As filed with the Securities and Exchange Commission on April 30, 2003
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. 45 [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.
PART A: INFORMATION REQUIRED IN A PROSPECTUS
Shareholder Transaction Expenses
Sales Load (as a percentage of offering price).....................N/A
Dividend Reinvestment and Cash Purchase Plan Fees..................(1)
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Annual Expenses (as a percentage of net assets attributable to common shares)
Management Fees................................................. 0.78%
Interest Payments on Borrowed Funds............................. 0.25%
Other Expenses.................................................. 0.41%
Total Annual Expenses.................................. 1.44%
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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 $15 $30 $79 $173
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(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.
(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.
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.
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.
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.
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.
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 -15.15% -7.97% 0.79% 6.40% 13.58% 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 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, 2002, 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 100% 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." During 2002, dividend captures accounted for approximately 30% of the Fund's investment income. 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. However, under normal circumstances, the holder of the call option will elect to exercise the option and thus the Fund will have disposed of the stock by 10:00 a.m. on the trading day immediately following the ex-dividend date. 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 Fund incurs transaction costs in connection with the purchase of the stock and the sale of the option. In 2002 such transaction costs equaled
approximately 0.3% 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. Because of the possibility that the call option will not be exercised, the Fund utilizes the 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.
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
---- --- ---- --- ---- ---
2003 March 31 $ 10.7500 $ 9.6900 $ 7.51 $ 6.85 43.14% 41.46%
2002 December 31 10.0000 8.1900 7.31 6.35 36.80% 28.98%
September 30 10.4300 7.8500 7.61 7.09 37.06% 10.72%
June 30 11.6200 9.1500 9.09 8.63 27.83% 6.03%
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%)
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On April 11, 2003, the net asset value was $7.01, trading prices ranged between $10.30 and $10.44 (representing a premium to net asset value of 46.93% and 48.93%, respectively) and the closing price was $10.37 (representing a premium to net asset value of 47.93%).
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 $3.9 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 four 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.
Inc. Under the terms of an administration agreement (the
"Administration Agreement"), the Administrator provides all
management and administrative services required in
connection 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.
(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 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.
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.
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).
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,
(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.
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 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).
(4)
(3) Amount Outstanding
(2) Amount Held by at 3/31/2003
(1) Amount the Fund or for Exclusive of Amount
Title of Class Authorized its Account Shown Under (3)
-------------- ---------- ----------- ---------------
Common, $.001
par value 250,000,000 -0- 216,844,831
Preferred, $.001
par value 100,000,000 -0- 5,000
|
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.
2. See Item 8.2.
3. See Item 8.2.
4. The Fund's portfolio turnover rate was 197.27% in 2002, 213.48% in 2001 and 229.70% in 2000. 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 and (ii) a lower level of dividend captures due to higher contributions to income from the Fund's leverage (see Item 8.3 for an explanation of dividend captures).
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: 77 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 & 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: 77
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: 71
-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
------- ------------------ ----------------------
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: 76 named Walter E. Heller International 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: 76 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 48 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); Member,
Circle Financial Group, Ltd. (private investment
company); Director, Third Age Media Inc. (internet
marketing company); Member (2002) and Chair
(2003), Policyowners' Examining Committee,
Northwestern Mutual Life Insurance Company.
Robert J. Genetski (4)(5)(6) Director since April 2001. President, Robert 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: 60 (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: 72 Corporation, June 1993-November 1995 (President and
Chief Executive Officer, January 1992-June 1993);
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) since 2000;
Louisville, Kentucky 40202 Chairman and Chief Executive Officer, American Life
Age: 60 and Accident Insurance Company of Kentucky since
1971; director, Constellation Energy Group, Inc.
(public utility holding company), Brinly-Hardy
Corporation (lawn and garden tractor accessories),
Thorium Power Corporation (designer of
non-proliferative fuel for nuclear energy needs).
-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
------- ------------------ ----------------------
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 64 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. Private investor and, since February 2003, Senior
141 West Jackson Boulevard Term expires in 2003. Adviser to the Chicago Board of Education; President
Chicago, Illinois 60604 and Chief Executive Officer, Board of Trade of the
Age: 56 City of Chicago, Inc. March 2001-November 2002;
Retired bank executive 1999-2001; Vice Chairman
and 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.
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: 46 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 and Senior Vice Senior Vice President, Duff & Phelps Investment
55 East Monroe Street President since January 1995 Management Co. since 1993 (Vice President 1987-1993).
Chicago, Illinois 60603 (Treasurer January 1995-
Age: 53 September 2002).
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: 56 1994-1996.
Joseph C. Curry, Jr. Treasurer since September 2002; Senior Vice President, J.J.B. Hilliard, W.L. Lyons,
Hilliard Lyons Center Vice President since April 1988. Inc. since 1994 (Vice President 1982-1994); Vice
Louisville, Kentucky 40202 President, Hilliard Lyons Trust Company; President,
Age: 58 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: 42 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 2002 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 four times during 2002.
(4) Member of the nominating committee of the board of directors, which selects nominees for election as directors and officers. The nominating committee met three times during 2002. 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 four times during 2002.
(6) Director elected by holders of preferred stock.
(7) Mr. Jeffries oversees 29 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, 2002, 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
Securities in All Funds
Overseen or to be
Dollar Range of Overseen by Director
Name of Equity Securities or Nominee in Family
Director in the Fund of Investment 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 (1) none (1)
Robert J. Genetski $50,001-$100,000 $50,001-$100,000
Francis E. Jeffries over $100,000 over $100,000
Nancy Lampton over $100,000 over $100,000
Carl F. Pollard over $100,000 over $100,000
David J. Vitale $10,001-$50,000 $10,001-$50,000
-------------------
|
(1) Ms. Duckworth purchased equity shares in the Fund on March 5, 2003. As a result of this purchase the dollar range of equity securities owned by her in the Fund (and in all registered investment companies overseen by her within the same family of investment companies as the Fund) became $50,001-$100,000.
8. As of December 31, 2002, 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.
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 during 2002, which was generally a difficult year for the securities markets, had enabled the Fund to pay all of its regular monthly dividends in 2002. The directors also viewed the fact that the Fund's stock traded at an
average premium of 28.19% to net asset value during 2002 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.
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, 2004 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 2002:
COMPENSATION TABLE (1)(2)
Aggregate
Compensation
from the
Name of Director Fund
---------------- ------------
Interested Director
Claire V. Hansen.............................................. $ 0
Independent Directors
Wallace B. Behnke............................................. $ 39,125
Harry J. Bruce................................................ 31,625
Franklin A. Cole.............................................. 45,541
Gordon B. Davidson............................................ 41,541
Connie K. Duckworth........................................... 30,640
Robert J. Genetski............................................ 42,625
Francis E. Jeffries (2)....................................... 39,125
Nancy Lampton................................................. 43,125
Carl F. Pollard............................................... 27,140
David J. Vitale............................................... 49,041
------------------------------------
|
(1) Each director not affiliated with the Adviser receives an annual fee of $25,000 (and an additional $5,000 if the director serves as chairman of a committee of the board of directors) plus an attendance fee of $2,000 for each meeting of the board of directors and $1,500 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 2002, Mr. Jeffries received aggregate compensation of $145,375 for service as a director of the Fund and as a director or trustee of 30 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.
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.
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, 2002, the officers and directors of the Fund owned in the aggregate 245,703 shares of Common Stock, representing less than 1% of the Fund's outstanding Common Stock.
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 $13,776,089 in 2002, $15,284,267 in 2001 and $14,719,244 in 2000.
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 $3,505,218 in 2002, $3,806,813 in 2001 and $3,693,849 in 2000.
5. Not applicable.
6. See Item 9.1 (e).
7. The Fund's independent public accountant is Ernst & Young LLP.
8. Not applicable.
2. The Fund did not pay any brokerage commissions during 2002, 2001
or 2000 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 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.
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, 2002, the Fund had tax capital loss carry forwards of $199,205,932 which expire beginning on December 31, 2003. For the period from November 1, 2002 through December 31, 2002 the Fund incurred net realized capital losses of $181,983,140. The Fund intends to treat these losses as having occurred on January 1, 2003.
- Report of independent public accountants
- Schedule of Investments at December 31, 2002
- Balance Sheet at December 31, 2002
- Statement of Operations for the year ended December 31, 2002
- Statement of Changes in Net Assets for the years ended December 31, 2002 and 2001
- Statement of Cash Flows for the year ended December 31, 2002
- Notes to Financial Statements
- Financial Highlights - Selected Per Share Data and Ratios
PART C: OTHER INFORMATION
In Part B:
Report of independent public accountants
Schedule of Investments at December 31, 2002
Balance Sheet at December 31, 2002
Statement of Operations for the year ended
December 31, 2002
Statement of Changes in Net Assets for the years
ended December 31, 2002 and 2001
Statement of Cash Flows for the year ended
December 31, 2002
Notes to Financial Statements
Financial Highlights - Selected Per Share Data
and Ratios
In Part C:
None
2. Exhibits
a.1 Articles of Incorporation (Incorporated by reference from post-effective amendment no. 44 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915)
a.2 Amendment to Articles of Incorporation (Incorporated by reference from post-effective amendment no. 44 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915)
a.3 Second Amendment to Articles of Incorporation (Incorporated by reference from post-effective amendment no. 44 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915)
a.4 Form of Articles Supplementary creating Remarketed Preferred Stock, Series A, B, C, D and E (Incorporated by reference from post-effective amendment no. 44 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915)
a.5 Form of Articles Supplementary creating Remarketed Preferred Stock, Series I (Incorporated by reference from post-effective amendment no. 44 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915)
a.6 Third Amendment to Articles of Incorporation (Incorporated by reference from post-effective amendment no. 44 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915)
a.7 Fourth Amendment to Articles of Incorporation (Incorporated by reference from post-effective amendment no. 44 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915)
a.8 Fifth Amendment to Articles of Incorporation (Incorporated by reference from post-effective amendment no. 44 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915)
a.9 Sixth Amendment to Articles of Incorporation (Incorporated by reference from post-effective amendment no. 44 to Registrant's registration statement under the Investment Company Act of 1940 on Form N-2, no. 811-4915)
b. Bylaws (as amended through February 21, 2003)
c. None
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.1 Custody Agreement
j.2 Foreign Custody Manager Agreement
k.1 Fund Accounting Agreement
k.2 Form of Remarketing Agreement (Incorporated by reference from exhibit k.3 to pre-effective amendment no. 3 to Registrant's registration statement on Form N-2, no. 33-22933)
k.3 Form of Paying Agent Agreement (Incorporated by reference from exhibit k-4 to 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
r.2 Amended and Restated Code of Ethics of Duff & Phelps Investment Management Co. (investment adviser to Registrant)
Item 28. Number of Holders of Securities
------- -------------------------------
Number of
Record Holders
Title of Class March 31, 2003
-------------- --------------
Common Stock, $.001 par value 26,740
Preferred Stock, $.001 par value 1
|
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.
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, 2003.
DNP SELECT INCOME FUND INC.
By: /s/ Nathan I. Partain
--------------------------------------
Nathan I. Partain
President and Chief Executive Officer
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EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
----------- ----------- --------
b Bylaws (as amended through February 21, 2003)
j.1 Custody Agreement
j.2 Foreign Custody Manager Agreement
k.1 Fund Accounting Agreement
r.1 Amended and Restated Code of Ethics of Registrant
r.2 Amended and Restated Code of Ethics of Duff & Phelps Investment
Management Co. (investment adviser to Registrant)
|
Exhibit b
DNP SELECT INCOME FUND INC.
(formerly known as DUFF & PHELPS UTILITIES INCOME INC.)
BYLAWS
(as amended through February 21, 2003)
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 2003, the annual meeting of stockholders shall be held on the third Tuesday of April or at such date and time between April 15 and May 15 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.
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.
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.
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.
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.
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.
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.
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:
(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.
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.
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):
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
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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
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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
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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
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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
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(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.
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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
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.
"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),
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.
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
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;
(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.
"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 |
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
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
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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
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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
|
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
|
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
|
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
|
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.
Exhibit j.1
CUSTODY AGREEMENT
Agreement made as of this 26th day of February, 1999, between DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation organized and existing under the laws of the State of Maryland, having its principal office and place of business at 55 East Monroe Street, Chicago, Illinois 60603 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized to do a banking business, having its principal office and place of business at One Wall Street, New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any person, whether or not such person is an officer or employee of the Fund, duly authorized by the Board of Directors of the Fund to execute any Certificate, instruction, notice or other instrument on behalf of the Fund and listed in the Certificate annexed hereto as Appendix A or such other Certificate as may be received by the Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry system for United States and federal agency securities, its successor or successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect to Securities other than Stock Index Options, Futures Contracts, and Futures Contract Options entitling the holder, upon timely exercise and payment of the exercise price, as specified therein, to purchase from the writer thereof the specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other instrument in writing, authorized or required by this Agreement to be given to the Custodian which is actually received by the Custodian and signed on behalf of the Fund by any two Authorized Persons, and the term Certificate shall also include Instructions.
5. "Clearing Member" shall mean a registered broker-dealer which is a clearing member under the rules of O.C.C. and a member of a national securities exchange qualified to act as a custodian for an investment company, or any broker-dealer reasonably believed by the Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so denominated which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put Option guarantee letter or similar document described in paragraph 8 of Article V herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency Unit or any other composite unit consisting of the aggregate of specified amounts of specified Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded option entitling the holder, upon timely exercise and payment of the exercise price, as specified therein, to purchase from the writer thereof the specified underlying Securities (excluding Futures Contracts) which are owned by the writer thereof and subject to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of any country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company ("DTC"), a clearing agency registered with the Securities and Exchange Commission, its successor or successors and its nominee or nominees. The term "Depository" shall further mean and include any other person authorized to act as a depository under the Investment Company Act of 1940, its successor or successors and its nominee or nominees, specifically identified in a certified copy of a resolution of the Fund's Board of Directors specifically approving deposits therein by the Custodian.
