallest number that, when added to the number of directors then constituting the Board of Directors, shall (together with the two directors elected by the holders of Preferred Stock, including RP, pursuant to paragraph 6(a)) constitute a majority of such increased number, and the holders of a majority of Preferred Stock, including RP, shall be entitled, voting as a single class on a one-vote-per-share basis (to the exclusion of the holders of all other securities and classes of capital stock of the Corporation), to elect the smallest number of additional directors of the Corporation that shall constitute a majority of the total number of directors of the Corporation so increased. A Voting Period shall commence if at the close of business on any Dividend Payment Date accumulated dividends (whether or not earned or declared, and whether or not funds are then legally available in an amount sufficient therefor) on the outstanding shares of RP 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 Paying Agent for the payment of such accumulated dividends. Upon the termination of a Voting period, the voting rights described in this paragraph 6(b) shall cease, subject always, however, to the revesting of such voting rights in the holders of Preferred Stock, including RP, upon the further occurrence of any of the events described in this paragraph 6(b). (c) Voting Procedures. ----------------- (i) As soon as practicable after the accrual of any right of the holders of Preferred Stock, including RP, to elect a majority of directors, the Corporation shall notify the Paying Agent and Paying Agent shall call a special meeting of the holders of Preferred Stock, including RP, and shall mail a notice of such special meeting to such holders not less than 10 nor more than 20 days after the date of mailing of such notice. If the Corporation fails to send such notice to the Paying Agent or if the Paying Agent does not call such a special meeting, it may be called by any holder of Preferred Stock, including RP, on like notice. The record date for determining the holders of Preferred Stock, including RP, 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, the holders of Preferred Stock, including RP, voting together as a class (to the exclusion of the holders of all other securities and classes of capital stock of the Corporation), shall be entitled to elect the number of directors prescribed in paragraph 6(b) above on a one-vote-per-share basis. At any such meeting or adjournment thereof in the absence of a quorum, a majority of the holders of Preferred Stock, including RP, present in person or by proxy, shall have the power to adjourn the meeting without notice, other than an announcement at the meeting, until a quorum is present; provided, however, that no such meeting may be adjourned to a date more than 120 days from the original record date without notice. 40 (ii) For purposes of determining any rights of the Holders to vote on any matter, whether such right is created by these Articles Supplementary, by statute or otherwise, no Holder shall be entitled to vote and no share of RP shall be deemed to be "outstanding" for the purpose of voting or determining the number of shares required to constitute a quorum, if, prior to or concurrently with the time of determination of shares entitled to vote or shares deemed outstanding for quorum purposes, as the case may be, sufficient funds for the redemption of such shares have been deposited in trust with the Paying Agent for that purpose and the requisite Notice of Redemption with respect to such shares shall have been given as provided in paragraph 4 of this Part I. No share of RP held by the Corporation or any affiliate of the Corporation shall have any voting rights or be deemed to be outstanding for voting purposes. (iii) The terms of office of all persons who are directors of the Corporation at the time of a special meeting of holders of Preferred Stock, including RP, to elect directors shall continue, notwithstanding the election at such meeting by such holders of the number of directors that they are entitled to elect, and the persons so elected by such holders, together with the incumbent directors elected by the holders of the Common Stock, shall constitute the duly elected directors of the Corporation. (iv) Simultaneously with the expiration of a Voting Period, the terms of office of the additional directors elected by the holders of Preferred Stock, including RP, shall terminate, the incumbent directors who shall have been elected by the holders of the Common Stock (or by the Board of Directors at a time which was not during a Voting Period) and the two incumbent directors the holders of Preferred Stock, including RP, have the right to elect in any event shall constitute the directors of the Corporation and the voting rights of such holders to elect additional directors shall cease. (v) The directors elected by the holders of Preferred Stock, including RP, shall (subject to the provisions of any applicable law) be subject to removal only by the vote of the holders of a majority of the shares of Preferred Stock, including RP, outstanding. Any vacancy on the Board of Directors occurring by reason of such removal or otherwise may be filled only by vote of the holders of at least a majority of shares of Preferred Stock, including RP, outstanding, and if not so filled such vacancy shall (subject to the provisions of any applicable law) be filled by a majority of the remaining directors (or the remaining director) who were elected by such holders. Any other vacancy on the Board of Directors during a Voting Period shall be filled by a vote of the holder or holders of Common Stock. (d) Exclusive Remedy. Unless otherwise required by law, the Holders of shares of RP shall not have any relative rights or preferences or other special rights other than those specifically set forth herein. The Holders of shares of RP shall have no preemptive rights. In the event that the Corporation fails to pay any dividends on the shares of RP, the exclusive remedy of the Holders shall be the right to vote for directors pursuant to the provisions of this paragraph 6. In no event shall the Holders of shares of RP have any right to sue for, or bring a proceeding with respect to, such dividends or redemptions or damages for the failure to receive the same. 41 7. 1940 Act RP Asset Coverage. The Corporation shall maintain, as of the last Business Day of each month in which any share of RP is outstanding, the 1940 Act RP Asset Coverage. 8. Asset and Liquidity Coverage. ---------------------------- (a) RP Basic Maintenance Amount. (i) The Corporation shall maintain, on each Valuation Date, Eligible Portfolio Property having an aggregate Discounted Value at lease equal to the RP Price Maintenance Amount. (ii) On or before 5:00 p.m., New York City time, on the third Business Day after each Valuation Date, the Corporation shall complete and deliver to the Remarketing Agent and the Paying Agent an RP Basic Maintenance Report, which will be deemed to have been delivered to the Remarketing Agent and the Paying Agent if the Remarketing Agent and the Paying Agent receive a copy or telecopy, telex or other electronic transcription thereof and on the same day the Corporation mails to the Remarketing Agent and the Paying Agent for delivery on the next Business Day the full RP Basic Maintenance Report A failure by the Corporation to deliver an RP Basic Maintenance Report under this paragraph 8(a)(ii) without the prior consent of the Remarketing Agent and the Paying Agent shall be deemed to be delivery of an RP Basic Maintenance Report indicating the Discounted Value for all assets of the Corporation is less than the RP Basic Maintenance Amount, as of the relevant Valuation Date. (iii) Within ten Business Days after the date of delivery to the Remarketing Agent and the Paying Agent of an RP Basic Maintenance Report in accordance with paragraph 8(a)(ii) above relating to a Quarterly Valuation Date, the Independent Accountant will confirm in writing to the Remarketing Agent and the Paying Agent (A) the mathematical accuracy of the calculations reflected in such Report, (B) that, in such Report, the Corporation determined in accordance with these Articles Supplementary the assets of the corporation which constitute Eligible Portfolio Property at such Quarterly Valuation Date, (C) that, in such Report, the Corporation has determined in accordance with these Articles Supplementary the assets of the Corporation had, at such Quarterly Valuation Date, Eligible Portfolio Property of an aggregate Discounted Value at least equal to the RP Basic Maintenance Amount, (D) with respect to the S&P rating on Utility Bonds and Senior Debt Obligations, issuer name, issue size and coupon rate listed in such Report, that information has been traced and agrees with the information listed in The Standard & Poor's Bond Guide (in the event such information does not agree or such information is not listed in The Standard & Poor's Bond Guide, the Independent Accountant will inquire of S&P what such information is, and provide a listing in their letter of such differences, if any), (E) with respect to the Moody's ratings on Utility Bonds and Senior Debt Obligations, issuer name, issue size and coupon rate listed in such Report, that information has been traced and agrees with 42 the information listed in Moody's Bond Record (in the event such information does not agree or such information is not listed in Moody's Bond Record, the Independent Accountant will inquire of Moody's what such information is, and provide a listing in their letter of such differences), and (F) with respect to the lower of two bid prices (or alternative permissible factors used in calculating the Market Value) provided by the custodian of the Corporation's assets to the Corporation for purposes of valuing securities in the Corporation's portfolio, the Independent Accountant has traced the price used in such Report to the lower of the two bid prices listed in the Report provided by such custodian and verified that such information agrees (in the event such information does not agree, the Independent Accountant will provide a listing in its letter of such differences) (such confirmation is herein called the "Accountant's Confirmation"). If any Accountant's Confirmation delivered pursuant to this paragraph 8(a)(iii) shows that an error was made in the RP Basic Maintenance Report for a Quarterly Valuation Date, or shows that a lower aggregate Discounted Value for the aggregate of all Eligible Portfolio Property of the Corporation was determined by the Independent Accountant, the calculation or determination made by such Independent Accountant shall be final and conclusive and shall be binding on the Corporation, and the Corporation shall accordingly amend the RP Basic Maintenance Report to the Remarketing Agent and Paying Agent promptly following receipt by the Remarketing Agent and the Paying Agent of such Accountant's Confirmation. (b) Liquidity Coverage. ------------------ (i) As of each Valuation Date as long as any share of RP is outstanding, the Corporation shall determine (A) the Market Value of the Dividend Coverage Assets owned by the Corporation as of that Valuation Date, (B) the Dividend Coverage Amount on that Valuation Date, and (C) whether the Minimum Liquidity Level is met as of that Valuation Date. The calculations of the Dividend Coverage Assets, the Dividend Coverage Amount and whether the Minimum Liquidity Level is met shall be set forth on a certificate (a "Certificate of Minimum Liquidity") dated as of the Valuation Date. The RP Basic Maintenance Report and the Certificate of Minimum Liquidity may be combined in one certificate. The Corporation shall cause the Certificate of Minimum Liquidity to be delivered to the Remarketing Agent and the Paying Agent not later than the close of business on the third Business Day after the Valuation Date. The Minimum Liquidity Level shall be deemed to be met as of any date of determination if the Corporation has timely delivered a Certificate of Minimum Liquidity relating to such date, which states that the same has been met and which is not manifestly inaccurate. In the event that a Certificate of Minimum Liquidity is not delivered to the Remarketing Agent and the Paying Agent when required, the Minimum Liquidity Level shall be deemed not to have been met as of the applicable date. 43 (ii) If the Minimum Liquidity Level is not met as of any Valuation Date, then the Corporation shall purchase or otherwise acquire Dividend Coverage Assets (with the proceeds from the liquidation of Eligible Portfolio Property or otherwise) to the extent necessary so that the Minimum Liquidity Level is met as of the fifth Business Day following such Valuation Date. The Corporation shall, by such fifth Business Day, provide to the Paying Agent and the Remarketing Agent a Certificate of Minimum Liquidity setting forth the calculations of the Dividend Coverage Assets and the Dividend Coverage Amount and showing that the Minimum Liquidity Level is met as of such fifth Business Day together with a report of the custodian of the Corporation's assets confirming the amount of the Corporation's Dividend Coverage Assets as of such fifth Business Day. 9. Restrictions on Certain Distributions. For so long as any share of RP is outstanding, the Corporation shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or options, warrants or rights to subscribe for or purchase Common Stock or other stock, if any, ranking junior to the shares of RP as to dividends or upon liquidation) in respect of the Common Stock or any other stock of the Corporation ranking junior to or on a parity with the shares of RP as to dividends or upon liquidation, or call for redemption, redeem, purchase or otherwise acquire for consideration any shares of the Common Stock or any other such junior stock (except by conversion into or exchange for stock of the Corporation ranking junior to or on a parity with the shares of RP as to dividends and upon liquidation), unless (A) immediately after such transaction, the RP Basic Maintenance Amount and the 1940 Act RP Asset Coverage would be achieved, (B) full cumulative dividends on shares of RP and shares of Other RP 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 Paying Agent, (C) any debt required to be paid under paragraph 3(n) of this Part I on or before the date of such declaration or payment has been paid and (D) the Corporation has redeemed the full number of shares of RP required to be redeemed by any provision for mandatory redemption contained herein. 10. Notice. All notices or communications, unless otherwise specified in the Bylaws of the Corporation or these Articles Supplementary, shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid. Notice shall be deemed given on the earlier of the date received or the date seven days after which such notice is mailed. 