11. "Financial Futures Contract" shall mean the firm commitment to buy or sell fixed income securities including, without limitation, U.S. Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit, and Eurodollar certificates of deposit, during a specified month at an agreed upon price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or Stock Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with respect to a Futures Contract.
14. "FX Transaction" shall mean any transaction for the purchase by one party of an agreed amount in one Currency against the sale by it to the other party of an agreed amount in another Currency.
15. "Instructions" shall mean instructions communications transmitted by electronic or telecommunications media including S.W.I.F.T., computer-to-computer interface, dedicated transmission line, facsimile transmission signed by an Authorized Person and tested telex.
16. "Margin Account" shall mean a segregated account in the name of a broker, dealer, futures commission merchant, or a Clearing Member, or in the name of the Fund for the benefit of a broker, dealer, futures commission merchant, or Clearing Member, or otherwise, in accordance with an agreement between the Fund, the Custodian and a broker, dealer, futures commission merchant or a Clearing Member (a "Margin Account Agreement"), separate and distinct from the custody account, in which certain Securities and/or money of the Fund shall be deposited and withdrawn from time to time in connection with such transactions as the Fund may from time to time determine. Securities held in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting an appropriate entry in its books and records.
17. "Money Market Security" shall be deemed to include, without limitation, certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as to interest and principal by the government of the United States or agencies or instrumentalities thereof, any tax, bond or revenue anticipation note issued by any state or municipal government or public authority, commercial paper, certificates of deposit and bankers' acceptances, repurchase agreements with respect to the same and bank time deposits, where the purchase and sale of such securities normally requires settlement in federal funds on the same day as such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency registered under Section 17A of the Securities Exchange Act of 1934, its successor or successors, and its nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option, Stock Index Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually received by the Custodian from an Authorized Person or from a person reasonably believed by the Custodian to be an Authorized Person.
21. "Put Option" shall mean an exchange traded option with respect to Securities other than Stock Index Options, Futures Contracts, and Futures Contract Options entitling the holder, upon timely exercise and tender of the specified underlying Securities, to sell such Securities to the writer thereof for the exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to which the Fund sells Securities and agrees to repurchase such Securities at a described or specified date and price.
23. "Security" shall be deemed to include, without limitation, Money Market Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures Contracts, Stock Index Futures Contract Options, Financial Futures Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements, common stocks and other securities having characteristics similar to common stocks, preferred stocks, debt obligations issued by state or municipal governments and by public authorities, (including, without limitation, general obligation bonds, revenue bonds, industrial bonds and industrial development bonds), bonds, debentures, notes, mortgages or other obligations, and any certificates, receipts, warrants or other instruments representing rights to receive, purchase, sell or subscribe for the same, or evidencing or representing any other rights or interest therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained and specifically allocated to a Series under the terms of this Agreement as a segregated account, by recordation or otherwise, within the custody account in which certain Securities and/or other assets of the Fund specifically allocated to such Series shall be deposited and withdrawn from time to time in accordance with Certificates received by the Custodian in connection with such transactions as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund listed on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of capital stock of the Fund, each of which is, in the case of a Fund having Series, allocated to a particular Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement pursuant to which the parties agree to take or make delivery of an amount of cash equal to a specified dollar amount times the difference between the value of a particular stock index at the close of the last business day of the contract and the price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option entitling the holder, upon timely exercise, to receive an amount of cash determined by reference to the difference between the exercise price and the value of the index on the date of exercise.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of the Securities and money at any time owned by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in Article VIII, the Fund will deliver or cause to be delivered to the Custodian all Securities and all money owned by it, at any time during the period of this Agreement, and shall specify with respect to such Securities and money the Series to which the same are specifically allocated. The Custodian shall segregate, keep and maintain the assets of the Series separate and apart. The Custodian will not be responsible for any Securities and money not actually received by it. The Custodian will be entitled to reverse any credits made on the Fund's behalf where such credits have been previously made and money is not finally collected. The Fund shall deliver to the Custodian a certified resolution of the Board of Directors of the Fund, substantially in the form of Exhibit A hereto, approving, authorizing and instructing the Custodian on a continuous and on-going basis to deposit in the Book-Entry System all Securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated and to utilize the Book-Entry System to the extent possible in connection with its performance hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities and deliveries and returns of Securities collateral. Prior to a deposit of Securities specifically allocated to a Series in the Depository, the Fund shall deliver to the Custodian a certified resolution of the Board of Directors of the Fund, substantially in the form of Exhibit B hereto, approving, authorizing and instructing the Custodian on a continuous and ongoing basis until instructed to the contrary by a Certificate actually received by the Custodian to deposit in the Depository all Securities
specifically allocated to such Series eligible for deposit therein, and to utilize the Depository to the extent possible with respect to such Securities in connection with its performance hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities, and deliveries and returns of Securities collateral. Securities and money deposited in either the Book-Entry System or the Depository will be represented in accounts which include only assets held by the Custodian for customers, including, but not limited to, accounts in which the Custodian acts in a fiduciary or representative capacity and will be specifically allocated on the Custodian's books to the separate account for the applicable Series. Prior to the Custodian's accepting, utilizing and acting with respect to Clearing Member confirmations for Options and transactions in Options for a Series as provided in this Agreement, the Custodian shall have received a certified resolution of the Fund's Board of Directors, substantially in the form of Exhibit C hereto, approving, authorizing and instructing the Custodian on a continuous and on-going basis, until instructed to the contrary by a Certificate actually received by the Custodian, to accept, utilize and act in accordance with such confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the name of each Series, and shall credit to the separate account for each Series all money received by it for the account of the Fund with respect to such Series. Money credited to a separate account for a Series shall be disbursed by the Custodian only:
(b) as hereinafter provided;
(c) pursuant to Certificates setting forth the name and address of the person to whom the payment is to be made, the Series account from which payment is to be made and the purpose for which payment is to be made; or
(d) in payment of the fees and in reimbursement of the expenses and liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall furnish the Fund with confirmations and a summary, on a per Series basis, of all transfers to or from the account of the Fund for a Series, either hereunder or with any co-custodian or sub-custodian appointed in accordance with this Agreement during said day. Where Securities are transferred to the account of the Fund for a Series, the Custodian shall also by book-entry or otherwise identify as belonging to such Series a quantity of Securities in a fungible bulk of Securities registered in the name of the Custodian (or its nominee) or shown on the Custodian's account on the books of the Book-Entry System or the Depository. At least monthly and from time to time, the Custodian shall furnish the Fund with a detailed statement, on a per Series basis, of the Securities and money held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in Article VIII, all Securities held by the Custodian hereunder, which are issued or issuable only in bearer form, except such Securities as are held in the Book-Entry System, shall be held by the Custodian in that form; all other Securities held hereunder may be registered in the name of the Fund, in the name of any duly appointed registered nominee of the Custodian as the Custodian may from time to time determine, or in the name of the Book-Entry System or the Depository or their successor or successors, or their nominee or nominees. The Fund agrees to furnish to the Custodian appropriate instruments
to enable the Custodian to hold or deliver in proper form for transfer, or to register in the name of its registered nominee or in the name of the Book-Entry System or the Depository any Securities which it may hold hereunder and which may from time to time be registered in the name of the Fund. The Custodian shall hold all such Securities specifically allocated to a Series which are not held in the Book-Entry System or in the Depository in a separate account in the name of such Series physically segregated at all times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise instructed to the contrary by a Certificate, the Custodian by itself, or through the use of the Book-Entry System or the Depository with respect to Securities held hereunder and therein deposited, shall with respect to all Securities held for the Fund hereunder in accordance with preceding paragraph 4:
(b) collect all income, dividends and distributions due or payable;
(c) give notice to the Fund and present payment and collect the amount payable upon such Securities which are called, but only if either (i) the Custodian receives a written notice of such call, or (ii) notice of such call appears in one or more of the publications listed in Appendix C annexed hereto, which may be amended at any time by the Custodian without the prior notification or consent of the Fund;
(d) present for payment and collect the amount payable upon all Securities which mature;
(e) surrender Securities in temporary form for definitive Securities;
(f) execute, as custodian, any necessary declarations or certificates of ownership under the Federal Income Tax Laws or the laws or regulations of any other taxing authority now or hereafter in effect;
(g) hold directly, or through the Book-Entry System or the Depository with respect to Securities therein deposited, for the account of a Series, all rights and similar securities issued with respect to any Securities held by the Custodian for such Series hereunder; and
(h) deliver to the Fund all notices, proxies, proxy soliciting materials, consents and other written information (including, without limitation, notices of tender offers and exchange offers, pendency of calls, maturities of Securities and expiration of rights) relating to Securities held pursuant to this Agreement which are actually received by the Custodian, such proxies and other similar materials to be executed by the registered owner (if Securities are registered otherwise than in the name of the Fund), but without indicating the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian, directly or through the use of the Book-Entry System or the Depository, shall:
(b) execute and deliver to such persons as may be designated in such Certificate proxies, consents, authorizations, and any other instruments whereby the authority of the Fund as owner of any Securities held by the Custodian hereunder for the Series specified in such Certificate may be exercised;
(c) deliver any Securities held by the Custodian hereunder for the Series specified in such Certificate in exchange for other Securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, merger, consolidation or recapitalization of any corporation, or the exercise of any conversion privilege and receive and hold hereunder specifically allocated to such Series any cash or other Securities received in exchange;
(d) deliver any Securities held by the Custodian hereunder for the Series specified in such Certificate to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization or sale of assets of any corporation, and receive and hold hereunder specifically allocated to such Series such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery;
(e) make such transfers or exchanges of the assets of the Series specified in such Certificate, and take such other steps as shall be stated in such Certificate to be for the purpose of effectuating any duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Fund; and
(f) present for payment and collect the amount payable upon Securities not described in preceding paragraph 5(b) of this Article which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates
are available. The Fund shall deliver to the Custodian such a Certificate no
later than the business day preceding the availability of any such instrument
or certificate. Prior to such availability, the Custodian shall comply with
Section 17(f) of the Investment Company Act of 1940, as amended, in connection
with the purchase, sale, settlement, closing-out or writing of Futures
Contracts, Options, or Futures Contract Options by making payments or
deliveries specified in Certificates received by the Custodian in connection
with any such purchase, sale, writing, settlement or closing-out upon its
receipt from a broker, dealer, or futures commission merchant of a statement
or confirmation reasonably believed by the Custodian to be in the form
customarily used by brokers, dealers, or futures commission merchants with
respect to such Futures Contracts, Options, or Futures Contract Options, as
the case may be, confirming that such Security is held by such broker, dealer
or futures commission merchant, in book-entry form or otherwise, in the name
of the Custodian (or any nominee of the Custodian) as custodian for the Fund,
provided, however, that notwithstanding the foregoing, payments to or
deliveries from the Margin Account, and payments with respect to Securities to
which a Margin Account relates, shall be made in accordance with the terms and
conditions of the Margin Account Agreement. Whenever any such instruments or
certificates are available, the Custodian shall, notwithstanding any provision
in this Agreement to the contrary, make payment for any Futures Contract,
Option, or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the provisions of this
Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a purchase of an Option, a Futures Contract, or a Futures Contract Option, the Fund shall deliver to the Custodian (i) with respect to each purchase of Securities which are not Money Market Securities, a Certificate, and (ii) with respect to each purchase of Money Market Securities, a Certificate or Oral Instructions, specifying with respect to each such purchase: (a) the Series to which such Securities are to be specifically allocated; (b) the name of the issuer and the title of the Securities; (c) the number of shares or the principal amount purchased and accrued interest, if any; (d) the date of purchase and settlement; (e) the purchase price per unit; (f) the total amount payable upon such purchase; (g) the name of the person from whom or the broker through whom the purchase was made, and the name of the clearing broker, if any; and (h) the name of the broker to whom payment is to be made. The Custodian shall, upon receipt of Securities purchased by or for the Fund, pay to the broker specified in the Certificate out of the money held for the account of such Series the total amount payable upon such purchase, provided that the same conforms to the total amount payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each sale of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each such sale:
(a) the Series to which such Securities were specifically allocated; (b) the
name of the issuer and the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest, if any; (d) the date of sale; (e)
the sale price per unit; (f) the total amount payable to the Fund upon such
sale; (g) the name of the broker through whom or the person to whom the sale
was made, and the name of the clearing broker, if any; and (h) the name of the
broker to whom the Securities are to be delivered. The Custodian shall deliver
the Securities specifically allocated to such Series to the broker specified
in the Certificate against payment of the total amount payable to the Fund
upon such sale, provided that the same conforms to the total amount payable as
set forth in such Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund shall deliver to the Custodian a Certificate specifying with respect to each Option purchased: (a) the Series to which such Option is specifically allocated; (b) the type of Option (put or call); (c) the name of the issuer and the title and number of shares subject to such Option or, in the case of a Stock Index Option, the stock index to which such Option relates and the number of Stock Index Options purchased; (d) the expiration date; (e) the exercise price; (f) the dates of purchase and settlement; (g) the total amount payable by the Fund in connection with such purchase; (h) the name of the
Clearing Member through whom such Option was purchased; and (i) the name of the broker to whom payment is to be made. The Custodian shall pay, upon receipt of a Clearing Member's statement confirming the purchase of such Option held by such Clearing Member for the account of the Custodian (or any duly appointed and registered nominee of the Custodian) as custodian for the Fund, out of money held for the account of the Series to which such Option is to be specifically allocated, the total amount payable upon such purchase to the Clearing Member through whom the purchase was made, provided that the same conforms to the total amount payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each such sale: (a) the Series to which
such Option was specifically allocated; (b) the type of Option (put or call);
(c) the name of the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options sold; (d) the date of
sale; (e) the sale price; (f) the date of settlement; (g) the total amount
payable to the Fund upon such sale; and (h) the name of the Clearing Member
through whom the sale was made. The Custodian shall consent to the delivery of
the Option sold by the Clearing Member which previously supplied the
confirmation described in preceding paragraph 1 of this Article with respect
to such Option against payment to the Custodian of the total amount payable to
the Fund, provided that the same conforms to the total amount payable as set
forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option:
(a) the Series to which such Call Option was specifically allocated; (b) the
name of the issuer and the title and number of shares subject to the Call
Option; (c) the expiration date; (d) the date of exercise and settlement; (e)
the exercise price per share; (f) the total amount to be paid by the Fund upon
such exercise; and (g) the name of the Clearing Member through whom such Call
Option was exercised. The Custodian shall, upon receipt of the Securities
underlying the Call Option which was exercised, pay out of the money held for
the account of the Series to which such Call Option was specifically allocated
the total amount payable to the Clearing Member through whom the Call Option
was exercised, provided that the same conforms to the total amount payable as
set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a)
the Series to which such Put Option was specifically allocated; (b) the name
of the issuer and the title and number of shares subject to the Put Option;
(c) the expiration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid to the Fund upon
such exercise; and (g) the name of the Clearing Member through whom such Put
Option was exercised. The Custodian shall, upon receipt of the amount payable
upon the exercise of the Put Option, deliver or direct the Depository to
deliver the Securities specifically allocated to such Series, provided the
same conforms to the amount payable to the Fund as set forth in such
Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver
to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series to which such Stock Index Option was specifically allocated; (b) the type of Stock Index Option (put or call); (c) the number of Options being exercised; (d) the stock index to which such Option relates; (e) the expiration date; (f) the exercise price; (g) the total amount to be received by the Fund in connection with such exercise; and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Covered Call Option: (a) the Series for which such Covered Call Option was written; (b) the name of the issuer and the title and number of shares for which the Covered Call Option was written and which underlie the same; (c) the expiration date; (d) the exercise price; (e) the premium to be received by the Fund; (f) the date such Covered Call Option was written; and (g) the name of the Clearing Member through whom the premium is to be received. The Custodian shall deliver or cause to be delivered, in exchange for receipt of the premium specified in the Certificate with respect to such Covered Call Option, such receipts as are required in accordance with the customs prevailing among Clearing Members dealing in Covered Call Options and shall impose, or direct the Depository to impose, upon the underlying Securities specified in the Certificate specifically allocated to such Series such restrictions as may be required by such receipts. Notwithstanding the foregoing, the Custodian has the right, upon prior written notification to the Fund, at any time to refuse to issue any receipts for Securities in the possession of the Custodian and not deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the preceding paragraph of this Article is exercised, the Fund shall promptly deliver to the Custodian a Certificate instructing the Custodian to deliver, or to direct the Depository to deliver, the Securities subject to such Covered Call Option and specifying: (a) the Series for which such Covered Call Option was written; (b) the name of the issuer and the title and number of shares subject to the Covered Call Option; (c) the Clearing Member to whom the underlying Securities are to be delivered; and (d) the total amount payable to the Fund upon such delivery. Upon the return and/or cancellation of any receipts delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver, or direct the Depository to deliver, the underlying Securities as specified in the Certificate against payment of the amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Put Option: (a) the Series for which such Put Option was written; (b) the name of the issuer and the title and number of shares for which the Put Option is written and which underlie the same; (c) the expiration date; (d) the exercise price; (e) the premium to be received by the Fund; (f) the date such Put Option is written; (g) the name of the Clearing Member through whom the premium is to be received and to whom a Put Option guarantee letter is to be delivered; (h) the amount of cash, and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in the Senior Security Account for such Series; and (i) the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be deposited into the Collateral Account for such Series. The Custodian shall, after making the deposits into the Collateral Account specified in the Certificate, issue a Put Option guarantee letter substantially in the form utilized by the Custodian on the date hereof, and deliver the same to the Clearing Member specified in the Certificate against receipt of the premium specified in said Certificate. Notwithstanding the foregoing, the Custodian shall be under no
obligation to issue any Put Option guarantee letter or similar document if it is unable to make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the preceding paragraph is exercised, the Fund shall promptly deliver to the Custodian a Certificate specifying: (a) the Series to which such Put Option was written; (b) the name of the issuer and title and number of shares subject to the Put Option; (c) the Clearing Member from whom the underlying Securities are to be received; (d) the total amount payable by the Fund upon such delivery; (e) the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be withdrawn from the Collateral Account for such Series and (f) the amount of cash and/or the amount and kind of Securities, specifically allocated to such Series, if any, to be withdrawn from the Senior Security Account. Upon the return and/or cancellation of any Put Option guarantee letter or similar document issued by the Custodian in connection with such Put Option, the Custodian shall pay out of the money held for the account of the Series to which such Put Option was specifically allocated the total amount payable to the Clearing Member specified in the Certificate as set forth in such Certificate against delivery of such Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to
such Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the
number of options written; (d) the stock index to which such Option relates;
(e) the expiration date; (f) the exercise price; (g) the Clearing Member
through whom such Option was written; (h) the premium to be received by the
Fund; (i) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; (j) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in
the Collateral Account for such Series; and (k) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series
to be deposited in a Margin Account, and the name in which such account is to
be or has been established. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits, if any, into the Senior
Security Account specified in the Certificate, and either (1) deliver such
receipts, if any, which the Custodian has specifically agreed to issue, which
are in accordance with the customs prevailing among Clearing Members in Stock
Index Options and make the deposits into the Collateral Account specified in
the Certificate, or (2) make the deposits into the Margin Account specified in
the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in the preceding paragraph of this Article is exercised, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Stock Index Option: (a) the Series for which such Stock Index Option was written; (b) such information as may be necessary to identify the Stock Index Option being exercised; (c) the Clearing Member through whom such Stock Index Option is being exercised; (d) the total amount payable upon such exercise, and whether such amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the amount of cash and/or amount and kind of Securities, if any, to be withdrawn from the Senior Security Account for such Series; and the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Collateral Account for such Series. Upon the return and/or cancellation of the receipt, if any, delivered pursuant to the
preceding paragraph of this Article, the Custodian shall pay out of the money held for the account of the Series to which such Stock Index Option was specifically allocated to the Clearing Member specified in the Certificate the total amount payable, if any, as specified therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order
to liquidate its position as a writer of an Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase Transaction;
(b) the Series for which the Option was written; (c) the name of the issuer
and the title and number of shares subject to the Option, or, in the case of a
Stock Index Option, the stock index to which such Option relates and the
number of Options held; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the type of Option (put or call); (h)
the date of such purchase; (i) the name of the Clearing Member to whom the
premium is to be paid; and (j) the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Collateral Account, a
specified Margin Account, or the Senior Security Account for such Series. Upon
the Custodian's payment of the premium and the return and/or cancellation of
any receipt issued pursuant to paragraphs 6, 8 or 10 of this Article with
respect to the Option being liquidated through the Closing Purchase
Transaction, the Custodian shall remove, or direct the Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase Transaction with respect to any Option purchased or written by the Fund and described in this Article, the Custodian shall delete such Option from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein, and upon the return and/or cancellation of any receipts issued by the Custodian, shall make such withdrawals from the Collateral Account, and the Margin Account and/or the Senior Security Account as may be specified in a Certificate received in connection with such expiration, exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying stock index
or financial instrument); (c) the number of identical Futures Contracts
entered into; (d) the delivery or settlement date of the Futures Contract(s);
(e) the date the Futures Contract(s) was (were) entered into and the maturity
date; (f) whether the Fund is buying (going long) or selling (going short) on
such Futures Contract(s); (g) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series; (h) the name of the broker, dealer, or futures commission merchant
through whom the Futures Contract was entered into; and (i) the amount of fee
or commission, if any, to be paid and the name of the broker, dealer, or
futures commission merchant to whom such amount is to be paid. The Custodian
shall make the deposits, if any, to the Margin Account in accordance with the
terms and conditions of the Margin Account Agreement. The Custodian shall make
payment out of the money specifically allocated to such Series of the fee or
commission, if any, specified in the Certificate and deposit in the Senior Security Account for such Series the amount of cash and/or the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be made by the Fund to a broker, dealer, or futures commission merchant with respect to an outstanding Futures Contract, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker, dealer, or futures commission merchant to the Fund with respect to an outstanding Futures Contract, shall be received and dealt with by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying:
(a) the Futures Contract and the Series to which the same relates; (b) with
respect to a Stock Index Futures Contract, the total cash settlement amount to
be paid or received, and with respect to a Financial Futures Contract, the
Securities and/or amount of cash to be delivered or received; (c) the broker,
dealer, or futures commission merchant to or from whom payment or delivery is
to be made or received; and (d) the amount of cash and/or Securities to be
withdrawn from the Senior Security Account for such Series. The Custodian
shall make the payment or delivery specified in the Certificate, and delete
such Futures Contract from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a Futures Contract held by the Custodian hereunder, the Fund shall deliver to the Custodian a Certificate specifying: (a) the items of information required in a Certificate described in paragraph 1 of this Article, and (b) the Futures Contract being offset. The Custodian shall make payment out of the money specifically allocated to such Series of the fee or commission, if any, specified in the Certificate and delete the Futures Contract being offset from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein, and make such withdrawals from the Senior Security Account for such Series as may be specified in such Certificate. The withdrawals, if any, to be made from the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying:
(a) the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each
delivery of such a Certificate by the Fund shall constitute (x) a
representation and warranty by the Fund that the Rule 17f-6 agreement has been
duly authorized, executed and delivered by the Fund and the futures commission
merchant and complies with Rule 17f-6, and (y) an agreement by the Fund that
the Custodian shall not be liable for the acts or omissions of any such
futures commission merchant.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Futures Contract Option: (a) the Series to which such Option is specifically allocated; (b) the type of Futures Contract Option (put or call); (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option purchased; (d) the expiration date; (e) the exercise price; (f) the dates of purchase and settlement; (g) the amount of premium to be paid by the Fund upon such purchase; (h) the name of the broker or futures commission merchant through whom such option was purchased; and (i) the name of the broker, or futures commission merchant, to whom payment is to be made. The Custodian shall pay out of the money specifically allocated to such Series, the total amount to be paid upon such purchase to the broker or futures commissions merchant through whom the purchase was made, provided that the same conforms to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such sale: (a) the
Series to which such Futures Contract Option was specifically allocated; (b)
the type of Futures Contract Option (put or call); (c) the type of Futures
Contract and such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option; (d) the date of sale;
(e) the sale price; (f) the date of settlement; (g) the total amount payable
to the Fund upon such sale; and (h) the name of the broker or futures
commission merchant through whom the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract Option being closed
against payment to the Custodian of the total amount payable to the Fund,
provided the same conforms to the total amount payable as set forth in such
Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant
to paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to
the Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c) the type of Futures
Contract underlying the Futures Contract Option; (d) the date of exercise;
(e)the name of the broker or futures commission merchant through whom the
Futures Contract Option is exercised; (f) the net total amount, if any,
payable by the Fund; (g) the amount, if any, to be received by the Fund; and
(h) the amount of cash and/or the amount and kind of Securities to be
deposited in the Senior Security Account for such Series. The Custodian shall
make, out of the money and Securities specifically allocated to such Series,
the payments, if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits, if any, to be made to
the Margin Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to such Futures Contract Option: (a) the Series for which such Futures Contract Option was written; (b) the type of Futures Contract Option (put or call); (c)
the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Contract Option; (d) the expiration date; (e) the exercise price; (f) the premium to be received by the Fund; (g) the name of the broker or futures commission merchant through whom the premium is to be received; and (h) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in the Senior Security Account for such Series. The Custodian shall, upon receipt of the premium specified in the Certificate, make out of the money and Securities specifically allocated to such Series the deposits into the Senior Security Account, if any, as specified in the Certificate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call is exercised, the Fund shall promptly deliver to the Custodian a Certificate specifying: (a) the Series to which such Futures Contract Option was specifically allocated; (b) the particular Futures Contract Option exercised; (c) the type of Futures Contract underlying the Futures Contract Option; (d) the name of the broker or futures commission merchant through whom such Futures Contract Option was exercised; (e) the net total amount, if any, payable to the Fund upon such exercise; (f) the net total amount, if any, payable by the Fund upon such exercise; and (g) the amount of cash and/or the amount and kind of Securities to be deposited in the Senior Security Account for such Series. The Custodian shall, upon its receipt of the net total amount payable to the Fund, if any, specified in such Certificate make the payments, if any, and the deposits, if any, into the Senior Security Account as specified in the Certificate. The deposits, if any, to be made to the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund
and which is a put is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying such Futures Contract Option; (d)
the name of the broker or futures commission merchant through whom such
Futures Contract Option is exercised; (e) the net total amount, if any,
payable to the Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount and kind of
Securities and/or cash to be withdrawn from or deposited in, the Senior
Security Account for such Series, if any. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any, specified in the
Certificate, make out of the money and Securities specifically allocated to
such Series, the payments, if any, and the deposits, if any, into the Senior
Security Account as specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to a previously written Futures Contract Option described in this Article in order to liquidate its position as a writer of such Futures Contract Option, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to the Futures Contract Option being purchased: (a) the Series to which such Option is specifically allocated; (b) that the transaction is a closing transaction; (c) the type of Futures Contract and such other information as may be necessary to identify the Futures Contract underlying the Futures Option Contract; (d) the exercise price; (e) the premium to be paid by the Fund; (f) the expiration date; (g) the name of the broker or futures commission merchant to whom the premium is to be paid; and (h) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series. The Custodian shall effect the withdrawals from the Senior Security Account specified in the Certificate. The withdrawals, if any, to be made from the Margin Account shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction with respect to, any Futures Contract Option written or purchased by the Fund and described in this Article, the Custodian shall (a) delete such Futures Contract Option from the statements delivered to the Fund pursuant to paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in the case of an exercise such deposits into the Senior Security Account as may be specified in a Certificate. The deposits to and/or withdrawals from the Margin Account, if any, shall be made by the Custodian in accordance with the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a Futures Contract Option described in this Article shall be subject to Article VI hereof.
10. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying:
(a) the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each
delivery of such a Certificate by the Fund shall constitute (x) a
representation and warranty by the Fund that the Rule 17f-6 agreement has been
duly authorized, executed and delivered by the Fund and the futures commission
merchant and complies with Rule 17f-6, and (y) an agreement by the Fund that
the Custodian shall not be liable for the acts or omissions of any such
futures commission merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying: (a) the Series for which such short sale was made; (b) the name of the issuer and the title of the Security; (c) the number of shares or principal amount sold, and accrued interest or dividends, if any; (d) the dates of the sale and settlement; (e) the sale price per unit; (f) the total amount credited to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and kind of Securities, if any, which are to be deposited in a Margin Account and the name in which such Margin Account has been or is to be established; (h) the amount of cash and/or the amount and kind of Securities, if any, to be deposited in a Senior Security Account, and (i) the name of the broker through whom such short sale was made. The Custodian shall upon its receipt of a statement from such broker confirming such sale and that the total amount credited to the Fund upon such sale, if any, as specified in the Certificate is held by such broker for the account of the Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a receipt or make the deposits into the Margin Account and the Senior Security Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall promptly deliver to the Custodian a Certificate specifying with respect to each such closing-out: (a) the Series for which such transaction is being made; (b) the name of the issuer and the title of the Security; (c) the number of shares or the principal amount, and accrued interest or dividends, if any, required to effect such closing-out to be delivered to the broker; (d) the dates of closing-out and settlement; (e) the purchase price per unit; (f) the net total amount payable to the Fund upon such closing-out; (g) the net total amount payable to the broker upon such closing-out; (h) the amount of cash and the amount and kind of Securities to be withdrawn, if any, from the Margin Account; (i) the amount of cash and/or the amount and kind of Securities, if any, to be withdrawn from the Senior Security Account; and (j) the name of the broker through whom the Fund is effecting such closing-out. The Custodian shall, upon receipt of the net total amount payable to the Fund upon such closing-out, and the return and/or cancellation of the receipts, if any, issued by the Custodian with respect to the short sale being closed-out, pay out of the money held for the account of the Fund to the broker the net total amount payable to the broker, and make the withdrawals from the Margin Account and the Senior Security Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters into a Reverse Repurchase Agreement with respect to Securities and money held by the Custodian hereunder, the Fund shall deliver to the Custodian a Certificate, or in the event such Reverse Repurchase Agreement is a Money Market Security, a Certificate or Oral Instructions specifying: (a) the Series for which the Reverse Repurchase Agreement is entered; (b) the total amount payable to the Fund in connection with such Reverse Repurchase Agreement and specifically allocated to such Series; (c) the broker or dealer through or with whom the Reverse Repurchase Agreement is entered; (d) the amount and kind of Securities to be delivered by the Fund to such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and (f) the amount of cash and/or the amount and kind of Securities, if any, specifically allocated to such Series to be deposited in a Senior Security Account for such Series in connection with such Reverse Repurchase Agreement. The Custodian shall, upon receipt of the total amount payable to the Fund specified in the Certificate or Oral Instructions make the delivery to the broker or dealer, and the deposits, if any, to the Senior Security Account, specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in preceding paragraph 1 of this Article, the Fund shall promptly deliver a Certificate or, in the event such Reverse Repurchase Agreement is a Money Market Security, a Certificate or Oral Instructions to the Custodian specifying:(a) the Reverse Repurchase Agreement being terminated and the Series for which same was entered; (b) the total amount payable by the Fund in connection with such termination; (c) the amount and kind of Securities to be received by the Fund and specifically allocated to such Series in connection with such termination; (d) the date of termination; (e) the name of the broker or dealer with or through whom the Reverse Repurchase Agreement is to be terminated; and (f) the amount of cash and/or the amount and kind of Securities to be withdrawn from the Senior Securities Account for such Series. The Custodian shall, upon receipt of the amount and kind of Securities to be received by the Fund specified in the Certificate or Oral Instructions, make
the payment to the broker or dealer, and the withdrawals, if any, from the Senior Security Account, specified in such Certificate or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated to a Series held by the Custodian hereunder, the Fund shall deliver or cause to be delivered to the Custodian a Certificate specifying with respect to each such loan: (a) the Series to which the loaned Securities are specifically allocated; (b) the name of the issuer and the title of the Securities, (c) the number of shares or the principal amount loaned, (d) the date of loan and delivery, (e) the total amount to be delivered to the Custodian against the loan of the Securities, including the amount of cash collateral and the premium, if any, separately identified, and (f) the name of the broker, dealer, or financial institution to which the loan was made. The Custodian shall deliver the Securities thus designated to the broker, dealer or financial institution to which the loan was made upon receipt of the total amount designated as to be delivered against the loan of Securities. The Custodian may accept payment in connection with a delivery otherwise than through the Book- Entry System or Depository only in the form of a certified or bank cashier's check payable to the order of the Fund or the Custodian drawn on New York Clearing House funds and may deliver Securities in accordance with the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the Fund, the Fund shall deliver or cause to be delivered to the Custodian a Certificate specifying with respect to each such loan termination and return of Securities: (a) the Series to which the loaned Securities are specifically allocated; (b) the name of the issuer and the title of the Securities to be returned, (c) the number of shares or the principal amount to be returned, (d) the date of termination, (e) the total amount to be delivered by the Custodian (including the cash collateral for such Securities minus any offsetting credits as described in said Certificate), and (f) the name of the broker, dealer, or financial institution from which the Securities will be returned. The Custodian shall receive all Securities returned from the broker, dealer, or financial institution to which such Securities were loaned and upon receipt thereof shall pay, out of the money held for the account of the Fund, the total amount payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or withdrawals from, a Senior Security Account as specified in a Certificate received by the Custodian. Such Certificate shall specify the Series for which such deposit or withdrawal is to be made and the amount of cash and/or the amount and kind of Securities specifically allocated to such Series to be deposited in, or withdrawn from, such Senior Security Account for such Series. In the event that the Fund fails to specify in a Certificate the Series, the name of the issuer, the title and the number of shares or the principal amount of any particular Securities to be deposited by the Custodian into, or
withdrawn from, a Senior Securities Account, the Custodian shall be under no obligation to make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin Account to the broker, dealer, futures commission merchant or Clearing Member in whose name, or for whose benefit, the account was established as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with respect to Securities deposited in any Margin Account shall be dealt with in accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in and to any property at any time held by the Custodian in any Collateral Account described herein. In accordance with applicable law the Custodian may enforce its lien and realize on any such property whenever the Custodian has made payment or delivery pursuant to any Put Option guarantee letter or similar document or any receipt issued hereunder by the Custodian. In the event the Custodian should realize on any such property net proceeds which are less than the Custodian's obligations under any Put Option guarantee letter or similar document or any receipt, such deficiency shall be a debt owed the Custodian by the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a statement with respect to each Margin Account in which money or Securities are held specifying as of the close of business on the previous business day: (a) the name of the Margin Account; (b) the amount and kind of Securities held therein; and (c) the amount of money held therein. The Custodian shall make available upon request to any broker, dealer, or futures commission merchant specified in the name of a Margin Account a copy of the statement furnished the Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which cash and/or Securities are maintained in a Collateral Account for any Series, the Custodian shall furnish the Fund with a statement with respect to such Collateral Account specifying the amount of cash and/or the amount and kind of Securities held therein. No later than the close of business next succeeding the delivery to the Fund of such statement, the Fund shall furnish to the Custodian a Certificate specifying the then market value of the Securities described in such statement. In the event such then market value is indicated to be less than the Custodian's obligation with respect to any outstanding Put Option guarantee letter or similar document, the Fund shall promptly specify in a Certificate the additional cash and/or Securities to be deposited in such Collateral Account to eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of the Board of Directors of the Fund, certified by the Secretary or any Assistant Secretary, either (i) setting forth with respect to the Series specified therein the date of the declaration of a dividend or distribution, the date of payment thereof, the record date as of which shareholders entitled
to payment shall be determined, the amount payable per Share of such Series to the shareholders of record as of that date and the total amount payable to the Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on the payment date, or (ii) authorizing with respect to the Series specified therein the declaration of dividends and distributions on a daily basis and authorizing the Custodian to rely on Oral Instructions or a Certificate setting forth the date of the declaration of such dividend or distribution, the date of payment thereof, the record date as of which shareholders entitled to payment shall be determined, the amount payable per Share of such Series to the shareholders of record as of that date and the total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions or Certificate, as the case may be, the Custodian shall pay out of the money held for the account of each Series the total amount payable to the Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the Custodian a Certificate duly specifying:
(b) the Series, the number of Shares sold, trade date, and price; and
(c) the amount of money to be received by the Custodian for the sale of such Shares and specifically allocated to the separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall credit such money to the separate account in the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing provisions of this Article, the Custodian shall pay, out of the money held for the account of such Series, all original issue or other taxes required to be paid by the Fund in connection with such issuance upon the receipt of a Certificate specifying the amount to be paid.
4. Whenever the Fund desires the Custodian to make payment out of the money held by the Custodian hereunder in connection with a redemption of any Shares, it shall furnish to the Custodian:
(b) a resolution by the Board of Directors of the Fund directing the Transfer Agent to redeem the Shares; and
(c) a Certificate specifying the number and Series of Shares redeemed; and
(d) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the Series and number of Shares received by the Transfer Agent for redemption and that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the money held in the separate account in the name of the Series the total amount specified in the Certificate issued pursuant to the foregoing paragraph 4 of this Article.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on behalf of any Series which results in an overdraft because the money held by the Custodian in the separate account for such Series shall be insufficient to pay the total amount payable upon a purchase of Securities specifically allocated to such Series, as set forth in a Certificate or Oral Instructions, or which results in an overdraft in the separate account of such Series for some other reason, or if the Fund is for any other reason indebted to the Custodian with respect to a Series, including any indebtedness to The Bank of New York under the Fund's Cash Management and Related Services Agreement (except a borrowing for investment or for temporary or emergency purposes using Securities as collateral pursuant to a separate agreement and subject to the provisions of paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to be a loan made by the Custodian to the Fund for such Series payable on demand and shall bear interest from the date incurred at a rate per annum (based on a 360- day year for the actual number of days involved) equal to 1/2% over Custodian's prime commercial lending rate in effect from time to time, such rate to be adjusted on the effective date of any change in such prime commercial lending rate but in no event to be less than 6% per annum. In addition, the Fund hereby agrees that the Custodian shall have a continuing lien, security interest, and security entitlement in and to any property including any investment property or any financial asset specifically allocated to such Series at any time held by it for the benefit of such Series or in which the Fund may have an interest which is then in the Custodian's possession or control or in possession or control of any third party acting in the Custodian's behalf. The Fund authorizes the Custodian, in its sole discretion, at any time to charge any such overdraft or indebtedness together with interest due thereon against any balance of account standing to such Series' credit on the Custodian's books. In addition, the Fund hereby covenants that on each Business Day on which either it intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a third party, or which next succeeds a Business Day on which at the close of business the Fund had outstanding a Reverse Repurchase Agreement or such a borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian, in writing, of each such borrowing, shall specify the Series to which the same relates, and shall not incur any indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank (including, if the borrowing is pursuant to a separate agreement, the Custodian) from which it borrows money for investment or for temporary or emergency purposes using Securities held by the Custodian hereunder as collateral for such borrowings, a notice or undertaking in the form currently employed by any such bank setting forth the amount which such bank will loan to the Fund against delivery of a stated amount of collateral. The Fund shall promptly deliver to the Custodian a Certificate specifying with respect to each such borrowing: (a) the Series to which such borrowing relates; (b) the name of the bank, (c) the amount and terms of the borrowing, which may be set forth by incorporating by reference an attached promissory note, duly endorsed
by the Fund, or other loan agreement, (d) the time and date, if known, on which the loan is to be entered into, (e) the date on which the loan becomes due and payable, (f) the total amount payable to the Fund on the borrowing date, (g) the market value of Securities to be delivered as collateral for such loan, including the name of the issuer, the title and the number of shares or the principal amount of any particular Securities, and (h) a statement specifying whether such loan is for investment purposes or for temporary or emergency purposes and that such loan is in conformance with the Investment Company Act of 1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing date specified in a Certificate the specified collateral and the executed promissory note, if any, against delivery by the lending bank of the total amount of the loan payable, provided that the same conforms to the total amount payable as set forth in the Certificate. The Custodian may, at the option of the lending bank, keep such collateral in its possession, but such collateral shall be subject to all rights therein given the lending bank by virtue of any promissory note or loan agreement. The Custodian shall deliver such Securities as additional collateral as may be specified in a Certificate to collateralize further any transaction described in this paragraph. The Fund shall cause all Securities released from collateral status to be returned directly to the Custodian, and the Custodian shall receive from time to time such return of collateral as may be tendered to it. In the event that the Fund fails to specify in a Certificate the Series, the name of the issuer, the title and number of shares or the principal amount of any particular Securities to be delivered as collateral by the Custodian, the Custodian shall not be under any obligation to deliver any Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in order for the Fund to transmit Instructions to the Custodian (the "Software"), the Custodian grants to such Fund a personal, nontransferable and nonexclusive license to use the Software solely for the purpose of transmitting Instructions to, and receiving communications from, the Custodian in connection with its account(s). The Fund shall use the Software solely for its own internal and proper business purposes, and not in the operation of a service bureau, and agrees not to sell, reproduce, lease or otherwise provide, directly or indirectly, the Software or any portion thereof to any third party without the prior written consent of the Custodian. The Fund acknowledges that the Custodian and its suppliers have title and exclusive proprietary rights to the Software, including any trade secrets or other ideas, concepts, know how, methodologies, or information incorporated therein and the exclusive rights to any copyrights, trademarks and patents (including registrations and applications for registration of either) or statutory or legal protections available with respect thereof. The Fund further acknowledges that all or a part of the Software may be copyrighted or trademarked (or a registration or claim made therefor) by the Custodian or its suppliers. The Fund shall not take any action with respect to the Software inconsistent with the foregoing acknowledgments, nor shall the Fund attempt to decompile, reverse engineer or modify the Software. The Fund may not copy, sell, lease or provide, directly or indirectly, any of the Software or any portion thereof to any other person or entity without the Custodian's prior written consent. The Fund may not remove any statutory copyright notice, or other notice including the software or on any media containing the Software. The Fund shall reproduce any such notice on any reproduction of the Software and shall add statutory copyright notice or other notice to the Software or media upon the Bank's request. Custodian agrees to provide reasonable training, instruction manuals and access to Custodian's "help desk" in connection with the Fund's user support necessary to use of the Software. At the Fund's request, Custodian agrees to permit reasonable testing of the Software by the Fund.