11. Borrowings. For so long as the shares of RP are rated by S&P, the aggregate amount of borrowings by the Corporation (including guarantees made by the Corporation) shall be limited to an amount equal to 10% of the value of the Corporation's assets; provided, further, that the Corporation shall not incur any such borrowings subsequent to the issuance of the RP unless S&P advises the Corporation in writing that such borrowings will not adversely affect its then-current rating on the RP. 12. Options and Futures Transactions. For so long as the shares of RP are rated by either Moody's or S&P, the Corporation will not purchase or sell futures contracts or related options or engage in reverse 44 repurchase agreement transactions unless Moody's and/or S&P, as the case may be, advise the Corporation in writing that such action or actions will not adversely affect their then-current ratings on the RP. 13. Other Restrictions. For so long as the shares of RP are rated by S&P, the Corporation may not (i) engage in transactions involving repurchase obligations which do not constitute Short Term Money Market Instruments, (ii) engage in transactions involving short sales of portfolio securities or (iii) overdraw any bank accounts of the Corporation, unless, in each case, S&P advises the Corporation in writing that such action or actions will not adversely affect its then current ratings on the RP. PART II. -------- REMARKETING PROCEDURES 1. Remarketing Schedule. Each Remarketing shall take place over a three-day period consisting of the Tender Date, the Dividend Reset Date and the Settlement Date. Such dates or the method of establishing such dates shall be determined by the Board of Directors from time to time. 2. Procedure for Tendering. (a) Each share of RP is subject to Tender and Dividend Reset only at the end of each Dividend Period applicable to such share and may be tendered in a Remarketing only on the Tender Date immediately prior to the end of the current Dividend Period with respect thereto. By 12:00 noon, New York City time, on each such Tender Date, the Remarketing Agent shall, after canvassing the market and considering prevailing market conditions at the time for shares of RP and similar securities, provide Beneficial Owners non-binding indications of Applicable Dividend Rates for the next succeeding 7-day Dividend Period, 49-day Dividend Period and any Optional Dividend Period or designated Special Dividend Period provided that if the next Dividend Period has been designated a Special Dividend Period, the Remarketing Agent will provide to holders thereof a non-binding indication of the Applicable Dividend Rate only for such Special Dividend Period. The actual Applicable Dividend Rate for such Dividend Period may be greater than or less than the rate per annum indicated in such non-binding indications (but not greater than the applicable Maximum Dividend Rate). By 1:00 p.m., New York City time, on such Tender Date, each Beneficial Owner of shares of RP subject to Tender and Dividend Reset must notify the Remarketing Agent of its desire, on a share-by-share basis, either to tender such share of RP at a price of $100,000 per share or to continue to hold such share of RP and elect either a 7-day Dividend Period, a 49-day Dividend Period or a specific available Optional Dividend Period or, if applicable, accept a designated Special Dividend Period, at the new Applicable Dividend Rate for the selected or designated, as the case may be, Dividend Period. Any notice given to the Remarketing Agent to tender or hold shares for a particular Dividend Period shall be irrevocable and shall not be conditioned upon the level at which the Applicable Dividend Rate is established. Any such notice may not be waived by the Remarketing Agent, except that prior to 4:00 p.m., New York City time, on the Dividend Reset Date, the Remarketing Agent may, in its sole discretion (i) at the request of a Beneficial Owner that has tendered one or more shares of RP to the Remarketing Agent, contingently waive such Beneficial Owner's tender and thereby enable such Beneficial Owner to continue to hold the share or shares for a 7-day Dividend Period, 49-day 45 Dividend Period or available Optional Dividend Period or a designated Special Dividend Period as agreed to by such Beneficial Owner and the Remarketing Agent at such time, so long as such tendering Beneficial Owner has indicated to the Remarketing Agent that it would accept the new Applicable Dividend Rate for such Dividend Period, such waiver to be contingent upon the Remarketing Agent's ability to remarket all shares of RP tendered in such Remarketing, and (ii) at the request of a Beneficial Owner that has elected to hold one or more of its shares of RP, waive such Beneficial Owner's election with respect thereto. (b) The right of each Beneficial Owner to tender shares of RP in a Remarketing therefor shall be limited to the extent that (i) the Remarketing Agent conducts a Remarketing pursuant to the terms of the Remarketing Agreement, (ii) shares tendered have not been called for redemption and (iii) the Remarketing Agent is able to find a purchaser or purchasers for tendered shares of RP at an Applicable Dividend Rate for the next Dividend Period that is not in excess of the Maximum Dividend Rate. 3. Determination of Applicable Dividend Rates. (a) Between 1:00 p.m., New York City time, on each Tender Date and 4:00 p.m., New York City time, on the succeeding Dividend Reset Date, the Remarketing Agent shall determine (i) unless the Board of Directors has designated such next Dividend Period as a Special Dividend Period with respect to all shares subject to Tender and Dividend Reset, the allocation of tendered shares of RP among a 7-day Dividend Period, a 49-day Dividend Period and each available Option Dividend Period, if any, and any Special Dividend Period provided that, if the Remarketing Agent is unable to remarket on such Dividend Reset Date all such tendered shares in a Remarketing at a price of $100,000 per share, then the Remarketing Agent shall allocate no shares to any Optional Dividend Period of more than 98 days and no share will be assigned to any Special Dividend Period of more than 98 days, and (ii) the Applicable Dividend Rates to the nearest one-thousandth (0.001) of one percent per annum for the next 7-day Dividend Period, the next 49-day Dividend Period and the next Optional Dividend Period or Periods, or the next designated Special Dividend Period, as the case may be. The Applicable Dividend Rates for such Dividend Periods, except as otherwise required herein, shall be the rate per annum which the Remarketing Agent determines, in its sole judgment, to be the lowest rates, giving effect to such allocation, that will enable it to remarket on behalf of the Beneficial Owners thereof all shares of RP tendered to it at a price of $100,000 per share. (b) If no Applicable Dividend Rate shall have been established on a Dividend Reset Date on a Remarketing for a 7-day Dividend Period, a 49-day Dividend Period, or any Optional Dividend Period or Periods or Special Dividend Period, or for any or all of the foregoing, for any reason (other than because there is no Remarketing Agent or the Remarketing Agent is not required to conduct a Remarketing pursuant to the terms of the Remarketing Agreement), then the Remarketing Agent, except during a Non-Payment Period, in its sole discretion, shall, after taking into account market conditions as reflected in the prevailing yields of bond and variable rate taxable and tax-exempt debt securities and the prevailing dividend yields of fixed and variable rate preferred stock, if necessary, determine the Applicable Dividend Rate or Rates, as the case may be, 46 that would be the initial dividend rate or rates fixed in an offering on such Dividend Reset Date, assuming in each case a comparable dividend period or periods, issuer and security. If there is no Remarketing because there is no Remarketing Agent or the Remarketing Agent is not required to conduct a Remarketing pursuant to the Remarketing Agreement, then, except during a Non-Payment Period, the Applicable Dividend Rate for each subsequent Dividend Period for which no Remarketing takes place because of the foregoing shall be the applicable Maximum Dividend Rate for a 7-day Dividend Period and the next succeeding Dividend Period shall be a 7-day Dividend Period. In a Remarketing, the Applicable Dividend Rates for different Dividend Periods need not be equal. (c) In determining such Applicable Dividend Rate or Rates, the Remarketing Agent shall, after taking into account market conditions as reflected in the prevailing yields of fixed and variable rate taxable and tax-exempt debt securities and the prevailing dividend yields of fixed and variable rate preferred stock, in providing non-binding indications of the Applicable Dividend Rates to Beneficial Owners and potential purchasers of shares of RP, (i) consider the number of shares of RP tendered and the number of shares of RP potential purchasers are willing to purchase and (ii) contact by telephone or otherwise current and Potential Beneficial Owners of shares of RP and ascertain the dividend rates at which they would be willing to hold shares of RP. (d) The Applicable Dividend Rate or Rates, as well as the allocation of tendered shares of RP, shall be determined as aforesaid by the Remarketing Agent in its sole discretion (except as otherwise provided in these Articles Supplementary with respect to Applicable Dividend Rates that shall be the Non-Payment Period Rate and Maximum Dividend Rate) and shall be conclusive and binding on Holders and Beneficial Owners. (e) As a condition precedent to purchasing shares of RP in any offering, in any Remarketing or outside any Remarketing, each purchaser of shares of RP shall sign and deliver a Master Purchaser's Letter, the sufficiency of any Master Purchaser's Letter to be determined by the Remarketing Agent in its sole discretion. (f) Except during a Non-Payment Period, the Applicable Dividend Rate for any Dividend Period shall not be more than the applicable Maximum Dividend Rate. 4. Allocation of Shares; Failure to Remarket at $100,000 Per Share. (a) If the Remarketing Agent is unable to remarket by 4:00 p.m., New York City time, on any Dividend Reset Date all shares of RP tendered to it in the related Remarketing at a price of $100,000 per share (i) each Beneficial Owner that tendered shares of RP for sale shall sell a number of shares of RP on a pro rata basis, to the extent practicable, or by lot, as determined by the Remarketing Agent in its sole discretion based on the number of orders to purchase shares of RP in such Remarketing; and (ii) the next Dividend Period shall be a 7-day Dividend Period for all tendered (or deemed tendered) but unsold shares and for all other shares the Beneficial Owners of which shall have elected or been deemed to have elected to hold such shares for a Dividend Period of more than 98 days; and (iii) the 47 Applicable Dividend Rates for the next 7-day Dividend Period (including the 7-day Dividend Period referred to in the preceding clause (ii)), next 49 day Dividend Period and, if applicable, next Optional Dividend Period or Periods of 98 or fewer days or Special Dividend Period of 98 or fewer days shall be the applicable Maximum Dividend Rates for such Dividend Periods. (b) If the allocation procedures described above would result in the sale of a fraction of a share of RP, the Remarketing Agent shall, in its sole discretion, round up or down the number of shares of RP sold by each Beneficial Owner on such Dividend Reset Date so that each share sold by a Beneficial Owner shall be a whole share of RP and the total number of shares sold equals the total number of shares bought on such Dividend Reset Date. 5. Notification of Results; Settlement. (a) By telephone at approximately 4:30 p.m., New York City time, on each Dividend Reset Date the Remarketing Agent shall advise each Beneficial Owner of tendered shares and each purchaser thereof (or the Agent Member thereof, (i) of the number of shares such Beneficial Owner or purchaser as to sell or purchase and (ii) to give instructions to its Agent Member to deliver such shares against payment therefor or to pay the purchase price against delivery as appropriate. The Remarketing Agent will also advise each Beneficial Owner or purchaser that is to continue to hold, or to purchase, shares with Dividend Periods beginning on the Business Day following such Dividend Reset Date of the Applicable Dividend Rates for such shares. (b) In accordance with the Securities Depository's normal procedures, on the Settlement Date, the transactions described above with respect to each share of RP shall be executed through the Securities Depository, if the Securities Depository or its nominee holds or is to hold the certificates relating to the shares to be purchased, and the accounts of the respective Agent Members of the Securities Depository shall be debited and credited and shares delivered by book entry as necessary to effect the purchases and sales of shares of RP and the changes in types of Dividend Periods as determined in the related Remarketing. Purchasers of shares of RP shall make payment to the Paying Agent in same-day funds against delivery to other purchasers or their nominees of one or more certificates representing shares of RP, or, if the Securities Depository or its nominee holds or is to hold the certificates relating to the shares to be purchased, through their Agent Members in same-day funds to the Securities Depository against delivery through their Agent Members by book entry of shares of RP or as otherwise required by the Securities Depository. The Securities Depository shall make payment in accordance with its normal procedures. (c) If any Beneficial Owner selling shares of RP in a Remarketing fails to deliver such shares, the Agent Member of such selling Beneficial Owner and of any other person that was to have purchased shares of RP in such Remarketing may deliver to any such other person a number of whole shares of RP that is less than the number of shares that otherwise was to be purchased by such person. In such event, the number of shares of RP to be so delivered shall be determined by such Agent Member. Delivery of such lesser number of shares of RP shall constitute good delivery. 48 (d) The Remarketing Agent, the Paying Agent and the Securities Depository each will use its reasonable commercial efforts to meet the timing requirements set forth in paragraphs (a) and (b) above; provided that, in the event that there is a delay in the occurrence of any delivery or other event connected with a Remarketing, the Remarketing Agent, the Paying Agent and the Securities Depository each will use its reasonable commercial efforts to accommodate such delay in furtherance of the Remarketing. (e) Notwithstanding any of the foregoing provisions of this paragraph 5, the Remarketing Agent may, in its sole discretion, modify the settlement procedures set forth above with respect to settlement, provided any such modification does not adversely affect the Beneficial Owners or the Holders of RP or the Corporation. 6. Purchase of Shares of RP by Remarketing Agent. The Remarketing Agent may purchase for its own account shares of RP in a Remarketing, provided that it purchases all tendered (or deemed tendered) shares of RP not sold in such Remarketing to other purchasers and that the Applicable Dividend Rate or Rates established with respect to such shares in such Remarketing are no higher than the Applicable Dividend Rate or Rates that would have been established if the Remarketing Agent had not purchased such shares. Except as provided in the previous sentence, the Remarketing Agent shall not be obligated to purchase any shares of RP that would otherwise remain unsold in a Remarketing. If the Remarketing Agent owns any shares of RP subject to a Remarketing immediately prior to a Remarketing and if all other shares subject to such Remarketing and tendered for sale by other Beneficial Owners of shares of RP have been sold in such Remarketing, then the Remarketing Agent may sell such number of its such shares in such Remarketing as there are outstanding orders to purchase that have not been filled by such shares tendered for sale by other Beneficial Owners. Neither the Corporation, the Paying Agent nor the Remarketing Agent shall be obligated in any case to provide funds to make payment to a Beneficial Owner upon such Beneficial Owner's tender of its shares of RP in a Remarketing. 7. Applicable Dividend Rate During a Non-Payment Period. So long as a Non-Payment Period shall continue, paragraphs 1, 2, 3, 4, 5 and 6 of this Part II shall not be applicable to any of the shares of RP and the shares of RP shall not be subject to Tender and Dividend Reset. 8. Transfers. As a condition precedent to purchasing shares of RP in any offering, in any Remarketing or outside any Remarketing, each purchaser of shares of RP shall be required to sign and deliver a Master Purchaser's Letter, the sufficiency of any Master Purchaser's Letter to be determined by the Remarketing Agent in its sole discretion, in which such purchaser shall agree, among other things, (i) unless the Corporation has elected, during a Non-Payment Period, to waive this requirement, to have its ownership of such shares of RP maintained in book entry form by the Securities Depository, in the account of a designated Agent Member which, in turn, shall maintain records of such purchaser's beneficial ownership, (ii) to be conclusively bound by the remarketing procedures, including the Remarketing Agent's determination of the Applicable Dividend Rates, pursuant to the remarketing procedures, (iii) that its notice to tender shares of RP in a Remarketing will constitute an irrevocable offer, except as set forth in such Master Purchaser's Letter, to sell the shares 49 specified in such notice and authorization to the Remarketing Agent to sell, transfer or otherwise dispose of such shares as set forth herein and (iv) unless the Corporation shall have elected, during a Non-Payment Period, to waive this requirement, to sell, transfer or otherwise dispose of any share of RP held by it only pursuant to orders placed in a Remarketing therefor or to a person that has signed and delivered a Master Purchaser's Letter as provided herein, and, in the case of any transfer other than pursuant to a Remarketing, to ensure that an Agent Member advises the Remarketing Agent of such transfer. The Agent Member shall be authorized and instructed to disclose to the Remarketing Agent and/or the Paying Agent such information with respect to such purchaser's beneficial ownership as the Remarketing Agent or Paying Agent shall request. 9. Miscellaneous. To the extent permitted by applicable law, the Board of Directors of the Corporation may interpret or adjust the provisions hereof to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification which does not adversely affect the rights of Holders or Beneficial Owners of shares of RP and if such inconsistency or ambiguity reelects an incorrect provision hereof then the Board of Directors may authorize the filing of a Certificate of Amendment or a Certificate of Correction, as the case may be. 10. Securities Depository; Stock Certificates. (a) If there is a Securities Depository, an appropriate number of certificates for all of the shares of RP shall be issued to the Securities Depository and registered in the name of the Securities Depository or its nominee. Additional certificates may be issued as necessary to represent shares of RP having Optional Dividend Periods or Special Dividend Periods. All such certificates shall bear a legend to the effect that such certificate are issued subject to the provisions contained in these Articles Supplementary and each Master Purchaser's Letter. Unless the Corporation shall have elected, during a Non-Payment Period, to waive this requirement, the Corporation will also issue stop-transfer instructions to the Paying Agent for the shares of RP. 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 Dividend Rate applicable to all shares of RP shall be the Non-Payment Period Rate or there is no Securities Depository, the Corporation may at its option issue one or more new certificates with respect to such shares (without the legend referred to in paragraph 10(a) of this Part II) registered in the names of the Beneficial Owners or their nominees and rescind the stop-transfer instruction referred to in paragraph 10(a) of this Part II with respect to such shares. 50 IN WITNESS WHEREOF, DUFF & PHELPS SELECTED UTILITIES INC. has caused these presents to be signed in its name and on its behalf by its President, and its corporate seal to be hereunto affixed and attested by its Secretary, and the said officers of the Corporation further acknowledged said instrument to be the corporate act of the Corporation, and stated under the penalties of perjury that to the best of their knowledge, information and belief the matters and facts therein set forth with respect to approval are true in all material respects, all on November 15, 1988. DUFF & PHELPS SELECTED UTILITIES INC. By /s/ Charles V. Hansen --------------------------- President Attest: /s/ Calvin J. Pederson - ------------------------- Secretary 51 EX-99.A.6 CHARTER 8 ex-99a6.txt Exhibit a.6 DUFF & PHELPS SELECTED UTILITIES INC. Articles of Amendment --------------------- Duff & Phelps Selected Utilities Inc., a Maryland corporation having its principal office in Chicago, Illinois (hereinafter called the corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland, that: FIRST: The charter of the corporation, as heretofore amended, is hereby further amended as follows: The Articles Supplementary creating five series of Remarketed Preferred Stock of the corporation are amended as follows: 1. Part I, paragraph 1, Definitions, is amended by deleting the definition of "Eligible Portfolio Property" and replacing it with the following: "Eligible Portfolio Property" shall include Utility Bonds, Utility Stocks, cash, U.S. Government Obligations, Short Term Money Market Instruments, FNMA Certificates, FHLMC Certificates, FHLMC Multifamily Securities, GNMA Certificates, GNMA Multifamily Securities, GNMA Graduated Payment Securities, Conventional Mortgage Pass-Through Certificates, Other Permitted Securities and any other asset held by the Corporation that has been assigned a Discount Factor by the Rating Agencies and is included within the definition of Eligible Portfolio Property set forth herein or pursuant to an amendment or supplement hereto. 2. Part I, paragraph 1, Definitions, is further amended by the addition thereto of the following definition of "Other Permitted Securities": ""Other Permitted Securities" shall include any asset held or proposed to be acquired by the Corporation (i) not coming within the definition of Utility Bonds, Utility Stocks, cash, U.S. Government Obligations, Short Term Money Market Instruments, FNMA Certificates, FHLMC Certificates, FHLMC Multifamily Securities, GNMA Certificates, GNMA Multifamily Securities, GNMA Graduated Payment Securities or Conventional Mortgage Pass-Through Certificates and (ii) that has been assigned a Discount Factor by the Rating Agencies, provided that the Board of Directors determines and the Rating Agencies advise the Corporation in writing that the acquisition or holding of the asset will not adversely affect their then-current ratings of the RP. 3. Part I, paragraph 6, Voting, is amended by the addition thereto of the following sub-paragraph (e): (e) Voting by Series. In addition to any vote of the requisite percentage of shares of Common Stock and shares of Preferred Stock, including RP, otherwise necessary to authorize any proposed action under the Charter or the 1940 Act, on any matter therein the Preferred Stock has the right to vote as a class, the approval of the holders of a majority of the outstanding shares of any series of Preferred Stock, including any series of RP, voting separately as a series, shall be necessary to approve such proposed action if such series would be affected by the proposed action in a manner materially different from any other series. SECOND: The board of directors of the corporation on October 11, 1989 duly adopted a resolution in which was set forth the foregoing amendment to the charter, declaring that the said amendment to the charter as proposed was advisable and directing that it be submitted for consideration at the 1989 annual meeting of stockholders of the corporation. THIRD: Notice setting forth said amendment to the charter and a summary of the changes to be effected by said amendment and stating that a purpose of the meeting of the stockholders called to be held on December 13, 1989 would be to take action thereon, was given, as required by law, to all stockholders entitled to vote thereon. The amendment to the charter of the corporation as hereinabove set forth was approved by the stockholders of the corporation at said meeting by the affirmative vote of a majority of all the votes entitled to be cast thereon. FOURTH: The amendment to the charter of the corporation as hereinabove set forth has been duly advised by the board of directors and duly approved by the stockholders of the corporation. 2 IN WITNESS WHEREOF, Duff & Phelps Selected Utilities Inc., has caused these articles to be signed in its name and on its behalf by its chairman and attested by its secretary, on December 13, 1989. DUFF & PHELPS SELECTED UTILITIES INC. By /s/ Claire V. Hansen ----------------------------------- Claire V. Hansen, Chairman Attest: /s/ Calvin J. Pedersen - -------------------------- Calvin J. Pedersen, Secretary THE UNDERSIGNED, chairman of Duff & Phelps Selected Utilities Inc., who executed on behalf of said corporation the foregoing articles of amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said corporation, the foregoing articles of amendment to be the corporate act of said corporation and further certifies that to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ Claire V. Hansen ------------------------ Claire V. Hansen 3 EX-99.A.7 CHARTER 9 ex-99a7.txt Exhibit a.7 DUFF & PHELPS SELECTED UTILITIES INC. Articles of Amendment --------------------- Duff & Phelps Selected Utilities Inc., a Maryland corporation having its principal office in Chicago, Illinois (hereinafter called the corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland, that: FIRST: The charter of the corporation, as heretofore amended, is hereby further amended as follows: Article SECOND of the charter is hereby amended to read as follows: SECOND. Name. The name of the corporation is Duff & Phelps Utilities Income Inc. SECOND: The board of directors of the corporation on August 23, 1990 duly adopted a resolution by unanimous written consent in which was set forth the foregoing amendment to the charter, declaring that the said amendment to the charter as proposed was advisable and directing that it be submitted for consideration at the 1990 annual meeting of stockholders of the corporation. THIRD: Notice setting forth said amendment to the charter and the change to be effected by said amendment and stating that a purpose of the meeting of the stockholders called to be held on October 17, 1990 would be to take action thereon, was given, as required by law, to all stockholders entitled to vote thereon. The amendment to the charter of the corporation as hereinabove set forth was approved by the stockholders of the corporation at said meeting by the affirmative vote of a majority of all the votes entitled to be cast thereon. FOURTH: The amendment to the charter of the corporation as hereinabove set forth has been duly advised by the board of directors and duly approved by the stockholders of the corporation. FIFTH: This amendment does not increase the authorized stock of the corporation. SIXTH: This amendment shall become effective on November 1, 1990. IN WITNESS WHEREOF, Duff & Phelps Selected Utilities Inc., has caused these articles to be signed in its name and on its behalf by its chairman and attested by its secretary, on October 17, 1990. DUFF & PHELPS SELECTED UTILITIES INC. By /s/ Claire V. Hansen ----------------------------------- Claire V. Hansen, Chairman Attest: /s/ Calvin J. Pedersen - ----------------------------- Calvin J. Pedersen, Secretary THE UNDERSIGNED, chairman of Duff & Phelps Selected Utilities Inc., who executed on behalf of said corporation the foregoing articles of amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said corporation, the foregoing articles of amendment to be the corporate act of said corporation and further certifies that to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ Claire V. Hansen ---------------------- Claire V. Hansen 2 EX-99.A.8 CHARTER 10 ex-99a8.txt Exhibit a.8 DUFF & PHELPS UTILITIES INCOME INC. Articles of Amendment --------------------- Duff & Phelps Utilities Income Inc., a Maryland corporation having its principal office in Baltimore City, Maryland and its principal executive office in Chicago, Illinois (the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST:The Corporation's Articles Supplementary creating Remarketed Preferred Stock Series A, Series B, Series C, Series D and Series E are hereby amended as follows: 1. Part I, Paragraph 1, Definitions, is amended by deleting the definitions of "Deposit Securities," "Discounted Value," "RP Basic Maintenance Amount" and "RP Basic Maintenance Cure Date" and replacing them with the following definitions: "Deposit Securities" means cash, U.S. Government Obligations and Short Term Money Market Instruments. Except for purposes of determining compliance with either RP Basic Maintenance Amount, each Deposit Security shall be deemed to have a value equal to its principal or face amount payable at maturity plus any interest payable thereon after delivery of such Deposit Security but only if payable on or prior to the applicable payment date in advance of which the relevant deposit is made. "Discounted Value," with respect to any asset held by the Corporation as of any date, means the quotient of the Market Value of such asset divided by the applicable Discount Factor Supplied by S&P (provided that, in the event the Corporation has written a call option on such asset, the Discounted Value of such asset shall be zero) or the quotient of the Market Value of such asset divided by the applicable Discount Factor Supplied by Moody's (provided that, in the event the Corporation has written a call option on such asset, the Discounted Value of such asset shall mean the quotient of the lower of the Market Value of such asset and the exercise price of such call option divided by the applicable Discount Factor Supplied by Moody's), as the case may be, provided that in no event shall the Discounted Value of any asset constituting Eligible Portfolio Property as of any date exceed the unpaid principal balance or face amount of such asset as of that date. With respect to the calculation of the Discounted Value of any Utility Bond included in the Corporation's Eligible Portfolio Property, such calculation shall be made using the criteria set forth in the definitions of Utility Bonds and Market Value. With respect to the calculation of the Discounted Value of any Utility Stock included in the Corporation's Eligible Portfolio Property such calculation shall be made using the criteria set forth in the definitions of Utility Stocks and Market Value. When calculating the aggregate Discounted Value of the Corporation's Eligible Portfolio Property for comparison with the Moody's RP Basic Maintenance Amount, the Discount Factors Supplied by Moody's shall be used; provided that, in making such calculation, the amount of Utility Stocks issued by public utility companies with nuclear facilities under construction (as determined by the Adviser) which may be included in such calculation shall be limited to five percent of the Market Value of the Corporation's Eligible Portfolio Property. When calculating the aggregate Discounted Value of the Corporation's Eligible Portfolio Property for comparison with the S&P Basic Maintenance Amount, the Discount Factors Supplied by S&P shall be used. Notwithstanding any other provision of these Articles Supplementary, any Utility Bond that has a remaining maturity of more than 30 years, and any asset as to which there is no Discount Factor Supplied by Moody's or Discount Factor Supplied by S&P either in these Articles Supplementary or in an amendment or supplement thereof, shall have a Discounted Value for purposes of determining the aggregate Discounted Value of the Corporation's Eligible Portfolio Property calculated using the Discount Factor Supplied by Moody's or S&P, as the case may be, of zero. "RP Basic Maintenance Amount" means the Moody's RP Basic Maintenance Amount or the S&P RP Basic Maintenance Amount, as the case may be. "RP Basic Maintenance Cure Date," with respect to the failure by the Corporation to maintain either RP Basic Maintenance Amount (as required by paragraph 8 of this Part I) as of each Valuation Date, means the eighth Business Day following such Valuation Date. "RP Basic Maintenance Report" means a report signed by the President, the Treasurer, any Senior Vice President or any Vice President of the Corporation which sets forth, as of the related Valuation Date, the assets of the Corporation, the Market Value and the Discounted Value thereof (seriatim and in the aggregate), and each RP Basic Maintenance Amount. 2. Part I, Paragraph 1, Definitions, is further amended by the addition thereto of the following definitions of "Moody's RP Basic Maintenance Amount" and "S&P RP Basic Maintenance Amount": "Moody's RP Basic Maintenance Amount" means, initially, as of any date, the sum of (i) the aggregate liquidation preference of the shares of RP outstanding and shares of 2 Other RP outstanding, (ii) to the extent not covered in (i), the aggregate amount of accumulated but unpaid cash dividends with respect to the shares of RP outstanding and shares of Other RP outstanding, (iii) any Rights due and payable and any equivalent rights to receive cash with respect to Other RP which are due and payable, (iv) an amount equal to the product of (x) three and (y) the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding, (v) an amount equal to the sum of (x) the amount of accrued but unpaid interest on the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding and (y) an amount equal to 70 days of additional accrued interest on such loan at the then-current interest rate borne by such loan, (vi) an amount equal to the product of (x) three and (y) the aggregate principal amount of any other then outstanding indebtedness of the Corporation for money borrowed, (vii) an amount equal to the sum of (x) the aggregate accrued but unpaid interest on the indebtedness referred to in the foregoing clause (vi) and (y) an amount equal to 70 days of additional accrued interest on such indebtedness at the then-current interest rate(s) borne by such indebtedness, (viii) the aggregate Projected Dividend Amount, (ix) redemption premium, if any, and (x) the greater of $200,000 or an amount equal to projected expenses of the Corporation (including, without limitation, fee and indemnification obligations of the Corporation incurred in connection with any commercial paper program undertaken by the Corporation or with any credit facility related thereto) for the next three month period. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial elements comprising the Moody's RP Basic Maintenance Amount if the Board of Directors determines and Moody's advises the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect its then-current rating on the RP. "S&P RP Basic Maintenance Amount" means, initially, as of any date, the sum of (i) the aggregate liquidation preference of the shares of RP outstanding and shares of Other RP outstanding, (ii) to the extent not covered in (i), the aggregate amount of accumulated but unpaid cash dividends with respect to the shares of RP outstanding and shares of Other RP outstanding, (iii) any Rights due and payable and any equivalent rights to receive cash with respect to Other RP which are due and payable, (iv) the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding, (v) an amount equal to accrued but unpaid interest on the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding, (vi) the aggregate principal amount of, and an amount equal to accrued but unpaid interest on, any other then outstanding indebtedness of the Corporation for money borrowed, (vii) the aggregate Projected Dividend Amount, (viii) redemption premium, if any, and (ix) the greater of $200,000 or an amount equal to projected expenses of the Corporation (including, without limitation, fee and indemnification 3 obligations of the Corporation incurred in connection with any commercial paper program undertaken by the Corporation or with any credit facility related thereto) for the next three month period. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial elements comprising the S&P RP Basic Maintenance Amount if the Board of Directors determines and S&P advises the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect its then-current rating on the RP. 3. Part I, Paragraph 3, Dividends, is amended by deleting paragraph (i) thereof and replacing it with the following: (i) So long as any shares of RP are outstanding, the Corporation shall not, subject to the requirements of the 1940 Act and Maryland law, without the affirmative vote or consent of the holders of at least two-thirds of the votes of the shares of RP outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as one class): (a) authorize, create or issue, or increase the authorized or issued amount, of any class or series of stock ranking prior to the RP with respect to payment of dividends or the distribution of assets on liquidation, or (b) amend, alter or repeal the provisions of the Corporation's Charter including these Articles Supplementary, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privileges or voting power of such shares of RP or the Holders thereof; provided that, any increase in the amount of the authorized RP or the creation and issuance of other series of Preferred Stock, or any increase in the amount of authorized shares of such series or of any other series of remarketed preferred stock, in each case ranking on a parity with or junior to the RP, will not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers unless such issuance would cause the Corporation not to satisfy the 1940 Act RP Asset Coverage or either RP Basic Maintenance Amount. Unless a higher percentage is provided for under the Charter, the affirmative vote of the holders of a majority of the outstanding shares of Preferred Stock including RP, voting together as a single class, will be required to approve any plan of reorganization adversely affecting such shares or any action requiring a vote of security holders under Section 13(a) of the 1940 Act. The class vote of holders of shares of Preferred Stock, including RP, described above will in each case be in addition to a separate vote of the requisite percentage of shares of Common Stock and shares of Preferred Stock, including RP, necessary to authorize the action in question. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of RP shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption. 4 4. Part I, Paragraph 4, Redemption, is amended by deleting paragraph (b) thereof and replacing it with the following: (b) The Corporation shall redeem, out of funds legally available therefor, at a redemption price of $100,000 per share plus an amount equal to cash dividends thereon (whether or not earned or declared) accumulated but unpaid to the date of redemption, shares of RP to the extent permitted under the 1940 Act and Maryland law, on a date fixed by the Board of Directors, if the Corporation fails to maintain either RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage and such failure is not cured on or before the RP Basic Maintenance Cure Date or the 1940 Act Cure Date (herein referred to as the "Cure Date"), as the case may be. The number of shares to be redeemed shall be equal to the lesser of (i) the minimum number of shares of RP the redemption of which, if deemed to have occurred immediately prior to the opening of business on the Cure Date, together with all shares of other Preferred Stock subject to redemption or retirement, would result in the satisfaction of the relevant RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage, as the case may be, on such Cure Date (provided that, if there is no such minimum number of shares the redemption of which would have such result, all shares of RP then outstanding shall be redeemed), and (ii) the maximum number of shares of RP that can be redeemed out of funds expected to be legally available therefor on such redemption date. In determining the number of shares of RP required to be redeemed in accordance with the foregoing, the Corporation shall allocate the amount required to achieve the relevant RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage, as the case may be, pro rata among the RP and the Other RP. The Corporation shall effect such redemption not later than 41 days after such Cure Date, except that if the Corporation does not have funds legally available for the redemption of all of the required number of shares of RP which are subject to mandatory redemption or the Corporation otherwise is unable to effect such redemption on or prior to such Cure Date, the Corporation shall redeem those shares of RP which it was unable to redeem on the earliest practicable date on which it is able to effect such redemption. 5. Part I, Paragraph 8, Asset and Liquidity Coverage, is amended by deleting the text of Paragraph (i) of Paragraph (a), RP Basic Maintenance Amount, thereof and replacing it with the following text: (i) The Corporation shall maintain, on each Valuation Date, (A) Eligible Portfolio Property having an aggregate Discounted Value (calculated using the Discount Factors Supplied by Moody's) at least equal to the Moody's RP Basic Maintenance Amount and (B) Eligible Portfolio Property having an aggregate Discounted Value (calculated using the Discount Factors Supplied by S&P) at least equal to the S&P RP Basic Maintenance Amount. 5 SECOND: The Corporation's Articles Supplementary creating Remarketed Preferred Stock Series I are hereby amended as follows: 1. Part I, Paragraph 1, Definitions, is amended by deleting the definitions of "Deposit Securities," "Discounted Value," "RP Basic Maintenance Amount" and "RP Basic Maintenance Cure Date" and replacing them with the following definitions: "Deposit Securities" means cash, U.S. Government Obligations and Short Term Money Market Instruments. Except for purposes of determining compliance with either RP Basic Maintenance Amount, each Deposit Security shall be deemed to have a value equal to its principal or face amount payable at maturity plus any interest payable thereon after delivery of such Deposit Security but only if payable on or prior to the applicable payment date in advance of which the relevant deposit is made. "Discounted Value," with respect to any asset held by the Corporation as of any date, means the quotient of the Market Value of such asset divided by the applicable Discount Factor Supplied by S&P (provided that, in the event the Corporation has written a call option on such asset, the Discounted Value of such asset shall be zero) or the quotient of the Market Value of such asset divided by the applicable Discount Factor Supplied by Moody's (provided that, in the event the Corporation has written a call option on such asset, the Discounted Value of such asset shall mean the quotient of the lower of the Market Value of such asset and the exercise price of such call option divided by the applicable Discount Factor Supplied by Moody's), as the case may be, provided that in no event shall the Discounted Value of any asset constituting Eligible Portfolio Property as of any date exceed the unpaid principal balance or face amount of such asset as of that date. With respect to the calculation of the Discounted Value of any Utility Bond included in the Corporation's Eligible Portfolio Property, such calculation shall be made using the criteria set forth in the definitions of Utility Bonds and Market Value. With respect to the calculation of the Discounted Value of any Utility Stock included in the Corporation's Eligible Portfolio Property such calculation shall be made using the criteria set forth in the definitions of Utility Stocks and Market Value. When calculating the aggregate Discounted Value of the Corporation's Eligible Portfolio Property for comparison with the Moody's RP Basic Maintenance Amount, the Discount Factors Supplied by Moody's shall be used; provided that, in making such calculation, the amount of Utility Stocks issued by public utility companies with nuclear facilities under construction (as determined by the Adviser) which may be included in such calculation shall be limited to five percent of the Market Value of the Corporation's Eligible Portfolio Property. When calculating the aggregate Discounted Value of the Corporation's Eligible Portfolio Property for comparison with the S&P Basic Maintenance Amount, the Discount Factors Supplied by S&P shall be 6 used. Notwithstanding any other provision of these Articles Supplementary, any Utility Bond that has a remaining maturity of more than 30 years, and any asset as to which there is no Discount Factor Supplied by Moody's or Discount Factor Supplied by S&P either in these Articles Supplementary or in an amendment or supplement thereof, shall have a Discounted Value for purposes of determining the aggregate Discounted Value of the Corporation's Eligible Portfolio Property calculated using the Discount Factor Supplied by Moody's or S&P, as the case may be, of zero. "RP Basic Maintenance Amount" means the Moody's RP Basic Maintenance Amount or the S&P RP Basic Maintenance Amount, as the case may be. "RP Basic Maintenance Cure Date," with respect to the failure by the Corporation to maintain either RP Basic Maintenance Amount (as required by paragraph 8 of this Part I) as of each Valuation Date, means the eighth Business Day following such Valuation Date. "RP Basic Maintenance Report" means a report signed by the President, the Treasurer, any Senior Vice President or any Vice President of the Corporation which sets forth, as of the related Valuation Date, the assets of the Corporation, the Market Value and the Discounted Value thereof (seriatim and in the aggregate), and each RP Basic Maintenance Amount. 2. Part I, Paragraph 1, Definitions, is further amended by the addition thereto of the following definitions of "Moody's RP Basic Maintenance Amount" and "S&P RP Basic Maintenance Amount": "Moody's RP Basic Maintenance Amount" means, initially, as of any date, the sum of (i) the aggregate liquidation preference of the shares of RP outstanding and shares of Other RP outstanding, (ii) to the extent not covered in (i), the aggregate amount of accumulated but unpaid cash dividends with respect to the shares of RP outstanding and shares of Other RP outstanding, (iii) any Rights due and payable and any equivalent rights to receive cash with respect to Other RP which are due and payable, (iv) an amount equal to the product of (x) three and (y) the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding, (v) an amount equal to the sum of (x) the amount of accrued but unpaid interest on the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding and (y) an amount equal to 70 days of additional accrued interest on such loan at the then-current interest rate borne by such loan, (vi) an amount equal to the product of (x) three and (y) the aggregate principal amount of any other then outstanding indebtedness of the Corporation for money borrowed, (vii) an amount equal to the sum of (x) the aggregate accrued but unpaid interest on the indebtedness referred to in the foregoing clause (vi) and (y) an amount equal to 70 days of additional accrued 7 interest on such indebtedness at the then-current interest rate(s) borne by such indebtedness, (viii) the aggregate Projected Dividend Amount, (ix) redemption premium, if any, and (x) the greater of $200,000 or an amount equal to projected expenses of the Corporation (including, without limitation, fee and indemnification obligations of the Corporation incurred in connection with any commercial paper program undertaken by the Corporation or with any credit facility related thereto) for the next three month period. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial elements comprising the Moody's RP Basic Maintenance Amount if the Board of Directors determines and Moody's advises the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect its then-current rating on the RP. "S&P RP Basic Maintenance Amount" means, initially, as of any date, the sum of (i) the aggregate liquidation preference of the shares of RP outstanding and shares of Other RP outstanding, (ii) to the extent not covered in (i), the aggregate amount of accumulated but unpaid cash dividends with respect to the shares of RP outstanding and shares of Other RP outstanding, (iii) any Rights due and payable and any equivalent rights to receive cash with respect to Other RP which are due and payable, (iv) the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding, (v) an amount equal to accrued but unpaid interest on the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding, (vi) the aggregate principal amount of, and an amount equal to accrued but unpaid interest on, any other then outstanding indebtedness of the Corporation for money borrowed, (vii) the aggregate Projected Dividend Amount, (viii) redemption premium, if any, and (ix) the greater of $200,000 or an amount equal to projected expenses of the Corporation (including, without limitation, fee and indemnification obligations of the Corporation incurred in connection with any commercial paper program undertaken by the Corporation or with any credit facility related thereto) for the next three month period. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial elements comprising the S&P RP Basic Maintenance Amount if the Board of Directors determines and S&P advises the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect its then-current rating on the RP. 3. Part I, Paragraph 3, Dividends, is amended by deleting paragraph (i) thereof and replacing it with the following: (i) So long as any shares of RP are outstanding, the Corporation shall not, subject to the requirements of the 1940 Act and Maryland law, without the affirmative vote or consent of the holders of at least two-thirds of the votes of the shares of RP outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as one class): (a) authorize, create 8 or issue, or increase the authorized or issued amount, of any class or series of stock ranking prior to the RP with respect to payment of dividends or the distribution of assets on liquidation, or (b) amend, alter or repeal the provisions of the Corporation's Charter including these Articles Supplementary, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privileges or voting power of such shares of RP or the Holders thereof; provided that, any increase in the amount of the authorized RP or the creation and issuance of other series of Preferred Stock, or any increase in the amount of authorized shares of such series or of any other series of remarketed preferred stock, in each case ranking on a parity with or junior to the RP, will not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers unless such issuance would cause the Corporation not to satisfy the 1940 Act RP Asset Coverage or either RP Basic Maintenance Amount. Unless a higher percentage is provided for under the Charter, the affirmative vote of the holders of a majority of the outstanding shares of Preferred Stock including RP, voting together as a single class, will be required to approve any plan of reorganization adversely affecting such shares or any action requiring a vote of security holders under Section 13(a) of the 1940 Act. The class vote of holders of shares of Preferred Stock, including RP, described above will in each case be in addition to a separate vote of the requisite percentage of shares of Common Stock and shares of Preferred Stock, including RP, necessary to authorize the action in question. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of RP shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption. 4. Part I, Paragraph 4, Redemption, is amended by deleting paragraph (b) thereof and replacing it with the following: (b) The Corporation shall redeem, out of funds legally available therefor, at a redemption price of $100,000 per share plus an amount equal to cash dividends thereon (whether or not earned or declared) accumulated but unpaid to the date of redemption, shares of RP to the extent permitted under the 1940 Act and Maryland law, on a date fixed by the Board of Directors, if the Corporation fails to maintain either RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage and such failure is not cured on or before the RP Basic Maintenance Cure Date or the 1940 Act Cure Date (herein referred to as the "Cure Date"), as the case may be. The number of shares to be redeemed shall be equal to the lesser of (i) the minimum number of shares of RP the redemption of which, if deemed to have occurred immediately prior to the opening of business on the Cure Date, together with all shares of other Preferred Stock subject to redemption or retirement, would result in the 9 satisfaction of the relevant RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage, as the case may be, on such Cure Date (provided that, if there is no such minimum number of shares the redemption of which would have such result, all shares of RP then outstanding shall be redeemed), and (ii) the maximum number of shares of RP that can be redeemed out of funds expected to be legally available therefor on such redemption date. In determining the number of shares of RP required to be redeemed in accordance with the foregoing, the Corporation shall allocate the amount required to achieve the relevant RP Basic Maintenance Amount or the 1940 Act RP Asset Coverage, as the case may be, pro rata among the RP and the Other RP. The Corporation shall effect such redemption not later than 41 days after such Cure Date, except that if the Corporation does not have funds legally available for the redemption of all of the required number of shares of RP which are subject to mandatory redemption or the Corporation otherwise is unable to effect such redemption on or prior to such Cure Date, the Corporation shall redeem those shares of RP which it was unable to redeem on the earliest practicable date on which it is able to effect such redemption. 