2. The Fund shall obtain and maintain at its own cost and expense all equipment and services, including but not limited to communications services, necessary for it to utilize the Software and transmit Instructions to the Custodian. The Custodian shall not be responsible for the reliability, compatibility with the Software or availability of any such equipment or services or the performance or nonperformance by any nonparty to this Custody Agreement.
3. The Fund acknowledges that the Software, all data bases made available to the Fund by utilizing the Software (other than data bases relating solely to the assets of the Fund and transactions with respect thereto), and any proprietary data, processes, information and documentation (other than which are or become part of the public domain or are legally required to be made available to the public) (collectively, the "Information"), are the exclusive and confidential property of the Custodian. The Fund shall keep the Information confidential by using the same care and discretion that the Fund uses with respect to its own confidential property and trade secrets and shall neither make nor permit any disclosure without the prior written consent of the Custodian. Upon termination of this Agreement or the Software license granted hereunder for any reason, the Fund shall return to the Custodian all copies of the Information which are in its possession or under its control or which the Fund distributed to third parties. The provisions of this Article shall not affect the copyright status of any of the Information which may be copyrighted and shall apply to all Information whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own expense, the Software from time to time without prior notice and the Fund shall install new releases of the Software as the Custodian may direct. The Fund agrees not to modify or attempt to modify the Software without the Custodian's prior written consent. The Fund acknowledges that any modifications to the Software, whether by the Fund or the Custodian and whether with or without the Custodian's consent, shall become the property of the Custodian.
5. The Custodian and its manufacturers and suppliers make no warranties or representations of any kind with regard to the Software or the method(s) by which the Fund may transmit Instructions to the Custodian, express or implied, including but not limited to any implied warranties of merchantability or fitness for a particular purpose.
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL, DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE FUND OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S. LAWS PROHIBITED. The Fund hereby authorizes Custodian to report its name and address to government agencies to which Custodian is required to provide such information by law.
7. Where the method for transmitting Instructions by the Fund involves an automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not be liable for any failure to act pursuant to such Instructions, the Fund may not claim that such Instructions were received by the Custodian, and the Fund shall deliver a Certificate by some other means.
8. (a) The Fund agrees that where it delivers to the Custodian Instructions hereunder, it shall be the Fund's sole responsibility to ensure that only persons duly authorized by the Fund transmit such Instructions to the Custodian. The Fund will cause all persons transmitting Instructions to the Custodian to treat applicable user and authorization codes, passwords and authentication keys with extreme care, and irrevocably authorizes the Custodian to act in accordance with and rely upon Instructions received by it pursuant hereto.
(b) The Fund hereby represents, acknowledges and agrees that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Custodian and that there may be more secure methods of transmitting instructions to the Custodian than the method(s) selected by the Fund. The Fund hereby agrees that the security procedures (if any) to be followed in connection with the Fund's transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances.
9. The Fund hereby represents, warrants and covenants to the Custodian that this Agreement has been duly approved by a resolution of its Board of Directors, and that its transmission of Instructions pursuant hereto shall at all times comply with the Investment Company Act.
10. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours
after the earliest of (i) discovery thereof, (ii) the Business Day on which
discovery should have occurred through the exercise of reasonable care and
(iii) in the case of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that discovery and receipt
of notice may only occur on a business day. The Custodian shall promptly
advise the Fund whenever the Custodian learns of any errors, omissions or
interruption in, or delay or unavailability of, the Fund's ability to send
Instructions.
11. Custodian will indemnify and hold harmless the Fund with respect to any liability, damages, loss or claim incurred by or brought against Fund by reason any claim or infringement against any patent, copyright, license or other property right arising out or by reason of the Fund's use of the Software in the form provided under this Section. Custodian at its own expense will defend such action or claim brought against Fund to the extent that it is based on a claim that the Software in the form provided by Custodian infringes any patents, copyrights, license or other property right, provided that Custodian is provided with reasonable written notice of such claim, provided that the Fund has not settled, compromised or confessed any such claim without the Custodian's written consent, in which event Custodian shall have no liability or obligation hereunder, and provided Fund cooperates with and assists Custodian in the defense of such claim. Custodian shall have the right to control the defense of all such claims, lawsuits and other proceedings. If, as a result of any claim of infringement against any patent, copyright, license or other property right, Custodian is enjoined from using the Software, or if Custodian believes that the System is likely to become the subject of a claim of infringement, Custodian at its option may in its sole discretion either (a) at its expenses procure the right for the Fund to continue to use the Software,
or (b), replace or modify the Software so as to make it non-infringing, or (c) may discontinue the license granted herein upon written notice to Customer.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-custodian for each Series' Securities for which the primary market is outside the United States ("Foreign Securities") and other assets, the foreign banking institutions and foreign securities depositories and clearing agencies designated on Schedule I hereto ("Foreign Sub-Custodians"). The Fund may designate any additional foreign sub-custodian with which the Custodian has an agreement for such entity to act as the Custodian's agent, as its sub-custodian and any such additional foreign sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the employment of any one or more Foreign Sub-Custodians for maintaining custody of the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each delivery of a Certificate to the Custodian in connection with a transaction involving the use of a Foreign Sub-Custodian shall constitute a representation and warranty by the Fund that its Board of Directors, or its third party foreign custody manager as defined in Rule 17f-5 under the Investment Company Act of 1940, as amended, if any, has determined that use of such Foreign Sub-Custodian satisfies the requirements of such Investment Company Act of 1940 and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to each Series of the Fund the Foreign Securities of such Series held by each Foreign Sub-Custodian. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims by the Fund or any Series against a Foreign Sub-Custodian as a consequence of any loss, damage, cost, expense, liability or claim sustained or incurred by the Fund or any Series if and to the extent that the Fund or such Series has not been made whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the terms of the applicable Foreign Sub-Custodian agreement, use reasonable efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any Foreign Sub-Custodian insofar as such books and records relate to the performance of such Foreign Sub-Custodian under its agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of each Series held by Foreign Sub-Custodians, including but not limited to an identification of entities having possession of each Series' Foreign Securities and other assets, and advices or notifications of any transfers of Foreign Securities to or from each custodial account maintained by a Foreign Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Fund all notices, reports or other written information received pertaining to the Fund's Foreign Securities, including without limitation, notices of corporate action, proxies and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for securities received for the account of any Series and delivery of securities maintained for the account of such Series may be effected in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivery of securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the contrary, with respect to any losses or damages arising out of or relating to any actions or omissions of any Foreign Sub-Custodian the sole responsibility and liability of the Custodian shall be to take appropriate action at the Fund's expense to recover such loss or damage from the Foreign Sub-Custodian. It is expressly understood and agreed that the Custodian's sole responsibility and liability shall be limited to amounts so recovered from the Foreign Sub-Custodian.
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall promptly deliver to the Custodian a Certificate or Oral Instructions specifying with respect to such FX Transaction: (a) the Series to which such FX Transaction is specifically allocated; (b) the type and amount of Currency to be purchased by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the date on which the Currency to be purchased is to be delivered; (e) the date on which the Currency to be sold is to be delivered; and (f) the name of the person from whom or through whom such currencies are to be purchased and sold. Unless otherwise instructed by a Certificate or Oral Instructions, the Custodian shall deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to be sold on the date on which such delivery is to be made, as set forth in the Certificate, and shall receive, or instruct a Foreign Sub-Custodian to receive, the Currency to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as the Currency to be purchased, as specified in the Certificate or Oral Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such deliveries and receipts to be made in accordance with the customs prevailing from time to time among brokers or dealers in Currencies, and such receipt and delivery may not be completed simultaneously. The Fund assumes all responsibility and liability for all credit risks involved in connection with such receipts and deliveries, which responsibility and liability shall continue until the Currency to be received by the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this Agreement may be entered with the Custodian, any office, branch or subsidiary of The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as principal or otherwise through customary banking channels. The Fund
may issue a standing Certificate with respect to FX Transaction but the Custodian may establish rules or limitations concerning any foreign exchange facility made available to the Fund. The Fund shall bear all risks of investing in Securities or holding Currency. Without limiting the foregoing, the Fund shall bear the risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign depositories, exchange controls, asset freezes or other laws, rules, regulations or orders shall prohibit or impose burdens or costs on the transfer to, by or for the account of the Fund of Securities or any cash held outside the Fund's jurisdiction or denominated in Currency other than its home jurisdiction or the conversion of cash from one Currency into another currency. The Custodian shall not be obligated to substitute another Currency for a Currency (including a Currency that is a component of a Composite Currency Unit) whose transferability, convertibility or availability has been affected by such law, regulation, rule or procedure. Neither the Custodian nor any Foreign Sub-Custodian shall be liable to the Fund for any loss resulting from any of the foregoing events.
ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI, neither the Custodian nor its nominee shall be liable for any loss or damage, including counsel fees, resulting from its action or omission to act or otherwise, either hereunder or under any Margin Account Agreement, except for any such loss or damage arising out of its own negligence or willful misconduct. In no event shall the Custodian be liable to the Fund or any third party for special, indirect or consequential damages or lost profits or loss of business, arising under or in connection with this Agreement, even if previously informed of the possibility of such damages and regardless of the form of action. The Custodian may, with respect to questions of law arising hereunder or under any Margin Account Agreement, apply for and obtain the advice and opinion of counsel to the Fund, or of its own counsel, at the expense of the Fund, and shall be fully protected with respect to anything done or omitted by it in good faith in conformity with such advice or opinion. The Custodian shall be liable to the Fund for any loss or damage resulting from the use of the Book-Entry System or any Depository arising by reason of any negligence or willful misconduct on the part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall be under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased, sold, or written by or for the Fund, the legality of the purchase, sale or writing thereof, or the propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or the propriety of the amount to be received or paid therefor;
(c) the legality of the declaration or payment of any dividend by the Fund;
(d) the legality of any borrowing by the Fund using Securities as collateral;
(e) the legality of any loan of portfolio Securities, nor shall the Custodian be under any duty or obligation to see to it that any cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at any time as a result of such loan of portfolio Securities of the Fund is adequate collateral for the Fund against any loss it might sustain as a result of such loan. The Custodian specifically, but not by way of limitation, shall not be under any duty or obligation periodically to check or notify the Fund that the amount of such cash collateral held by it for the Fund is sufficient collateral for the Fund, but such duty or obligation shall be the sole responsibility of the Fund. In addition, the Custodian shall be under no duty or obligation to see that any broker, dealer or financial institution to which portfolio Securities of the Fund are lent pursuant to Article X of this Agreement makes payment to it of any dividends or interest which are payable to or for the account of the Fund during the period of such loan or at the termination of such loan, provided, however, that the Custodian shall promptly notify the Fund in the event that such dividends or interest are not paid and received when due; or
(f) the sufficiency or value of any amounts of money and/or Securities held in any Margin Account, Senior Security Account or Collateral Account in connection with transactions by the Fund. In addition, the Custodian shall be under no duty or obligation to see that any broker, dealer, futures commission merchant or Clearing Member makes payment to the Fund of any variation margin payment or similar payment which the Fund may be entitled to receive from such broker, dealer, futures commission merchant or Clearing Member, to see that any payment received by the Custodian from any broker, dealer, futures commission merchant or Clearing Member is the amount the Fund is entitled to receive, or to notify the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the Custodian of, any money, whether or not represented by any check, draft, or other instrument for the payment of money, received by it on behalf of the Fund until the Custodian actually receives and collects such money directly or by the final crediting of the account representing the Fund's interest at the Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for ascertaining or acting upon any calls, conversions, exchange offers, tenders, interest rate changes or similar matters relating to Securities held in the Depository, unless the Custodian shall have actually received timely notice from the Depository. In no event shall the Custodian have any responsibility or liability for the failure of the Depository to collect, or for the late collection or late crediting by the Depository of any amount payable upon Securities deposited in the Depository which may mature or be redeemed, retired, called or otherwise become payable. However, upon receipt of a Certificate from the Fund of an overdue amount on Securities held in the Depository the Custodian shall make a claim against the Depository on behalf of the Fund, except that the Custodian shall not be under any obligation to appear in, prosecute or defend any action, suit or proceeding in respect to any Securities held by the Depository which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take action to effect collection of any amount due to the Fund from the Transfer Agent of the Fund nor to take any action to effect payment or distribution by the Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action to effect collection of any amount if the Securities upon which such amount is payable are in default, or if payment is refused after due demand or presentation, unless and until (i) it shall be directed to take such action by a Certificate and (ii) it shall be assured to its satisfaction of reimbursement of its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign Sub-Custodians pursuant to Article XVI appoint one or more banking institutions as Depository or Depositories, as Sub-Custodian or Sub- Custodians, or as Co-Custodian or Co-Custodians including, but not limited to, banking institutions located in foreign countries, of Securities and money at any time owned by the Fund, upon such terms and conditions as may be approved in a Certificate or contained in an agreement executed by the Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to ascertain whether any Securities at any time delivered to, or held by it or by any Foreign Sub-Custodian, for the account of the Fund and specifically allocated to a Series are such as properly may be held by the Fund or such Series under the provisions of its then current prospectus, or (b) to ascertain whether any transactions by the Fund, whether or not involving the Custodian, are such transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay to the Custodian all out-of-pocket expenses and such compensation as may be agreed upon from time to time between the Custodian and the Fund. The Custodian may charge such compensation and any expenses with respect to a Series incurred by the Custodian in the performance of its duties pursuant to such agreement against any money specifically allocated to such Series. Unless and until the Fund instructs the Custodian by a Certificate to apportion any loss, damage, liability or expense among the Series in a specified manner, the Custodian shall also be entitled to charge against any money held by it for the account of a Series such Series' pro rata share (based on such Series, net asset value at the time of the charge to the aggregate net asset value of all Series at that time) of the amount of any loss, damage, liability or expense, including counsel fees, for which it shall be entitled to reimbursement under the provisions of this Agreement. The expenses for which the Custodian shall be entitled to reimbursement hereunder shall include, but are not limited to, the expenses of sub-custodians and foreign branches of the Custodian incurred in settling outside of New York City transactions involving the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice or other instrument in writing received by the Custodian and reasonably believed by the Custodian to be a Certificate. The Custodian shall be entitled to rely upon any Oral Instructions actually received by the Custodian herein above provided for. The Fund agrees to forward to the Custodian a Certificate or facsimile thereof confirming such Oral Instructions in such manner so that such Certificate or facsimile thereof is received by the Custodian, whether by hand delivery, telecopier or other similar device, or otherwise, by the close of business of the same day that such Oral Instructions are given to the Custodian. The Fund agrees that the fact that such confirming instructions are not received, or that contrary instructions are received, by the Custodian shall in no way affect the validity of the transactions or enforceability of the transactions hereby authorized by the Fund. The Fund agrees that the Custodian shall incur no liability to the Fund in acting upon Oral Instructions
given to the Custodian hereunder concerning such transactions provided such instructions reasonably appear to have been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument, instruction or notice received by the Custodian and reasonably believed by the Custodian to be given in accordance with the terms and conditions of any Margin Account Agreement. Without limiting the generality of the foregoing, the Custodian shall be under no duty to inquire into, and shall not be liable for, the accuracy of any statements or representations contained in any such instrument or other notice including, without limitation, any specification of any amount to be paid to a broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are in the possession of the Custodian shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the Investment Company Act of 1940, as amended, and other applicable securities laws and rules and regulations. The Fund, or the Fund's authorized representatives, shall have access to such books and records during the Custodian's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by the Custodian to the Fund or the Fund's authorized representative, and the Fund shall reimburse the Custodian its expenses of providing such copies. Upon reasonable request of the Fund, the Custodian shall provide in hard copy or on micro-film, whichever the Custodian elects, any records included in any such delivery which are maintained by the Custodian on a computer disc, or are similarly maintained, and the Fund shall reimburse the Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the Custodian on the system of internal accounting control of the Book- Entry System, the Depository or O.C.C., and with such reports on its own systems of internal accounting control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the Custodian harmless from all liability, claims, losses and demands whatsoever, including attorney's fees, howsoever arising or incurred because of or in connection with this Agreement, except for any such liability, claim, loss and demand arising out of the Custodian's own negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agreement, including, without limitation, those contained in Article XVI and XVII the Custodian may deliver and receive Securities, and receipts with respect to such Securities, and arrange for payments to be made and received by the Custodian in accordance with the customs prevailing from time to time among brokers or dealers in such Securities. When the Custodian is instructed to deliver Securities against payment, delivery of such Securities and receipt of payment therefor may not be completed simultaneously. The Fund assumes all responsibility and liability for all credit risks involved in connection with the Custodian's delivery of Securities pursuant to instructions of the Fund, which responsibility and liability shall continue until final payment in full has been received by the Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agreement, and no covenant or obligation shall be implied in this Agreement against the Custodian.