5. Part I, Paragraph 8, Asset and Liquidity Coverage, is amended by deleting the text of Paragraph (i) of Paragraph (a), RP Basic Maintenance Amount, thereof and replacing it with the following text: (i) The Corporation shall maintain, on each Valuation Date, (A) Eligible Portfolio Property having an aggregate Discounted Value (calculated using the Discount Factors Supplied by Moody's) at least equal to the Moody's RP Basic Maintenance Amount and (B) Eligible Portfolio Property having an aggregate Discounted Value (calculated using the Discount Factors Supplied by S&P) at least equal to the S&P RP Basic Maintenance Amount. THIRD: The amendments as herein above set forth have been duly advised by the Board of Directors of the Corporation and duly approved by the Corporation's stockholders. FOURTH: These amendments do not increase the authorized stock of the Corporation. FIFTH: These amendments shall become effective as of the time that the State Department of Assessments and Taxation of Maryland accepts these Articles of Amendment for record. 10 IN WITNESS WHEREOF, Duff & Phelps Utilities Income Inc. has caused these Articles of Amendment to be signed in its name and on its behalf by its chairman and attested by its secretary on this 30th day of November, 1993. Duff & Phelps Utilities Income Inc. By: /s/ Claire V. Hansen ------------------------------ Claire V. Hansen Chairman ATTEST: /s/ Calvin J. Pedersen - ------------------------- Calvin J. Pedersen Secretary THE UNDERSIGNED, chairman of Duff & Phelps Utilities Income Inc., who executed on behalf of said corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on the behalf of said corporation, the foregoing Articles of Amendment to be the corporate act of said corporation and further certifies that to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects, under the penalties of perjury. /s/ Claire V. Hansen ---------------------------- Claire V. Hansen 11 EX-99.A.9 CHARTER 11 exhiba9.txt Exhibit a.9 DUFF & PHELPS UTILITIES INCOME INC. Articles of Amendment Duff & Phelps Utilities Income Inc., a Maryland corporation having its principal office in Baltimore City, Maryland (hereinafter called the corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland, that: FIRST: The charter of the corporation, as heretofore amended, is hereby further amended as follows: Article SECOND of the charter is hereby amended to read as follows SECOND. Name. The name of the corporation is DNP Select Income Fund Inc. SECOND: The foregoing amendment was approved by a majority of the entire board of directors of the corporation at a regular meeting held on February 22, 2002 and such amendment is limited to a change expressly authorized by Section 2-605 of the Maryland General Corporation Law to be made without action by the stockholders of the corporation. THIRD: This amendment does not increase the authorized stock of the corporation. FOURTH: This amendment shall become effective at 5:00 p.m., Eastern Time, on April 23, 2002. IN WITNESS WHEREOF, Duff & Phelps Utilities Income Inc., has caused these articles to be signed in its name and on its behalf by its president and chief executive officer and attested by its secretary, on April 9th, 2002. DUFF & PHELPS UTILITIES INCOME INC. By /s/ Nathan I. Partain ---------------------------------------- Nathan I. Partain President and Chief Executive Officer Attest: /s/ T. Brooks Beittel -------------------------------------------- T. Brooks Beittel, Secretary THE UNDERSIGNED, president and chief executive officer of Duff & Phelps Utilities Income Inc., who executed on behalf of said corporation the foregoing articles of amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said corporation, the foregoing articles of amendment to be the corporate act of said corporation and further certifies that to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury. /s/ Nathan I. Partain --------------------------------- Nathan I. Partain 2 EX-99.B BYLAWS 12 exhibitb.txt Exhibit b DUFF & PHELPS UTILITIES INCOME INC. BYLAWS (as amended through October 18, 2001) ARTICLE I OFFICES Section 1.01. Principal office. The principal office of the corporation in the State of Maryland shall be located in the City of Baltimore. Section 1.02. Other offices. The corporation may also have offices at such other places both within and without the State of Maryland as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETING OF STOCKHOLDERS Section 2.01. Place of meetings. All meetings of the stockholders shall be held at such place in the United States as shall be designated from time to time by the board of directors. Section 2.02. Annual meeting. Beginning with the annual meeting of stockholders to be held in 1990, the annual meeting of stockholders shall be held on the third Wednesday of April or at such date and time within the month of April of each year as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect a board of directors and transact such other business as may properly be brought before the meeting. Section 2.03. Special meetings. Special meetings of stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the charter of the corporation, may be called at any time by the chairman, the president or the board of directors. Special meetings of stockholders shall be called by the secretary upon the written request of stockholders entitled to cast at least 25 percent of all the votes entitled to be cast at such meeting, provided that (a) such request shall state the purpose or purposes of the meeting and the matters proposed to be acted on at it; and (b) the stockholders requesting the meeting shall have paid to the corporation the reasonably estimated cost of preparing and mailing the notice thereof, which the secretary shall determine and specify to such stockholders. Upon payment of these costs to the corporation, the secretary shall notify each stockholder entitled to notice of the meeting. Unless requested by stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any special meeting of stockholders held during the preceding twelve months. 1 Section 2.04. Stockholders entitled to vote; number of votes. If a record date has been fixed for the determination of stockholders entitled to notice of or to vote at any meeting of stockholders, each stockholder of the corporation shall be entitled to vote, in person or by proxy, each share of stock (or fraction thereof) registered in his name on the books of the corporation outstanding at the close of business on such record date, with one vote (or fraction of a vote) for each share (or fraction thereof) so outstanding. Section 2.05. Notice of meetings. Written notice of each meeting of stockholders stating the place, date and hour of the meeting and, in the case of a special meeting or if otherwise required by law, the purpose or purposes for which the meeting is called, shall be given not less than 10 nor more than 90 days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 2.06. Quorum; adjournment. The holders of a majority of the stock entitled to vote at a meeting of stockholders, present in person or represented by proxy, shall constitute a quorum at the meeting for the transaction of business except as otherwise provided by statute or by the charter of the corporation. If, however, such quorum shall not be present or represented at any meeting of stockholders, the stockholders entitled to vote thereat present in person or represented by proxy shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At any adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjourned meeting is more than 120 days after the original record date, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. Section 2.07. Voting. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy and voting on the question shall decide any question brought before such meeting, unless the question is one upon which, by express provision of any statute or the charter of the corporation or these bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 2.08. Proxies. No proxy shall be valid more than eleven months after its date, unless it provides for a longer period. Section 2.09. Stock ledger. The secretary of the corporation shall cause an original or duplicate stock ledger to be maintained at the office of the corporation's transfer agent. ARTICLE III DIRECTORS AND COMMITTEES Section 3.01. Function and powers. The business and affairs of the corporation shall be managed under the direction of its board of directors. All powers of the corporation may be exercised by or under the authority of the board of directors except as conferred on or reserved to the stockholders by statute or the charter of the corporation or these bylaws. 2 Section 3.02. Number. The board of directors shall consist of 3 directors, which number may be increased or decreased by a resolution of a majority of the entire board of directors, provided that the number of directors shall not be less than 3 or more than 15. Section 3.03. Vacancies. Any vacancy occurring in the board of directors for any cause other than by reason of an increase in the number of directors may be filled by a majority of the remaining members of the board of directors, although such majority is less than a quorum; provided, however, that no vacancy shall be so filled unless immediately thereafter at least two-thirds of the directors then holding office shall have been elected to such office by the stockholders, and provided further that if at any time (other than prior to the first annual meeting of stockholders) less than a majority of the directors holding office at that time were elected by the stockholders, a meeting of the stockholders shall be held promptly and in any event within 60 days for the purpose of electing directors to fill any existing vacancy in the board of directors, unless the Securities and Exchange Commission shall by order extend such period under the authority granted by section 16(a) of the Investment Company Act of 1940. A director elected to fill a vacancy shall be elected to hold office until the next annual meeting of stockholders or until his successor is elected and qualifies. Section 3.04. Annual and regular meetings. The first meeting of each newly elected board of directors shall be held immediately after the adjournment of the annual meeting of stockholders, or at such other time or place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by any director who is not present at the meeting. The board of directors from time to time may provide for the holding of regular meetings of the board and fix their time and place. Section 3.05. Special meetings. Special meetings of the board may be called by the chairman on three days' notice to each director, either personally or by mail or by telegram. Special meetings shall be called by the chairman or secretary in like manner and on like notice on the written request of a majority of the directors or a majority of the members of the executive committee. Section 3.06. Quorum and voting. At all meetings of the board the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or the charter of the corporation or these bylaws. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 3.07. Telephone meetings. Members of the board of directors or any committee thereof may participate in a meeting of such board or committee by means of a conference telephone or similar 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 the meeting, except as may be otherwise specifically provided by statute or the charter of the corporation or these bylaws. 3 Section 3.08. Action without meeting. Unless otherwise restricted by statute or the charter of the corporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting if a unanimous written consent which sets forth the action is signed by each member of the board or committee, as the case may be, and filed with the minutes of proceedings of the board or committee. Section 3.09. Committees. The board of directors may, by resolution passed by a majority of the entire board, designate an executive committee and other committees, each committee to consist of two or more directors of the corporation. In the absence of a member of a committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another member of the board of directors to act at the meeting in the place of any such absent member. Section 3.10. Executive committee. Unless otherwise provided by resolution of the board of directors, the executive committee shall have and may exercise all powers of the board of directors in the management of the business and affairs of the corporation that may lawfully be exercised by an executive committee, except the power to: (i) declare dividends or distributions on stock; (ii) issue stock; (iii) recommend to the stockholders any action which requires stockholder approval; (iv) amend the bylaws; or (v) approve any merger or share exchange which does not require stockholder approval. Section 3.11. Other committees. To the extent provided by resolution of the board of directors, other committees of the board shall have and may exercise any of the powers that may lawfully be granted to the executive committee. Section 3.12. Minutes of committee meetings. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Section 3.13. Expenses and compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director, or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.14. Retirement of directors. Effective with the elections of directors to be held at the annual meeting of stockholders in 1992, no person shall stand for election or reelection as a director of the Fund if that person would be 75 years old or older at the date of the proxy statement for the meeting of stockholders at which such election would take place, unless such person's candidacy shall have been approved by a unanimous vote of all of the directors then in office (other than any director whose candidacy is being approved). Section 3.15. Qualification of directors. Until November 1, 1998, at least 75% of the members of the board of directors shall not be interested persons (as defined in section 2(a)(19) of the Investment Company Act of 1940) of Duff & Phelps Investment Management Co., the corporation's investment adviser. 4 ARTICLE IV NOTICES Section 4.01. Type of notice. Whenever, under the provision of any statute or the charter of the corporation or these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 4.02. Waiver of notice. Whenever the provisions of any statute or the charter of the corporation or these bylaws require notice of the time, place or purpose of a meeting of the board of directors or a committee of the board, or of stockholders, each person who is entitled to the notice waives notice if: (a) before or after the meeting he signs a waiver of notice which is filed with the records of the meeting; or (b) he is present at the meeting or, in the case of a stockholders' meeting, is represented by proxy. ARTICLE V OFFICERS Section 5.01. Offices. The officers of the corporation shall be elected by the board of directors and shall be a chairman, a president, one or more vice presidents, a secretary and a treasurer. The board of directors may also appoint one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the charter of the corporation or these bylaws otherwise provide, except that no one may serve concurrently as both president and vice president. A person who holds more than one office may not act in more than one capacity to execute, acknowledge or verify an instrument required by law to be executed, acknowledged or verified by more than one officer. Section 5.02. Annual election. The board of directors at its first meeting after each annual meeting of stockholders shall elect a chairman, a president, one or more vice presidents, a secretary and a treasurer. Section 5.03. Other officers and agents. The board of directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 5.04. Remuneration. The salaries or other remuneration, if any, of all officers of the corporation shall be fixed by the board of directors. 5 Section 5.05. Term of office; removal; vacancies. The officers of the corporation shall hold office until their respective successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors, when the board in its judgment finds that the best interests of the corporation will be served by such action. The removal of an officer or agent does not prejudice any of his contract rights. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. Section 5.06. The chairman. The chairman, who shall be chosen from among the directors of the corporation, shall preside at all meetings of the board of directors and stockholders. He shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 5.07. The president and chief executive officer. The president and chief executive officer shall be the chief executive officer of the corporation, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. In the absence of the chairman or in the event of his inability or refusal to act, the president shall preside at all meetings of the board of directors and stockholders. The president may execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. Section 5.08. The vice presidents. In the absence of the president or in the event of his inability or refusal to act, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting shall have all the powers of and be subject to all the restrictions upon the president. The vice presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 5.09. The secretary. The secretary: (a) shall attend all meetings of the board of directors and all meetings of stockholders and record all the proceedings of the meetings in a book to be kept for that purpose and shall perform like duties for the standing committees when required; (b) shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors, the chairman or the president, under whose supervision the secretary shall be; and (c) shall have custody of the corporate seal of the corporation and shall have authority to affix the same to any instrument requiring it, and when so affixed it may be attested by his signature. Section 5.10. The assistant secretary. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. 6 Section 5.11. The treasurer. The treasurer: (a) shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; (b) shall deposit with the corporation's custodian all moneys and other valuable effects in the name and to the credit of the corporation; (c) shall direct the custodian to make such disbursements of the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements; and (d) shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and financial statements of the corporation. Section 5.12. The assistant treasurer. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE VI CAPITAL STOCK Section 6.01. Certificates of stock. Every holder of stock in the corporation shall be entitled, upon request, to have a certificate or certificates, signed by, or in the name of the corporation by the chairman, the president or a vice president and the treasurer, an assistant treasurer, the secretary or an assistant secretary of the corporation, certifying the number of full shares owned by him in the corporation. No certificates shall be issued for fractional shares. Where a certificate is countersigned by a transfer agent other than the corporation or its employee, any other signature on the certificate may be facsimile. In case any officer or transfer agent who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer or transfer agent before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer or transfer agent at the date of issue. Section 6.02. Lost certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. The issuance of a new certificate under this section does not constitute an overissue of the shares it represents. Section 6.03. Transfers of stock. The shares of stock of the corporation shall be transferable on the books of the corporation at the request of the record holder thereof in person or by a duly authorized attorney, upon presentation to the corporation or its transfer agent of a duly executed assignment or authority to transfer, or power evidence of succession, and, if the shares are represented by a certificate, a duly endorsed certificate or certificates of stock surrendered for cancellation, and with such proof of the authenticity of the signatures as the corporation or its transfer agent may reasonably require. The transfer shall be recorded on the books of the corporation, the old certificates, if any, shall be cancelled, and the new record holder, upon request, shall be entitled to a new certificate or certificates. 7 Section 6.04. Fixing of record date. The board of directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, provided that such record date shall not be a date more than 90 days, and in the case of a meeting of stockholders not less than 10 days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. In such case only such stockholders as shall be stockholders of record on the record date so fixed shall be entitled to such notice of, and to vote at, such meeting or adjournment, or to give such consent, or to receive payment of such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, or to take such other action, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after any such record date. Section 6.05. Registered stockholders. The corporation shall be entitled to treat the holder of record of shares as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by statute. ARTICLE VII CUSTODIAN Section 7.01. Qualifications. The corporation shall at all times employ, pursuant to a written contract, a bank or trust company having an aggregate capital, surplus and undivided profits (as shown in its last published report) of at least $2,000,000 as custodian to hold the funds and securities of the corporation. Section 7.02. Contract. Such contract shall be upon such terms and conditions and may provide for such compensation as the board of directors deems necessary or appropriate, provided such contract shall further provide that the custodian shall deliver securities owned by the corporation only upon sale of such securities for the account of the corporation and receipt of payment therefor by the custodian or when such securities may be called, redeemed, retired or otherwise become payable. Such limitation shall not, however, prevent: 8 (a) the delivery of securities for examination to the broker selling the same in accord with the "street delivery" custom whereby such securities are delivered to such broker in exchange for a delivery receipt exchanged on the same day for an uncertified check of such broker to be presented on the same day for certification; (b) the delivery of securities of an issuer in exchange for or conversion into other securities alone or cash and other securities pursuant to any plan of merger, consolidation, reorganization, recapitalization or readjustment of the securities of such issuer; (c) the conversion by the custodian of securities owned by the corporation pursuant to the provisions of such securities into other securities; (d) the surrender by the custodian of warrants, rights or similar securities owned by the corporation in the exercise of such warrants, rights or similar securities, or the surrender of interim receipts or temporary securities for definitive securities; (e) the delivery of securities as collateral on borrowing effected by the corporation; (f) the delivery of securities owned by the corporation as a redemption in kind of securities issued by the corporation. The custodian shall deliver funds of the corporation only upon the purchase of securities for the portfolio of the corporation and the delivery of such securities to the custodian, but such limitation shall not prevent the release of funds by the custodian for payment of interest, dividend disbursements, taxes and management fees, for payments in connection with the conversion, exchange or surrender of securities owned by the corporation as set forth in sub-paragraphs (b), (c) and (d) above and for operating expenses of the corporation. Section 7.03. Termination of contract. The contract of employment of the custodian shall be terminable by either party on 60 days' written notice to the other party. Upon any termination, the board of directors shall use its best efforts to obtain a successor custodian, but lacking success in the appointment of a successor custodian, the question of whether the corporation shall be liquidated or shall function without a custodian shall be submitted to the stockholders before delivery of any funds or securities of the corporation to any person other than a successor custodian, including a temporary successor selected by the retiring custodian. If a successor custodian is found, the retiring custodian shall deliver funds and securities owned by the corporation directly to the successor custodian. Section 7.04. Agents of custodian. The provisions of any other selection of these bylaws to the contrary notwithstanding, any contract of employment of a custodian to hold the funds and securities of the corporation may authorize the custodian, upon approval of the board of directors, to appoint other banks or trust companies meeting the requirements of this article, domestic and foreign (including domestic and foreign branches), to perform all or a part of the duties of the custodian under its contract with the corporation. In the case of foreign banks, no authorization or appointment providing for the holding of funds or securities of the corporation (other than in connection with the clearing of transactions or exchanges of securities) shall become effective unless permitted by an appropriate order, rule or written advice of the Securities and Exchange Commission. 9 Section 7.05. Negotiable instruments. Except as otherwise authorized by the board of directors, all checks and drafts for the payment of money shall be signed in the name of the corporation by the custodian, and all requisitions or orders for the payment of money by the custodian or for the issue of checks and drafts therefor, all promissory notes, all assignments of shares or securities standing in the name of the corporation, and all requisitions or orders for the assignment of shares or securities standing in the name of the custodian or its nominee, or for the execution of powers to transfer the same, shall be signed in the name of the corporation by not less than two of its officers. Promissory notes, checks or drafts payable to the corporation may be endorsed only to the order of the custodian or its agent. ARTICLE VIII GENERAL PROVISIONS Section 8.01. Dividends. (a) The board of directors, from time to time as they may deem advisable, may declare and pay dividends in cash or other property of the corporation, out of any source available for dividends, to the stockholders according to their respective rights and interests and in accordance with the applicable provisions of the charter of the corporation. (b) The board of directors may prescribe from time to time that dividends declared are payable at the election of any of the stockholders, either in cash or in shares of the corporation. (c) The board of directors shall cause any dividend payment to be accompanied by a written statement if paid wholly or partly from any source other than: (i) the corporation's accumulated undistributed net income (determined in accordance with generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission then in effect) and not including profits or losses realized upon the sale of securities or other properties; or (ii) the corporation's net income so determined for the current or preceding fiscal year. Such statement shall adequately disclose the source or sources of such payment and the basis of calculation, and shall be in such form as the Securities and Exchange Commission may prescribe. Section 8.02. Fiscal year. The fiscal year of the corporation shall end on December 31. Section 8.03. Seal. The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Maryland". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or by placing the word "seal" adjacent to the signature of the authorized officer of the corporation. Any officer or director of the corporation shall have authority to affix the corporate seal of the corporation to any document requiring the same. 10 ARTICLE IX AMENDMENTS Section 9.01. General. Except as provided in section 9.02, these bylaws may be altered, amended or repealed, and new bylaws may be adopted solely by the board of directors, at any meeting of the board of directors. Section 9.02. Amended by stockholders only. Sections 2.06 and 2.07 of article II, sections 3.04 and 3.15 of article III, article VII, and sub-section 8.01(c) of article VIII of these bylaws may be altered, amended or repealed only with the approval of the holders of a "majority of the outstanding voting securities" of the corporation, as that term is defined in section 2(a)(40) of the Investment Company Act of 1940. ARTICLE X CERTAIN PROVISIONS RELATING TO FITCH IBCA, INC. Section 10.01. General Definitions. Capitalized terms used in this Article X but not specifically defined herein shall have the respective meanings assigned to them in the Articles Supplementary creating Remarketed Preferred Stock Series A, Series B, Series C, Series D and Series E, as amended (the "Articles Supplementary"), which definitions are hereby incorporated by reference herein. The following terms shall have the meanings set forth below for purposes of this Article X: "Corporate Bonds" means debt securities issued by a business entity. "Discount Factor" means Discount Factor Supplied by Fitch. "Discount Factor Supplied by Fitch" means, initially, for any asset held by the corporation, the number set forth opposite such type of asset in the following table (it being understood that any asset held by the corporation and not listed in the following table or in an amendment or supplement thereto shall have a Discounted Value of zero): Discount Factor (1) -------- Type I Corporate Bonds with a remaining term to maturity of less than or equal to 2 years...........................1.16 Type I Corporate Bonds with a remaining term to maturity of more than 2 years, but less than or equal to 4 years....1.26 Type I Corporate Bonds with a remaining term to maturity of more than 4 years, but less than 7 years................1.40 11 Discount Factor (1) -------- Type I Corporate Bonds with a remaining term to maturity of more than 7 years, but less than or equal to 12 years....................................1.44 Type I Corporate Bonds with a remaining term to maturity of more than 12 years, but less than or equal to 25 years....................................1.48 Type I Corporate Bonds with a remaining term to maturity of more than 25 years, but less than or equal to 30 years...............................1.52 Type I Corporate Bonds with a remaining term to maturity of more than 30 years, but less than or equal to 50 years...............................1.60 Type II Corporate Bonds with a remaining term to maturity of less than or equal to 2 years...............1.25 Type II Corporate Bonds with a remaining term to maturity of more than 2 years, but less than or equal to 4 years.....................................1.26 Type II Corporate Bonds with a remaining term to maturity of more than 4 years, but less than or equal to 7 years................................1.43 Type II Corporate Bonds with a remaining term to maturity of more than 7 years, but less than or equal to 12 years...............................1.44 Type II Corporate Bonds with a remaining term to maturity of more than 12 years, but less than or equal to 25 years...............................1.51 Type II Corporate Bonds with a remaining term to maturity of more than 25 years, but less than or equal to 30 years...............................1.56 Type II Corporate Bonds with a remaining term to maturity of more than 30 years, but less than or equal to 50 years....................................1.65 Type III Corporate Bonds with a remaining term to maturity of more than or equal to 2 years...............1.25 Type III Corporate Bonds with a remaining term to maturity of more than 2 years, but less than or equal to 4 years.....................................1.29 Type III Corporate Bonds with a remaining term to maturity of more than 4 years, but less than or equal to 7 years.....................................1.46 Type III Corporate Bonds with a remaining term to maturity of more than 7 years, but less than or equal to 12 years...............................1.50 Type III Corporate Bonds with a remaining term to maturity of more than 12 years, but less than or equal to 25 years....................................1.55 Type III Corporate Bonds with a remaining term to maturity of more than 25 years, but less than or equal to 30 years....................................1.60 Type III Corporate Bonds with a remaining term to maturity of more than 30 years, but less than or equal to 50 years....................................1.70 12 Discount Factor (1) -------- Type IV Corporate Bonds with a remaining term to maturity of less than or equal to 2 years.................27 Type IV Corporate Bonds with a remaining term to maturity of more than 2 years, but less than or equal to 4 years.....................................1.32 Type IV Corporate Bonds with a remaining term to maturity of more than 4 years, but less than or equal to 7 years.....................................1.52 Type IV Corporate Bonds with a remaining term to maturity of more than 7 years, but less than or equal to 12 years....................................1.57 Type IV Corporate Bonds with a remaining term to maturity of more than 12 years, but less than or equal to 25 years....................................1.63 Type IV Corporate Bonds with a remaining term to maturity of more than 25 years, but less than or equal to 30 years....................................1.69 Type IV Corporate Bonds with a remaining term to maturity of more than 30 years, but less than or equal to 50 years....................................1.80 Stocks ------ Utility Stock.....................................................2.00 Utility Stocks (ADRs).............................................2.50 Investment Grade REIT Stock.......................................2.15 Below Investment Grade or Unrated REIT Stock, capitalization greater than $500,000,000. ..................2.50 Below Investment Grade or Unrated REIT Stock, capitalization less than $500,000,000.......................3.00 Preferred Stock rated AAA by Fitch................................1.66 Preferred Stock rated AA by Fitch.................................1.68 Preferred Stock rated A by Fitch..................................1.71 Preferred Stock rated BBB by Fitch................................1.77 FNMA, FHLMC or GNMA Certificates -------------------------------- FNMA or FHLMC with 6.0% interest rate.............................1.70 FNMA or FHLMC with 7.0% interest rate.............................1.65 FNMA or FHLMC with 8.0% interest rate.............................1.59 FNMA or FHLMC with 9.0% interest rate.............................1.52 FNMA or FHLMC with 10.0% interest rate............................1.40 13 GNMA with 6% interest rate........................................1.80 GNMA with 7% interest rate........................................1.70 GNMA with 8% interest rate........................................1.64 GNMA with 9% interest rate........................................1.57 GNMA with 10.0% interest1.45 U.S. Government Obligations having a remaining term to maturity of up to one year................................1.06 U.S. Government Obligations having a remaining term to maturity of more than one year but not more than two years............................................1.11 U. S. Government Obligations having a remaining term to maturity of more than two years but not more than five years...........................................1.20 U. S. Government Obligations having a remaining term to maturity of more than five years but not more than fifteen years........................................1.45 U. S. Government Obligations having a remaining term to maturity of more than fifteen years but not more than twenty-five years....................................1.65 U. S. Government Obligations having a remaining term to maturity of more than twenty-five years but not more than forty years.....................................1.80 Cash held in segregated custody account at an F-1 + Institution.........................................1.00 Cash held in segregated custody account at an F-1 Institution.....1.00 ----------------------- (1) In the case of Eligible Portfolio Property rated by Moody's or S&P, but not rated by Fitch, the Discount Factor Supplied by Fitch shall be the Discount Factor determined therefor in writing by Fitch. Absent such written notification, the asset shall have a Discounted Value of zero. Notwithstanding the foregoing, for so long as is required by Fitch to maintain its then-current credit rating of the Original RP or Serial RP, the Discount Factor Supplied by Fitch with respect to Eligible Portfolio Property sold pursuant to a reverse repurchase agreement with a remaining term to maturity of more than 25 days on the date of determination of the Discounted Value of such Eligible Portfolio Property shall be the current Discount Factor provided by Fitch to the corporation in writing for the purpose of such determination. "Discounted Value," with respect to any asset held by the corporation as of any date, means the quotient of the Market Value of such asset divided by the applicable Discount Factor Supplied by Fitch, provided that in no event shall the Discounted Value of any asset constituting Eligible Portfolio Property as of any date exceed the unpaid principal balance or face amount of such asset as of that date. With respect to the calculation of the Discounted Value of any Utility Bond included in the corporation's Eligible Portfolio Property, such calculation shall be made using the criteria set forth in the definitions of Utility Bonds and Market Value. With respect to the calculation of the Discounted Value of any Utility Stock included in the corporation's Eligible Portfolio Property such calculation shall be made using the criteria set forth in the definitions of Utility Stocks and Market Value. When calculating the aggregate 14 Discounted Value of the corporation's Eligible Portfolio Property for comparison with the Fitch RP Basic Maintenance Amount, the Discount Factors Supplied by Fitch shall be used. Notwithstanding any other provision of the Articles Supplementary or these bylaws, any Utility Bond that has a remaining maturity of more than 30 years, and any asset as to which there is no Discount Factor Supplied by Fitch either in the Articles Supplementary, in an amendment or supplement thereof or in this Article X, shall have a Discounted Value for purposes of determining the aggregate Discounted Value of the corporation's Eligible Portfolio Property calculated using the Discount Factor Supplied by Fitch of zero. "F-1+ Institution" means a financial institution that has a debt rating of F-1+ by Fitch. "Fitch" means Fitch IBCA, Inc. "Fitch RP Basic Maintenance Amount" means, initially, as of any date, the sum of (i) the aggregate liquidation preference of the shares of RP outstanding and shares of Other RP outstanding, (ii) to the extent not covered in (i), the aggregate amount of accumulated but unpaid cash dividends with respect to the shares of RP outstanding and shares of Other RP outstanding, (iii) the aggregate principal amount of, and an amount equal to accrued but unpaid interest on any Notes outstanding, (iv) the aggregate Projected Dividend Amount, and (v) an amount equal to the projected expenses of the corporation (including, without limitation, fee and indemnification obligations of the corporation incurred in connection with any commercial paper program undertaken by the corporation or with any credit facility related thereto) for the next three month period. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial elements comprising the Fitch RP Basic Maintenance Amount if the Board of Directors determines and Fitch advises the corporation in writing that such adjustment, modification, alteration or change will not adversely affect its then-current rating on the RP. "RP Basic Maintenance Amount" means the Fitch RP Basic Maintenance Amount. Section 10.02. Eligible Assets. The following assets, specifically Preferred Stock, Type I Corporate Bonds, Type II Corporate Bonds, Type III Corporate Bonds, and Type IV Corporate Bonds, having met the requirements set forth in the definition of "Other Permitted Securities" in the Articles Supplementary, shall be included as Other Permitted Securities for purposes of determining maintenance of the Fitch RP Basic Maintenance Amount. "Below Investment Grade REIT Stock" means an equity security issued by a REIT rated BB+ or lower by Fitch. "Preferred Stock" means securities of an issuer senior in preference to the common equity of the issuer. 15 "Type I Corporate Bonds" as of any date means Corporate Bonds rated AAA by Fitch. "Type II Corporate Bonds" as of any date means Corporate Bonds rated AA- to AA+ by Fitch. "Type III Corporate Bonds" as of any date means Corporate Bonds rated A- to A+ by Fitch. "Type IV Corporate Bonds" as of any date means Corporate Bonds rated BBB- to BBB+ by Fitch. "Unrated REIT Stock" shall mean an equity security issued by a REIT that is not rated by the Ratings Agencies or by Fitch. Section 10.03. RP Basic Maintenance Amount. (a) The corporation shall maintain, on each Valuation Date, Eligible Portfolio Property having an aggregate Discounted Value at least equal to the RP Basic Maintenance Amount. (b) On or before 5:00 p.m., New York City time, on the third Business Day after each Valuation Date, the corporation shall complete and deliver to the Remarketing Agent and the Paying Agent an RP Basic Maintenance Report, which will be deemed to have been delivered to the Remarketing Agent and the Paying Agent if the Remarketing Agent and the Paying Agent receive a copy or telecopy, telex or other electronic transcription thereof and on the same day the corporation mails to the Remarketing Agent and the Paying Agent for delivery on the next Business Day the full RP Basic Maintenance Report. A failure by the corporation to deliver an RP Basic Maintenance Report under this paragraph 10.03(b) without the prior consent of the Remarketing Agent and the Paying Agent shall be deemed to be delivery of an RP Basic Maintenance Report indicating the Discounted Value for all assets of the corporation is less than the RP Basic Maintenance Amount, as of the relevant Valuation Date. (c) Within ten Business Days after the date of delivery to the Remarketing Agent and the Paying Agent of an RP Basic Maintenance Report in accordance with paragraph 10.03(b) above relating to a Quarterly Valuation Date, the Independent Accountant will confirm in writing to the Remarketing Agent and the Paying Agent (A) the mathematical accuracy of the calculations reflected in such Report, (B) that, in such Report, the corporation determined in accordance with the Articles Supplementary the assets of the corporation which constitute Eligible Portfolio Property at such Quarterly Valuation Date, (C) that, in such Report, the corporation determined in accordance with the Articles Supplementary whether the corporation had, at such Quarterly Valuation Date, Eligible Portfolio Property of an aggregate Discounted Value at least equal to the RP Basic Maintenance Amount, (D) with respect to the Fitch rating on Utility Bonds and Senior Debt obligations, issuer name, issue size and coupon rate listed in such Report, that information has been traced and agrees with the information listed in the Fitch IBCA Ratings Book (in the event such information does not agree or such information is not listed in the Fitch IBCA Ratings Book, the Independent Accountant will inquire of Fitch what such information is and provide a listing in their letter of such difference), 16 and (E) with respect to the lower of two bid prices (or alternative permissible factors used in calculating the Market Value) provided by the custodian of the corporation's assets to the corporation for purposes of valuing securities in the corporation's portfolio, the Independent Accountant has traced the price used in such Report to the lower of the two bid prices listed in the Report provided by such custodian and verified that such information agrees (in the event such information does not agree, the Independent Accountant will provide a listing in its letter of such differences) (such confirmation is herein called the "Accountant's Confirmation"). If any Accountant's Confirmation delivered pursuant to this paragraph 10.03(c) shows that an error was made in the RP Basic Maintenance Report for a Quarterly Valuation Date, or shows that a lower aggregate Discounted Value for the aggregate of all Eligible Portfolio Property of the corporation was determined by the Independent Accountant, the calculation or determination made by such Independent Accountant shall be final and conclusive and shall be binding on the corporation, and the corporation shall accordingly amend the RP Basic Maintenance Report to the Remarketing Agent and Paying Agent promptly following receipt by the Remarketing Agent and the Paying Agent of such Accountant's Confirmation. ARTICLE XI CERTAIN PROVISIONS RELATING TO RATINGS ORGANIZATIONS Section 11.01. General Definitions. Capitalized terms used in this Article XI but not specifically defined herein shall have the respective meanings assigned them in the Articles Supplementary, which definitions are hereby incorporated by reference herein. The following capitalized terms shall have the following meanings for purposes of this Article XI, whether used in the singular or plural. "REIT" means an entity qualifying as a real estate investment trust under the United States Internal Revenue Code of 1986, as amended. "NYSE" means the New York Stock Exchange. "AMEX" means the American Stock Exchange. "ADR" means American Depository Receipts. "National Securities Exchange" means the NYSE, AMEX, Midwest Stock Exchange, Philadelphia Stock Exchange, Boston Stock Exchange, NASDAQ System or any other national securities exchange. "Market Value" means, as to any S&P Eligible REIT Share, S&P Eligible Utility ADR, S&P Eligible Preferred Stock and S&P Eligible Corporate Bond, the value calculated by reference to the highest closing price on a National Securities Exchange on the date preceding any relevant date of determination. "MTNP" means, initially, a medium term note program. "Yankee Bond" means, initially, a debt security which is issued by a foreign government, province, supranational agency or foreign corporation. 17 Section 11.02. S&P Eligible Asset Definitions. The following assets, specifically S&P Eligible REIT Shares, S&P Eligible Preferred Stock, S&P Eligible Corporate Bonds and S&P Eligible Utility ADRs, having met the requirements set forth in the definition of "Other Permitted Securities" in the Articles Supplementary, shall be included as "Other Permitted Securities" for purposes of determining maintenance of the "S&P RP Basic Maintenance Amount". "S&P Eligible REIT Share" means, initially, an equity security issued by a REIT. So long as the shares of RP are rated AAA or higher by S&P, no equity security held by the Corporation shall be deemed an S&P Eligible REIT Share unless (i) such equity security has been listed or traded for more than 15 months on a National Securities Exchange and (ii) the aggregate Market Value of all such equity securities outstanding is equal to or exceeds $100,000,000. So long as the shares of RP are rated AAA or higher by S&P, no equity security held by the Corporation shall be deemed an S&P Eligible REIT Share to the extent (but only to the proportionate extent) (i) the amount thereof held by the Corporation exceeds the lesser of (x) 5% of the issued and outstanding equity securities of the REIT issuing such S&P Eligible REIT Shares and (y) the average weekly trading volume for the past month preceding any relevant date of determination; and (ii) the aggregate Market Value of the amount thereof held by the Corporation exceeds 5% of the aggregate Market Value of the issued and outstanding equity securities of the REIT issuing such equity security. "S&P Eligible Utility ADRs" means, initially, ADRs issued by public utility companies, which ADRs have been listed or traded for more than 15 months on a National Securities Exchange. So long as the shares of the RP are rated AAA or higher by S&P, no ADR held by the Corporation shall be deemed an S&P Eligible Utility ADR unless the aggregate Market Value of all such ADRs outstanding is equal to or exceeds $100,000,000. So long as the shares of RP are rated AAA or higher by S&P, no ADR held by the Corporation shall be deemed an S&P Eligible Utility ADR to the extent (but only to the proportionate extent) (i) the amount thereof held by the Corporation exceeds the lesser of (x) 5% of the issued and outstanding S&P Eligible Utility ADRs of the public utility company issuing such S&P Eligible Utility ADRs and (y) the average weekly trading volume for the past month preceding any relevant date of determination; and (ii) the aggregate Market Value of the amount thereof held by the Corporation does not exceed 5% of the aggregate Market Value of the issued and outstanding equity securities of the public utility company issuing such equity security. "S&P Eligible Preferred Stock" means, initially, preferred stock (i) rated BBB or higher by S&P or (ii) issued by an entity having debt obligations outstanding with senior unsecured or subordinated unsecured debt ratings of BBB or higher by S&P; provided, however, that no share of Yankee Preferred Stock (as such term is defined by S&P from time to time) will be considered an S&P Eligible Preferred Stock unless such Yankee Preferred Stock is (x) rated A or higher by S&P or (y) issued by an entity having debt obligations outstanding with senior unsecured or subordinated unsecured debt ratings of A or higher by S&P. So long as the shares of RP are rated AAA or higher by S&P, no preferred stock owned by the Corporation shall be deemed an S&P Eligible Preferred Stock to the extent (but only to the proportionate extent) (i) the aggregate of preferred stock owned by the Corporation of an issuer having debt obligations outstanding with a senior debt rating of A or higher by S&P exceeds 5% of the aggregate Market Value of Eligible Portfolio Property 18 owned by the Corporation; (ii) the aggregate Market Value of preferred stock owned by the Corporation of an issuer having debt obligations outstanding with a senior debt rating of BBB by S&P exceeds 2.5% of the aggregate Market Value of Eligible Portfolio Property owned by the Corporation; and (iii) the aggregate Market Value of preferred stock owned by the Corporation in any one industry (as defined by S&P from time to time) exceeds 20% of the aggregate Market Value of the securities owned by the Corporation. In addition, so long as the shares of RP are rated AAA or higher by S&P, no preferred stock held by the Corporation shall be deemed an S&P Eligible Preferred Stock unless such Preferred Stock meets the following conditions: (i) shares of the issuer (or if the issuer is a special purpose corporation, the parent of the issuer) of such preferred stock are traded on the NYSE or the AMEX; (ii) except in the case of Yankee Preferred Stock, such preferred stock is cumulative; (iii) such preferred stock is nonconvertible; (iv) such preferred stock has no attached warrants; (v) the aggregate Market Value of all outstanding equity securities of the issues of such preferred stock is at least $500,000; (vi) such preferred stock (x) has an initial issue size of at least $50 million or (y) is issued by an entity with preferred stock outstanding with an aggregate Market Value of at least $50 million; (vii) the issuer of such preferred stock pays cash dividends in U.S. denominated dollars and has paid cash dividends consistently over the previous three years (unless the issuer of the preferred stock has no relevant history of issuing dividends, in which case the issuer has received an A or higher debt or preferred stock rating from S&P); (viii) the aggregate Market Value of all equity securities outstanding of the issuer of the preferred stock is equal to or greater than $50 million; (ix) the aggregate Market Value of such preferred stock (calculated by reference to the closing price on the Securities Exchanges for such preferred stock on the day preceding any relevant date of determination) owned by the Corporation