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than ninety (90) days after the date of giving of such notice. In the event such notice is given by the Fund, it shall be accompanied by a copy of a resolution of the Board of Directors of the Fund, certified by the Secretary or any Assistant Secretary, electing to terminate this Agreement and designating a successor custodian or custodians, each of which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. In the event such notice is given by the Custodian, the Fund shall, on or before the termination date, deliver to the Custodian a copy of a resolution of the Board of Directors of the Fund, certified by the Secretary or any Assistant Secretary, designating a successor custodian or custodians. In the absence of such designation by the Fund, the Custodian may designate a successor custodian which shall be a bank or trust company having not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon the date set forth in such notice this Agreement shall terminate, and the Custodian shall upon receipt of a notice of acceptance by the successor custodian on that date deliver directly to the successor custodian all Securities and money then owned by the Fund and held by it as Custodian, after deducting all fees, expenses and other amounts for the payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the Custodian in accordance with the preceding paragraph, the Fund shall upon the date specified in the notice of termination of this Agreement and upon the delivery by the Custodian of all Securities (other than Securities held in the Book-Entry System which cannot be delivered to the Fund) and money then owned by the Fund be deemed to be its own custodian and the Custodian shall thereby be relieved of all duties and responsibilities pursuant to this Agreement, other than the duty with respect to Securities held in the Book Entry System which cannot be delivered to the Fund to hold such Securities hereunder in accordance with this Agreement.
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the present Authorized Persons of the Fund under its seal, setting forth the names and the signatures of the present Authorized Persons of the Fund. The Fund agrees to furnish to the Custodian a new Certificate in similar form in the event that any such present Authorized Person ceases to be an Authorized Person of the Fund, or in the event that other or additional Authorized Persons are elected or appointed. Until such new Certificate shall be received, the Custodian shall be fully protected in acting under the provisions of this Agreement or Oral Instructions upon the signatures of the Authorized Persons as set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Custodian, shall be sufficiently given if addressed to the Custodian and mailed or delivered to it at its offices at 90 Washington Street, New York, New York 10286, or at such other place as the Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Fund shall be sufficiently given if addressed to the Fund and mailed or delivered to it at its office at the address for the Fund first above written, or at such other place as the Fund may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties with the same formality as this Agreement and approved by a resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Fund without the written consent of the Custodian, or by the Custodian without the written consent of the Fund, authorized or approved by a resolution of the Fund's Board of Directors.
6. This Agreement shall be construed in accordance with the laws of the State of New York without giving effect to conflict of laws principles thereof. Each party hereby consents to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers, thereunto duly authorized and their respective seals to be hereunto affixed, as of the day and year first above written.
DUFF & PHELPS UTILITIES INCOME INC.
[SEAL] By: /s/ Joseph C. Curry, Jr.
-------------------------------
Name: Joseph C. Curry, Jr.
Attest: Title: Vice President
/s/ Dianna P. Wengler
--------------------------------
Name: Dianna P. Wengler
Title: Assistant Secretary
|
THE BANK OF NEW YORK
[SEAL] By: /s/ Stephen E. Grunston
-------------------------------
Name: Stephen E. Grunston
Attest: Title: Vice President
/s/ Paul DiFilippi
--------------------------------
Name: Paul DiFilippi
Title: Assistant Treasurer
|
APPENDIX A
I, ________________________, and I, ____________________________, of DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation (the "Fund"), do hereby certify that:
The following persons have been duly authorized in conformity with the Fund's Articles of Incorporation and By-Laws to execute any Certificate, instruction, notice or other instrument on behalf of the Fund and the signatures set forth opposite their respective names are their true and correct signatures:
Name Position Signature
APPENDIX B
SERIES
APPENDIX C
I, Mayra Adonnino, a Vice President with THE BANK OF NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected and acting of DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Directors of the Fund at a meeting duly held on , 1999, at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 1999, (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis to deposit in the Book-Entry System, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated, and to utilize the Book-Entry System to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of DUFF & PHELPS UTILITIES INCOME INC., as of the day of , 1999.
[SEAL]
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected and acting of DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Directors of the Fund at a meeting duly held on , 1999, at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 1999, (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it receives a Certificate, as defined in the Custody Agreement, to the contrary to deposit in the Depository, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated, and to utilize the Depository to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of DUFF & PHELPS UTILITIES INCOME INC., as of the ____ day of _______________, 1999.
[SEAL]
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected and acting of DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Directors of the Fund at a meeting duly held on , 1999, at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 1999, (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it receives a Certificate, as defined in the Custody Agreement, to the contrary to deposit in the Participants Trust Company as Depository, as defined in the Custody Agreement, all securities eligible for deposit therein, regardless of the Series to which the same are specifically allocated, and to utilize the Participants Trust Company to the extent possible in connection with its performance thereunder, including, without limitation, in connection with settlements of purchases and sales of securities, loans of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of DUFF & PHELPS UTILITIES INCOME INC., as of the ____ day of ____________, 1999.
[SEAL]
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is the duly elected and acting of DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation (the "Fund"), and further certifies that the following resolution was adopted by the Board of Directors of the Fund at a meeting duly held on , 1999, at which a quorum was at all times present and that such resolution has not been modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody Agreement between The Bank of New York and the Fund dated as of , 1999, (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis until such time as it receives a Certificate, as defined in the Custody Agreement, to the contrary, to accept, utilize and act with respect to Clearing Member confirmations for Options and transaction in Options, regardless of the Series to which the same are specifically allocated, as such terms are defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of DUFF & PHELPS UTILITIES INCOME INC., as of the ____ day of _______________, 1999.
[SEAL]
EXHIBIT D
The undersigned, , hereby certifies that he or she is the duly elected and acting of DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation (the "Fund"), further certifies that the following resolutions were adopted by the Board of Directors of the Fund at a meeting duly held on , 1999, at which a quorum was at all times present and that such resolutions have not been modified or rescinded and are in full force and Effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody Agreement between The Bank of New York and the Fund dated as of , 1999 (the "Custody Agreement") is authorized and instructed on a continuous and ongoing basis to act in accordance with, and to rely on Instructions (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of such access codes only to Authorized Persons of the Fund as defined in the Custody Agreement, shall establish internal safekeeping procedures to safeguard and protect the confidentiality and availability of user and access codes, passwords and authentication keys, and shall use Instructions only in a manner that does not contravene the Investment Company Act of 1940, as amended, or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of DUFF & PHELPS UTILITIES INCOME INC., as of the ____ day of _______________, 1999.
[SEAL]
Exhibit j.2
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT made as of March 8, 2000, between Duff & Phelps Utilities Income Inc. (the "Fund") and The Bank of New York ("BNY").
W I T N E S S E T H:
WHEREAS, the Fund desires to appoint BNY as a Foreign Custody Manager on the terms and conditions contained herein;
WHEREAS, BNY desires to serve as a Foreign Custody Manager and perform the duties set forth herein on the terms and condition contained herein;
NOW THEREFORE, in consideration of the mutual promises hereinafter contained in this Agreement, the Fund and BNY hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
1. "Board" shall mean the board of directors or board of trustees, as the case may be, of the Fund.
2. "Eligible Foreign Custodian" shall have the meaning provided in the Rule.
3. "Monitoring System" shall mean a system established by BNY to fulfill the Responsibilities specified in clauses 1(d) and 1(e) of Article III of this Agreement.
4. "Qualified Foreign Bank" shall have the meaning provided in the Rule.
5. "Responsibilities" shall mean the responsibilities delegated to BNY as a Foreign Custody Manager with respect to each Specified Country and each Eligible Foreign Custodian selected by BNY, as such responsibilities are more fully described in Article III of this Agreement.
6. "Rule" shall mean Rule 17f-5 under the Investment Company Act of 1940, as amended.
7. "Securities Depository" shall mean any securities depository or clearing agency within the meaning of Section (a)(1)(ii) or (a)(1)(iii) of the Rule.
8. "Specified Country" shall mean each country listed on Schedule I attached hereto and each country, other than the United States, constituting the primary market for a security with respect to which the Fund has given settlement instructions to The Bank of New York as custodian (the "Custodian") under its Custody Agreement with the Fund.
ARTICLE II
BNY AS A FOREIGN CUSTODY MANAGER
1. The Fund on behalf of its Board hereby delegates to BNY with respect to each Specified Country the Responsibilities.
2. BNY accepts the Board's delegation of Responsibilities with respect to each Specified Country and agrees in performing the Responsibilities as a Foreign Custody Manager to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of the Fund's assets would exercise.
3. BNY shall provide to the Board at such times as the Board deems reasonable and appropriate based on the circumstances of the Fund's foreign custody arrangements written reports notifying the Board of the placement of assets of the Fund with a particular Eligible Foreign Custodian within a Specified Country and of any material change in the arrangements (including, in the case of Qualified Foreign Banks, any material change in any contract governing such arrangements and in the case of Securities Depositories, any material change in the established practices or procedures of such Securities Depositories) with respect to assets of the Fund with any such Eligible Foreign Custodian.