is no less than $500,000 and no more than $5,000,000, unless such preferred stock is floating rate preferred stock where an auction restricts the Corporation's ownership of such floating rate preferred stock; 19 (x) if such preferred stock is floating rate preferred stock, (x) such floating rate preferred stock has a dividend period of less than or equal to 49 days, unless such preferred stock is a new issue, in which case, the first dividend period of such new issue is up to 64 days; and (y) such floating rate preferred stock has not been subject to a failed auction; (xi) if such preferred stock is adjustable rate preferred stock, the aggregate Market Value of all adjustable rate preferred stock owned by the Corporation does not exceed 10% of the Other Permitted Securities owned by the Corporation. "S&P Eligible Corporate Bonds" means, initially, debt securities issued by a corporation having a maturity of thirty years or less. So long as the shares of RP are rated AAA or higher by S&P, no debt security held by the Corporation shall be deemed an S&P Eligible Corporate Bond unless (i) in the case of a debt security rated CCC or lower by S&P, such debt security is a subordinated debt security with an implied senior rating by S&P of B- or higher and (ii) at least two dealers registered with the National Association of Securities Dealers offer bids on such debt security. In addition, so long as the shares of RP are rated AAA or higher by S&P, no debt security held by the Corporation shall be deemed an S&P Eligible Corporate Bond unless the following conditions are met: (i) at least 80% of the aggregate Market Value of debt securities owned by the Corporation which are rated BBB or lower have an original issue size of $100 million or higher and the remaining 20% have an original issue size no lower than $50 million; (ii) in the case of a debt security issued under a MTNP such debt security is (x) rated BBB or higher by S&P and has an original issue size equal to the maximum number of medium term notes authorized by the issuer pursuant to such MTNP and (y) part of a series of medium term notes which exceeds $5 million in aggregate Market Value; (iii) in the case of a Yankee Bond, such Yankee Bond is rated A or higher by S&P and the aggregate of such Yankee Bonds owned by the Corporation does not exceed 25% of the aggregate Market Value of securities owned by the Corporation; (iv) financial statements are publicly available for the issuer of such debt securities and such debt securities are registered under the Securities Act of 1933; (v) the terms of such debt securities provide for periodic interest payments in cash over the life of the security; (vi) such debt securities are not convertible or exchangeable into capital of the issuer at any time; provided that 10% of such debt securities outstanding may be subject to exchange or tender offer; and (vii) in the case of Type IV S&P Eligible Corporate Bonds, the aggregate Market Value of such debt securities issued by companies engaged principally in any one industry (as defined by S&P) does not exceed 20% of the aggregate Market Value of all securities owned by the Corporation. 20 "Type I S&P Eligible Corporate Bonds" means, initially, S&P Eligible Corporate Bonds rated AAA by S&P. "Type II S&P Eligible Corporate Bonds" means, initially, S&P Eligible Corporate Bonds rated AA by S&P. "Type III S&P Eligible Corporate Bonds" means, initially, S&P Eligible Corporate Bonds rated A by S&P. "Type IV S&P Eligible Corporate Bonds" means, initially, S&P Eligible Corporate Bonds rated BBB by S&P. Section 11.03. Discount Factors Supplied by S&P. The following Discount Factors, having been supplied by S&P, shall be "Discount Factors Supplied by S&P" as defined in the Articles Supplementary for purposes of calculating the "Discounted Value" of the assets for purposes of determining maintenance of the S&P RP Basic Maintenance Amount". S&P Eligible REIT Shares which have been outstanding 2.52 for more than eighteen (18) months S&P Eligible REIT Shares which have been outstanding for 3.25 eighteen (18) or fewer months S&P Eligible Utility ADRs which have been outstanding for 2.52 more than eighteen (18) months S&P Eligible Utility ADRs which have been outstanding for 3.25 eighteen (18) or fewer months Type I S&P Eligible Corporate Bonds 1.50 Type II S&P Eligible Corporate Bonds 1.55 Type III S&P Eligible Corporate Bonds 1.60 Type IV S&P Eligible Corporate Bonds 1.65 Type V S&P Eligible Corporate Bonds 1.70 Type VI S&P Eligible Corporate Bonds 1.80 Type VII S&P Eligible Corporate Bonds 1.90 Type VIII S&P Eligible Corporate Bonds 2.05 Type IX S&P Eligible Corporate Bonds 2.20 S&P Eligible Preferred Stock (Sinking Fund, Fixed Rate, Perpetual or Floating (Rate) 2.40 S&P Eligible Preferred Stock (Adjustable or Auction Rate) 4.00 21 Section 11.04 . Moody's Eligible Asset Definitions. The following assets, specifically Auction Rate Preferred Stock, Hybrid Securities, Preferred Stock, Type I REIT Shares, Type I Utility ADRs, Industrial Bonds and Utility Preferred Stock, having met the requirements set forth in the definition of "Other Permitted Securities" in the Articles Supplementary, shall be included as "Other Permitted Securities" for purposes of determining maintenance of the "Moody's RP Basic Maintenance Amount". "Auction Rate Preferred Stock" means, initially, preferred stock rated a3 or higher which is issued by a company which has paid dividends during the preceding three year period. "Convertible Preferred Stock" means, initially, Utility Preferred Stock which is mandatorily convertible into common equity of the company issuing such securities. "Hybrid Preferred Stock" means monthly income Preferred Stock, quarterly income Preferred Stock and other nonstandard Preferred Stock rated a3 or higher which is issued by a company which has paid dividends during the preceding three years. "Industrial Bond" means, initially, industrial revenue bonds and industrial development bonds. "Preferred Stock" means, initially, preferred stock rated a3 or higher which is (i) not convertible into common equity and (ii) issued by a non-utility company which has paid dividends during the preceding 3 years. "Type I Industrial Bonds" as of any date means Industrial Bonds rated Aaa by Moody's. "Type II Industrial Bonds" as of any date means Industrial Bonds rated Aa3 by Moody's. "Type III Industrial Bonds" as of any date means Industrial Bonds rated A3 by Moody's. "Type IV Industrial Bonds" as of any date means Industrial Bonds rated Baa3 by Moody's. "Type I REIT Shares" means, initially, equity securities issued by REITs having debt obligations outstanding with senior unsecured or subordinated unsecured debt ratings of Baa3 or higher from Moody's. So long as the shares of RP are rated Baa3 or higher by Moody's, no equity security held by the Corporation shall be deemed a REIT Share unless (i) such equity security is traded on the NYSE or the AMEX, (ii) the aggregate value of all such equity securities outstanding (calculated based upon the highest of the closing prices on the NYSE or the AMEX as applicable, for such equity security on the day preceding any relevant date of determination) is equal to or exceeds $500,000,000 and (iii) the REIT which issues such equity security has paid dividends for all periods since it first qualified as a REIT. In addition, so long as the shares of 22 RP are rated Baa3 or higher by Moody's, no equity security held by the Corporation shall be deemed a Type I REIT Share to the extent (but only to the proportionate extent) the amount thereof held by the Corporation exceeds the lesser of (i) 5% of the issued and outstanding equity securities of the REIT issuing such equity security and (ii) the average weekly trading volume thereof for the 26 week period immediately preceding any relevant date of determination. "Type I Utility ADRs" means, initially, ADRs, which are traded on the NYSE or the AMEX with respect to equity securities issued by public utility companies having U.S. dollar denominated debt obligations outstanding with senior unsecured or subordinated unsecured debt ratings of Baa3 or higher from Moody's. In addition, so long as the shares of RP are rated Baa3 or higher by Moody's, no equity security held by the Corporation shall be deemed a Type I Utility ADR to the extent (but only to the proportionate extent) the amount thereof held by the Corporation exceeds the lesser of (i) 5% of the issued and outstanding equity securities of the utility company issuing such equity security and (ii) the average weekly trading volume thereof for the 26 week period immediately preceding any relevant date of determination. "Utility Preferred Stock" means, initially, preferred stock rated a3 or higher which is issued by a public utility company which had paid dividends during the preceding three years. Section 11.05 . Discount Factors Supplied by Moody's. The following Discount Factors, having been supplied by Moody's, shall be "Discount Factors Supplied by Moody's" as defined in the Articles Supplementary for purposes of calculating the "Discounted Value" of the assets for purposes of determining maintenance of the "Moody's RP Basic Maintenance Amount". Discount Factor(1) Auction Rate Preferred Stock 3.50 Convertible Preferred Stock 2.00 Hybrid Preferred Stock 3.50 Preferred Stock 2.35 Type I Industrial Bonds having a remaining term to maturity of one year or less: 1.20 Type I Industrial Bonds having a remaining term to maturity of more than one year but not more than two years: 1.27 Type I Industrial Bonds having a remaining term to maturity of more than two years but not more than three years: 1.32 23 Type I Industrial Bonds having a remaining term to maturity of more than three years but not more than four years: 1.38 Type I Industrial Bonds having a remaining term to maturity of more than four years but not more than five years: 1.44 Type I Industrial Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.53 Type I Industrial Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.61 Type I Industrial Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.69 Type I Industrial Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.76 Type I Industrial Bonds having a remaining term to maturity of more than 20 years but less than 30 years: 1.79 Type II Industrial Bonds having a remaining term to maturity of one year or less: 1.24 Type II Industrial Bonds having a remaining term to maturity of more than one year but not more than two years: 1.31 Type II Industrial Bonds having a remaining term to maturity of more than two years but not more than three years: 1.38 Type II Industrial Bonds having a remaining term to maturity of more than three years but not more than four years: 1.44 24 Type II Industrial Bonds having a remaining term to maturity of more than four years but not more than five years: 1.50 Type II Industrial Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.60 Type II Industrial Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.70 Type II Industrial Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.76 Type II Industrial Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.84 Type II Industrial Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 1.87 Type III Industrial Bonds having a remaining term to maturity of one year or less: 1.29 Type III Industrial Bonds having a remaining term to maturity of more than one year but not more than two years: 1.38 Type III Industrial Bonds having a remaining term to maturity of more than two years but not more than three years: 1.44 Type III Industrial Bonds having a remaining term to maturity of more than three years but not more than four years: 1.51 25 Type III Industrial Bonds having a remaining term to maturity of more than four years but not more than five years: 1.57 Type III Industrial Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.67 Type III Industrial Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.77 Type III Industrial Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.84 Type III Industrial Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 1.92 Type III Industrial Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 1.95 Type IV Industrial Bonds having a remaining term to maturity of one year or less: 1.36 Type IV Industrial Bonds having a remaining term to maturity of more than one year but not more than two years: 1.44 Type IV Industrial Bonds having a remaining term to maturity of more than two years but not more than three years: 1.50 Type IV Industrial Bonds having a remaining term to maturity of more than three years but not more than four years: 1.57 26 Type IV Industrial Bonds having a remaining term to maturity of more than four years but not more than five years: 1.63 Type IV Industrial Bonds having a remaining term to maturity of more than five years but not more than seven years: 1.74 Type IV Industrial Bonds having a remaining term to maturity of more than seven years but not more than ten years: 1.83 Type IV Industrial Bonds having a remaining term to maturity of more than ten years but not more than 15 years: 1.92 Type IV Industrial Bonds having a remaining term to maturity of more than 15 years but not more than 20 years: 2.02 Type IV Industrial Bonds having a remaining term to maturity of more than 20 years but not more than 30 years: 2.03 Type I REIT Shares: 3.00 Type I Utility ADRs issued by an entity organized under the laws of Argentina or any political subdivision thereof: 5.00 Type I Utility ADRs issued by an entity organized under the laws of Australia or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Belgium or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Brazil or any political subdivision thereof: 4.20 Type I Utility ADRs issued by an entity organized under the laws of Canada or any political subdivision thereof: 2.00 27 Type I Utility ADRs issued by an entity organized under the laws of Chile or any political subdivision thereof: 3.00 Type I Utility ADRs issued by an entity organized under the laws of Denmark or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of France or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Germany or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Greece or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Italy or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Mexico or any political subdivision thereof: 4.00 Type I Utility ADRs issued by an entity organized under the laws of Netherlands or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Peru or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Portugal or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of Spain or any political subdivision thereof: 2.00 Type I Utility ADRs issued by an entity organized under the laws of the United Kingdom or any political subdivision thereof: 2.00 Utility Preferred Stock 1.60 28 Section 11.06. Revised Definitions. The definitions of "Utility Bonds" and "Utility Stocks" set forth in the Articles Supplementary are hereby modified to delete the requirement that the issuers of such securities be "state regulated". Section 11.07. Initial Elements of Moody's RP Basic Maintenance Amount. In lieu of the definition in Part I, Paragraph 1, Definitions, of the Articles, the following definition of "Moody's RP Basic Maintenance Amount," having been approved by Moody's, shall be used for purposes of the Articles: "Moody's RP Basic Maintenance Amount" means, initially, as of any date, the sum of (i) the aggregate liquidation preference of the shares of RP outstanding and shares of Other RP outstanding, (ii) to the extent not covered in (i), the aggregate amount of accumulated but unpaid cash dividends with respect to the shares of RP outstanding and shares of Other RP outstanding, (iii) any Rights due and payable and any equivalent rights to receive cash with respect to Other RP which are due and payable, (iv) an amount equal to the product of (x) three and (y) the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding, (v) an amount equal to the sum of (x) the amount of accrued but unpaid interest on the principal amount of the Corporation's loan from the Aid Association for Lutherans then outstanding and (y) an amount equal to 70 days of additional accrued interest on such loan at the then-current interest rate borne by such loan, (vi) the aggregate principal amount of any other then outstanding indebtedness of the Corporation for money borrowed, (vii) an amount equal to the sum of (x) the aggregate accrued but unpaid interest on the indebtedness referred to in the foregoing clause (vi) and (y) an amount equal to 70 days of additional accrued interest on such indebtedness at the then-current interest rate(s) borne by such indebtedness, (viii) the aggregate Projected Dividend Amount, (ix) redemption premium, if any, and (x) the greater of $200,000 or an amount equal to projected expenses of the Corporation (including, without limitation, fee and indemnification obligations of the Corporation incurred in connection with any commercial paper program undertaken by the Corporation or with any credit facility related thereto) for the next three month period. The Board of Directors shall have the authority to adjust, modify, alter or change from time to time the initial elements comprising the Moody's RP Basic Maintenance Amount if the Board of Directors determines and Moody's advises the Corporation in writing that such adjustment, modification, alteration or change will not adversely affect its then-current rating on the RP. 29 -----END PRIVACY-ENHANCED MESSAGE-----