ARTICLE III
RESPONSIBILITIES
1. Subject to the provisions of this Agreement, BNY shall with respect to
each Specified Country select an Eligible Foreign Custodian. In connection
therewith, BNY shall: (a) determine that assets of the Fund held by such
Eligible Foreign Custodian will be subject to reasonable care, based on the
standards applicable to custodians in the relevant market in which such
Eligible Foreign Custodian operates, after considering all factors relevant to
the safekeeping of such assets, including, without limitation, those contained
in paragraph (c)(1) of the Rule; (b) determine that the Fund's foreign custody
arrangements with each Qualified Foreign Bank are governed by a written
contract with the Custodian (or, in the case of a Securities Depository, by
such a contract, by the rules or established practices or procedures of the
Securities Depository, or by any combination of the foregoing) which will
provide reasonable care for the Fund's assets based on the standards specified
in paragraph (c)(1) of the Rule; (c) determine that each contract with a
Qualified Foreign Bank shall include the provisions specified in paragraph
(c)(2)(i)(A) through (F) of the Rule or, alternatively, in lieu of any or all
of such (c)(2)(i)(A) through (F) provisions, such other provisions as BNY
determines will provide, in their entirety, the same or a greater level of
care and protection for the assets of the Fund as such specified provisions;
(d) monitor pursuant to the Monitoring System the appropriateness of
maintaining the assets of the Fund with a particular Eligible Foreign
Custodian pursuant to paragraph (c)(1) of the Rule and in the case of a
Qualified Foreign Bank, any material change in the contract governing such
arrangement and in the case of a Securities Depository, any material change in
the established practices or procedures of such Securities Depository; and (e)
advise the Fund whenever an arrangement (including, in the case of a Qualified
Foreign Bank, any material change in the contract governing such arrangement
and in the case of a Securities Depository, any material change in the
established practices or procedures of such Securities Depository) described
in preceding clause (d) no longer meets the requirements of the Rule. Anything
in this Agreement to the contrary notwithstanding, BNY shall in no event be
deemed to have selected any Securities Depository the use of which is
mandatory by law or regulation or because securities cannot be withdrawn from
such Securities Depository, or because maintaining securities outside the Securities Depository is not consistent with prevailing custodial practices in the relevant market (each, a "Compulsory Depository"); it being understood however, that for each Compulsory Depository utilized or intended to be utilized by the Fund, BNY shall provide the Fund from time to time with information addressing the factors set forth in Section (c)(1) of the Rule and BNY's opinions with respect thereto so that the Fund may determine the appropriateness of placing Fund assets therein.
2. (a) For purposes of Clauses (a) and (b) of preceding Section 1 of this Article, with respect to Securities Depositories, it is understood that such determination shall be made on the basis of, and limited by, information gathered through BNY's subcustodian network, or through publicly available information otherwise obtained with respect to each such Securities Depository.
(b) For purposes of clause (d) of preceding Section 1 of this Article,
BNY's determination of appropriateness shall not include, nor be deemed to
include, any evaluation of Country Risks associated with investment in a
particular country. For purposes hereof, "Country Risks" shall mean systemic
risks of holding assets in a particular country including, but not limited to,
(a) the use of Compulsory Depositories, (b) such country's financial
infrastructure, (c) such country's prevailing custody and settlement
practices, (d) nationalization, expropriation or other governmental actions,
(e) regulation of the banking or securities industry, (f) currency controls,
restrictions, devaluations or fluctuations, and (g) market conditions which
affect the orderly execution of securities transactions or affect the value of
securities.
ARTICLE IV
REPRESENTATIONS
1. The Fund hereby represents that: (a) this Agreement has been duly
authorized, executed and delivered by the Fund, constitutes a valid and
legally binding obligation of the Fund enforceable in accordance with its
terms, and no statute, regulation, rule, order, judgment or contract binding
on the Fund prohibits the Fund's execution or performance of this Agreement;
(b) this Agreement has been approved and ratified by the Board at a meeting
duly called and at which a quorum was at all times present; and (c) the Board
or its investment advisor has considered the Country Risks associated with
investment in each Specified Country and will have considered such risks prior
to any settlement instructions being given to the Custodian with respect to
any other Specified Country.
2. BNY hereby represents that: (a) BNY is duly organized and existing under the laws of the State of New York, with full power to carry on its businesses as now conducted, and to enter into this Agreement and to perform its obligations hereunder; (b) this Agreement has been duly authorized, executed and delivered by BNY, constitutes a valid and legally binding obligation of BNY enforceable in accordance with its terms, and no statute, regulation, rule, order, judgment or contract binding on BNY prohibits BNY's execution or performance of this Agreement; and (c) BNY has established the Monitoring System.
ARTICLE V
CONCERNING BNY
1. BNY shall not be liable for any costs, expenses, damages, liabilities
or claims, including attorneys' and accountants' fees, sustained or incurred
by, or asserted against, the Fund except to the extent the same arises out of
the failure of BNY to exercise the care, prudence and diligence required by
Section 2 of Article II hereof. In no event shall BNY be liable to the Fund,
the Board, or any third party for special, indirect or consequential damages,
or for lost profits or loss of business, arising in connection with this
Agreement.
2. The Fund shall indemnify BNY and hold it harmless from and against any and all costs, expenses, damages, liabilities or claims, including attorneys' and accountants' fees, sustained or incurred by, or asserted against, BNY by reason or as a result of any action or inaction, or arising out of BNY's performance hereunder, provided that the Fund shall not indemnify BNY to the extent any such costs, expenses, damages, liabilities or claims arises out of BNY's failure to exercise the reasonable care, prudence and diligence required by Section 2 of Article II hereof.
3. For its services hereunder, the Fund agrees to pay to BNY such compensation and out-of-pocket expenses as shall be mutually agreed.
4. BNY shall have only such duties as are expressly set forth herein. In no event shall BNY be liable for any Country Risks associated with investments in a particular country.
ARTICLE VI
MISCELLANEOUS
1. This Agreement constitutes the entire agreement between the Fund and BNY, and no provision in the Custody Agreement between the Fund and the Custodian shall affect the duties and obligations of BNY hereunder, nor shall any provision in this Agreement affect the duties or obligations of the Custodian under the Custody Agreement.
2. Any notice or other instrument in writing, authorized or required by this Agreement to be given to BNY, shall be sufficiently given if received by it at its offices at 90 Washington Street, New York, New York 10286, or at such other place as BNY may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by this Agreement to be given to the Fund shall be sufficiently given if received by it at its offices at 55 East Monroe Street, Chicago, Illinois 60603 or at such other place as the Fund may from time to time designate in writing.
4. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected thereby. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties. This Agreement shall extend to and shall be binding upon the parties hereto, and their respective
successors and assigns; provided however, that this Agreement shall not be assignable by either party without the written consent of the other.
5. This Agreement shall be construed in accordance with the substantive laws of the State of New York, without regard to conflicts of laws principles thereof. The Fund and BNY hereby consent to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder. The Fund hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such proceeding brought in such a court and any claim that such proceeding brought in such a court has been brought in an inconvenient forum. The Fund and BNY each hereby irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this Agreement.
6. The parties hereto agree that in performing hereunder, BNY is acting solely on behalf of the Fund and no contractual or service relationship shall be deemed to be established hereby between BNY and any other person.
7. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute only one instrument.
8. This Agreement shall terminate simultaneously with the termination of
the Custody Agreement between the Fund and the Custodian, and may otherwise be
terminated by either party giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than thirty
(30) days after the date of such notice.
IN WITNESS WHEREOF, the Fund and BNY have caused this Agreement to be executed by their respective officers, thereunto duly authorized, as of the date first above written.
DUFF & PHELPS UTILITIES INCOME INC.
By: /s/ Joseph C. Curry, Jr. ------------------------------- Title: Vice President |
Tax Identification No.: 36-3480989
THE BANK OF NEW YORK
By: /s/ Stephen E. Grunston ------------------------------- Title: Vice President |
SCHEDULE I
Specified Countries
Exhibit k.1
FUND ACCOUNTING AGREEMENT
AGREEMENT made as of this 26th day of February, 1999 by and between DUFF & PHELPS UTILITIES INCOME INC., a Maryland corporation having its principal place of business at 55 East Monroe Street, Chicago, Illinois 60603 (hereinafter called the "Fund") and The Bank of New York, a New York corporation authorized to do a banking business, having its principal place of business at One Wall Street, New York, New York 10286 (hereinafter called the "Bank").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the Fund and the Bank hereby agree as follows:
1. The Fund hereby appoints the Bank to perform the duties hereinafter set forth.
2. The Bank hereby accepts appointment and agrees to perform the duties hereinafter set forth.
3. Subject to the provisions of paragraphs 4 and 5 below, the Bank shall compute the net asset value per share of each Series of shares listed on Schedule I hereto (the "Series") of the Fund and shall value the securities held by the Fund (the "Securities") at such times and dates and in the manner specified in the then currently effective Prospectus of the Fund.
4. To the extent valuation of Securities or computation of a Series' net asset value as specified in the Fund's then currently effective Prospectus is at any time inconsistent with any applicable laws or regulations, the Fund shall immediately so notify the Bank in writing and thereafter shall either furnish the Bank at all appropriate times with the values of such Securities and each Series' net asset value, or subject to the prior approval of the Bank, instruct the Bank in writing to value Securities and compute each Series' net asset value in a manner which the Fund then represents in writing to be consistent with all applicable laws and regulations. The Fund may also from time to time, subject to the prior approval of the Bank, instruct the Bank in writing to compute the value of the Securities or a Series' net asset value in a manner other than as specified in paragraph 3 of this Agreement. By giving such instruction, the Fund shall be deemed to have represented that such instruction is consistent with all applicable laws and regulations and
the then currently effective Prospectus of the Fund. The Fund shall have sole responsibility for determining the method of valuation of Securities and the method of computing each Series' net asset value.
5. The Fund shall furnish the Bank with any and all instructions, explanations, information, specifications and documentation deemed necessary by the Bank in the performance of its duties hereunder, including, without limitation, the amounts or written formula for calculating the amounts and times of accrual of Fund liabilities and expenses. The Bank shall not be required to include as Fund liabilities and expenses, nor as a reduction of net asset value, any accrual for any federal, state, or foreign income taxes unless the Fund shall have specified to the Bank the precise amount of the same to be included in liabilities and expenses or used to reduce net asset value. The Fund shall also furnish the Bank with bid, offer, or market values of Securities if the Bank notifies the Fund that same are not available to the Bank from a security pricing or similar service utilized, or subscribed to, by the Bank which the Bank in its judgment deems reliable at the time such information is required for calculations hereunder. At any time and from time to time, the Fund also may furnish the Bank with bid, offer, or market values of Securities and instruct the Bank to use such information in its calculations hereunder. The Bank shall at no time be required or obligated to commence or maintain any utilization of, or subscriptions to, any securities pricing or similar service.
6. The Bank shall advise the Fund, the Fund's custodian and the Fund's transfer agent of the net asset value of each Series upon completion of the computations required to be made by the Bank pursuant to this Agreement.
7. The Bank shall, as agent for the Fund, maintain and keep current the books, accounts and other documents, if any, listed in Appendix A hereto and made a part hereof, as such Appendix A may be amended from time to time, and preserve any such books, accounts and other documents in accordance with the applicable provisions of Rule 31a-2 of the General Rules and Regulations under the Investment Company Act of 1940, as amended (the "Rules"). Such books, accounts and other documents shall be made available upon reasonable request for inspection by officers, employees and auditors of the Fund during the Bank's normal business hours.
8. All records maintained and preserved by the Bank pursuant to this Agreement which the Fund is required to maintain and preserve in accordance
with the above-mentioned Rules shall be and remain the property of the Fund and shall be surrendered to the Fund promptly upon request in the form in which such records have been maintained and preserved. Upon reasonable request of the Fund, the Bank shall provide in hard copy or on micro-film, whichever the Bank shall elect, any records included in any such delivery which are maintained by the Bank on a computer disc, or are similarly maintained, and the Fund shall reimburse the Bank for its expenses of providing such hard copy or micro-film.
9. The Bank, in performing the services required of it under the terms of this Agreement, shall be entitled to rely fully on the accuracy and validity of any and all instructions, explanations, information, specifications and documentation furnished to it by the Fund and shall have no duty or obligation to review the accuracy, validity or propriety of such instructions, explanations, information, specifications or documentation, including, without limitation, evaluations of Securities; the amounts or formula for calculating the amounts and times of accrual of Series' liabilities and expenses; the amounts receivable and the amounts payable on the sale or purchase of Securities; and amounts receivable or amounts payable for the sale or redemption of Fund shares effected by or on behalf of the Fund. In the event the Bank's computations hereunder rely, in whole or in part, upon information, including, without limitation, bid, offer or market values of Securities or other assets, or accruals of interest or earnings thereon, from a pricing or similar service utilized, or subscribed to, by the Bank which the Bank in its judgment deems reliable, the Bank shall not be responsible for, under any duty to inquire into, or deemed to make any assurances with respect to, the accuracy or completeness of such information.
10. The Bank shall not be required to inquire into any valuation of Securities or other assets by the Fund or any third party described in preceding paragraph 9 hereof, even though the Bank in performing services similar to the services provided pursuant to this Agreement for others may receive different valuations of the same or different securities of the same issuers.
11. The Bank, in performing the services required of it under the terms of this Agreement, shall not be responsible for determining whether any interest accruable to the Fund is or will be actually paid, but will accrue such interest until otherwise instructed by the Fund.
12. The Bank shall not be responsible for delays or errors which occur by reason of circumstances beyond its control in the performance of its duties
under this Agreement, including, without limitation, labor difficulties within or without the Bank, mechanical breakdowns, flood or catastrophe, acts of God, failures of transportation, communication or power supply, or other similar circumstances. Nor shall the Bank be responsible for delays or failures to supply the information or services specified in this Agreement where such delays or failures are caused by the failure of any person(s) other than the Bank to supply any instructions, explanations, information, specifications or documentation deemed necessary by the Bank in the performance of its duties under this Agreement.
13. No provision of this Agreement shall prevent the Bank from offering services similar or identical to those covered by this Agreement to any other corporations, associations or entities of any kind. Any and all operational procedures, techniques and devices developed by the Bank in connection with the performance of its duties and obligations under this Agreement, including those developed in conjunction with the Fund, shall be and remain the property of the Bank, and the Bank shall be free to employ such procedures, techniques and devices in connection with the performance of any other contract with any other person whether or not such contract is similar or identical to this Agreement.
14. The Bank may, with respect to questions of law, apply to and obtain the advice and opinion of counsel to the Fund or its own counsel and shall be entitled to rely on the advice or opinion of such counsel. The costs of any such advice or opinion shall be borne by the Fund.
15. The Bank shall be entitled to rely upon any oral instructions received by the Bank and reasonably believed by the Bank to be given by or on behalf of the Fund, even if the Bank subsequently receives written instructions contradicting such oral instructions. The books and records of the Bank with respect to the content of any oral instruction shall be binding and conclusive.
16. Notwithstanding any other provision contained in this Agreement, the Bank shall have no duty or obligation with respect to, including, without limitation, any duty or obligation to determine, or advise or notify the Fund of: (a) the taxable nature of any distribution or amount received or deemed received by, or payable to, the Fund; (b) the taxable nature or effect on the Fund or its shareholders of any corporate actions, class actions, tax reclaims, tax refunds, or similar events; (c) the taxable nature or taxable amount of any distribution or dividend paid, payable or deemed paid, by the
Fund to its shareholders; or (d) the effect under any federal, state, or foreign income tax laws of the Fund making or not making any distribution or dividend payment, or any election with respect thereto.
17. The Bank shall not be liable for any loss, damage or expense, including counsel fees and other costs and expenses of a defense against any claim or liability, resulting from, arising out of, or in connection with its performance hereunder, including its actions or omissions, the incompleteness or inaccuracy of any specifications or other information furnished by the Fund, or for delays caused by circumstances beyond the Bank's control, unless such loss, damage or expense arises out of the bad faith, negligence, or willful misconduct of the Bank. In no event shall the Bank be liable to the Company or any third party for special, indirect, or consequential damages, or for lost profits or loss of business, arising under or in connection with this Agreement, even if previously informed of the possibility of such damages and regardless of the form of action.
18. Without limiting the generality of the foregoing, the Fund shall indemnify the Bank against and save the Bank harmless from any loss, damage or expense, including counsel fees and other costs and expenses of a defense against any claim or liability, arising from any one or more of the following:
(a) Errors in records or instructions, explanations, information, specifications or documentation of any kind, as the case may be, supplied to the Bank by any third party described in preceding paragraph 9 hereof or by or on behalf of the Fund;
(b) Action or inaction taken or omitted to be taken by the Bank pursuant to written or oral instructions of the Fund or otherwise without bad faith, negligence or willful misconduct;
(c) Any action taken or omitted to be taken by the Bank in good faith in accordance with the advice or opinion of counsel for the Fund or its own counsel;
(d) Any improper use by the Fund or its agents, distributor or investment advisor of any valuations or computations supplied by the Bank pursuant to this Agreement;
(e) The method of valuation of the Securities and the method of computing each Series' net asset value; or
(f) Any valuations of Securities or net asset value provided by the Fund.
19. In consideration for all of the services to be performed by the Bank as set forth herein the Bank shall be entitled to receive reimbursement for all out-of-pocket expenses and such compensation as may be agreed upon in writing from time to time between the Bank and the Fund.
20. Attached hereto as Appendix B is a list of persons duly authorized by the Board of Directors of the Fund to execute this Agreement and give any written or oral instructions, or written or oral specifications, by or on behalf of the Fund. From time to time the Fund may deliver a new Appendix B to add or delete any person and the Bank shall be entitled to rely on the last Appendix B actually received by the Bank.
21. The Fund represents and warrants to the Bank that it has all requisite power to execute and deliver this Agreement, to give any written or oral instructions contemplated hereby, and to perform the actions or obligations contemplated to be performed by it hereunder, and has taken all necessary action to authorize such execution, delivery, and performance.
22. This Agreement shall not be assignable by the Fund without the prior written consent of the Bank, or by the Bank without the prior written consent of the Fund.
23. Either of the parties hereto may terminate this Agreement by giving the other party a notice in writing specifying the date of such termination, which shall not be less than ninety (90) days after the date of giving of such notice. Upon the date set forth in such notice, the Bank shall deliver to the Fund all records then the property of the Fund and, upon such delivery, the Bank shall be relieved of all duties and responsibilities under this Agreement.
24. This Agreement may not be amended or modified in any manner except by written agreement executed on behalf of both parties hereto.
25. This Agreement is executed in the State of New York and all laws and rules of construction of the State of New York (other than those relating to choice of laws) shall govern the rights, duties and obligations of the parties hereto.
26. The performance and provisions of this Agreement are intended to benefit only the Bank and the Fund, and no rights shall be granted to any other person by virtue of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above.
DUFF & PHELPS UTILITIES INCOME INC.
[SEAL] By: /s/ Joseph C. Curry, Jr.
--------------------------------
Name: Joseph C.Curry, Jr.
Attest: Title: Vice President
/s/ Dianna P. Wengler
--------------------------------
Name: Dianna P. Wengler
Title: Assistant Secretary
|
THE BANK OF NEW YORK
[SEAL] By: /s/ Stephen E. Grunston.
---------------------------------
Name: Stephen E.Grunston
Attest: Title: Vice President
/s/ Paul DiFilippi
-------------------------------
Name: Paul DiFilippi
Title: Assistant Treasurer
|
APPENDIX A TO FUND ACCOUNTING AGREEMENT
BETWEEN
THE BANK OF NEW YORK
AND
DUFF & PHELPS UTILITIES INCOME INC.
I. The Bank of New York (the "Bank"), as agent for DUFF & PHELPS UTILITIES INCOME INC. (the "Fund"), shall maintain the following records on a daily basis for each Series.
1. Report of priced portfolio securities
2. Statement of net asset value per share
II. The Bank shall maintain the following records on a monthly basis for each Series:
1. General Ledger
2. General Journal
3. Cash Receipts Journal
4. Cash Disbursements Journal
5. Subscriptions Journal
6. Redemptions Journal
7. Accounts Receivable Reports
8. Accounts Payable Reports
9. Open Subscriptions/Redemption Reports
10. Transaction (Securities) Journal
11. Broker Net Trades Reports
III. The Bank shall prepare a Holdings Ledger on a quarterly basis, and a Buy-Sell Ledger (Broker's Ledger) on a semiannual basis for each Series. Schedule D shall be produced on an annual basis for each Series.
The above reports may be printed according to any other required frequency to meet the requirements of the Internal Revenue Service, The Securities and Exchange Commission and the Fund's Auditors.
IV. For internal control purposes, the Bank uses the Account Journals produced by The Bank of New York Custody System to record daily settlements of the following for each Series:
1. Securities bought
2. Securities sold
3. Interest received
4. Dividends received
5. Capital stock sold
6. Capital stock redeemed
7. Other income and expenses
All portfolio purchases for the Fund are recorded to reflect expected maturity value and total cost including any prepaid interest.
APPENDIX B
I, , of DUFF & PHELPS UTILITIES INCOME INC., a Maryland
corporation (the "Fund"), do hereby certify that:
The following individuals serve in the following positions with the Fund, and each has been duly elected or appointed by the Board of Directors of the Fund to each such position and qualified therefor in conformity with the Fund's Articles of Incorporation and By-Laws, and the signatures set forth opposite their respective names are their true and correct signatures. Each such person is authorized to give written or oral instructions or written or oral specifications by or on behalf of the Fund to the Bank.
Name Position Signature
SCHEDULE I
SERIES
Exhibit r.1
DNP SELECT INCOME FUND INC.
AMENDED AND RESTATED CODE OF ETHICS
I. Applicability
This Amended and Restated Code of Ethics (the "Code"), adopted by the Board of Directors of DNP Select Income Fund Inc. (the "Fund") pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended (the "Act"), establishes rules of conduct for "Covered Persons" or "Access Persons" (each as defined in this Code) of the Fund. For purposes of this Code, "Covered Person" or "Access Person" shall mean any director, officer or "Advisory Person" of the Fund and "Advisory Person" shall include the following persons:
(A) any employee of the Fund or any company in a control relationship to the Fund who, in connection with his or her regular functions or duties, makes or participates in investment decisions, or obtains investment information, regarding the purchase or sale of securities by the Fund, or whose functions relate to the making of any investment recommendations with respect to the purchases or sales; and
(B) any natural person in a control relationship to the Fund who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of securities by the Fund.
For purposes of this Article I, a person does not become a Covered Person solely by reason of (i) normally assisting in the preparation of public reports or receiving public reports, but not receiving information about current recommendations or trading; or (ii) a single instance of obtaining knowledge of current recommendations or trading activity, or infrequently and inadvertently obtaining such knowledge.
II. Statement of General Principles
The general fiduciary principles that govern the personal trading activities of a Covered Person are as follows:
(A) the duty at all times to place the interests of the shareholders of the Fund first;
(B) the requirement that all personal securities transactions be conducted in a manner which does not interfere with the Fund's portfolio transactions so as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trust and responsibility; and
(C) the fundamental standard that Covered Persons should not take inappropriate or unfair advantage of their relationship with the Fund.
Covered Persons must adhere to these general principles as well as comply with the Code's specific provisions.
III. Prohibitions
(A) No Covered Person shall purchase or sell, directly or indirectly, any security in which he has, or by reason of such transaction acquires, any direct or indirect beneficial ownership (as defined in Attachment A hereto) and which he knows at the time of such purchase or sale:
(1) is being considered for purchase or sale by the Fund; or
(2) is being purchased or sold by the Fund.
No Advisory Person shall purchase or sell a security when the Fund has a pending purchase or sale of the same security until the Fund's order has been completed or withdrawn. If the proposed personal trade is on the same side as the completed Fund transaction, the personal trade cannot occur within two days of the Fund transaction (i.e., neither at T or T + 1 calendar day). If the proposed trade is on the opposite side of the completed Fund transaction in that security, the personal trade cannot occur within three days after the Fund transaction (i.e., T + 2 calendar days or later).
No Advisory Person shall profit in the purchase and sale or sale and purchase, of the same (or equivalent) securities of an issuer within 60 calendar days if the Fund purchases or sells the same (or equivalent) securities of such issuer during such 60-day period. Any profit realized on such short-term trades shall be disgorged.
For purposes of Article III(A)(1), a security is "being considered for purchase or sale" when a recommendation to purchase or sell a security has been made and communicated and, with respect to the person making the recommendation, when such person receives information that would lead such person in his or her normal course of business to consider making such a recommendation.
(B) No Covered Person shall recommend any securities transaction by the Fund without having disclosed his interest, if any, in such securities or the issuer of the securities, including without limitation:
(1) such person's direct or indirect beneficial ownership of any securities of such issuer;
(2) any contemplated transaction by such person in such securities;
(3) any position with such issuer or its affiliates; and
(4) any present or proposed business relationship between such issuer or its affiliates and such person or any party in which such person has a significant interest.
(C) No Covered Person shall, directly or indirectly in connection with the purchase or sale of any securities held or to be acquired by the Fund:
(1) employ any device, scheme or artifice to defraud the Fund; or
(2) make to the Fund any untrue statement of a material fact or omit to state to the Fund a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;
(3) engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon the Fund; or
(4) engage in any manipulative practice with respect to the Fund.
(D) No Advisory Person shall purchase, directly or indirectly, or by reason of such transaction acquire, any direct or indirect beneficial ownership (as defined in Attachment A hereto) of any securities in an initial public offering or a private placement transaction, without prior approval in accordance with this Code; or
(E) No Covered Person shall accept any gift or other thing of more than de minimis value from any person or entity that does business with or on behalf of the Fund.
For purposes of this Code, the term "security" shall have the meaning set forth in Section 2(a)(36) of the Act, provided that the term "security" shall not include securities issued by the Government of the United States, short term securities which are "government securities" as defined in Section 2(a)(16) of the Act, bankers' acceptances, bank certificates of deposit, commercial paper, shares of registered open-end investment companies and such other money market instruments as designated by the Board of Directors of the Fund.
IV. Exempt Transactions
The prohibitions described in paragraph (A) of Article III shall not apply to:
(A) purchases or sales effected in any account over which the Covered Person has (i) no direct or indirect influence or control or (ii) given discretionary investment authority to an independent third party;
(B) purchases or sales of securities of an issuer of the type in which the Fund does not typically invest;
(C) purchases or sales that are non-volitional on the part of the Covered Person;
(D) purchases of shares necessary to establish an automatic dividend reinvestment plan or pursuant to an automatic dividend reinvestment plan, and subsequent sales of such securities;
(E) purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from the issuer, and sales of such rights so acquired;
(F) purchases or sales of up to 500 shares of stock of issuers that are included in the calculation of the Standard & Poor's 500 Composite Stock Index at the time of purchase or sale; or
(G) purchases or sales for which the Covered Person has received prior approval from the Compliance Officer of Duff & Phelps Investment Management Co. (the "DPIM Compliance Officer") in accordance with this Code.
V. Prior Approval for Non-Exempt Transactions
A Covered Person shall not be required to obtain prior approval for any personal securities transaction that is exempt by Article IV hereof. In all other instances, upon written request from a Covered Person as provided in Article V(C) below, the DPIM Compliance Officer shall have the sole discretion to pre-approve a personal securities transaction, and thereby exempt such transaction from the restrictions of this Code. The DPIM Compliance Officer shall make such determination in accordance with the following:
(A) Prior approval shall be granted only if a purchase or
sale of securities is consistent with the purposes of this Code and
Section 17(j) of the Act. To illustrate, a purchase or sale shall be
considered consistent with those purposes if such purchase or sale is
only remotely potentially harmful to the Fund because such purchase
or sale would be unlikely to affect a highly institutional market, or
because such purchase or sale is clearly not related economically to
the securities held, purchased or sold by the Fund.
(B) Prior approval shall take into account, among other factors:
(1) whether the investment opportunity should be reserved for the Fund and its shareholders and whether the opportunity is being offered to the Covered Person by virtue of the Covered Person's position with the Fund;
(2) whether the amount or nature of the transaction or person making it is likely to affect the price or market for the security;
(3) whether the Covered Person making the proposed purchase or sale is likely to benefit from purchases or sales being made or being considered by the Fund;
(4) whether the security proposed to be purchased or sold is one that would qualify for purchase or sale by the Fund; and
(5) whether the transaction is non-volitional on the part of the individual, such as receipt of a stock dividend or a sinking fund call.
(C) To obtain prior approval, Covered Persons must submit in writing a completed and executed Personal Trading Request for Pre-Clearance (a form of which is appended hereto as Attachment B), which shall set forth the details of the proposed transaction. Approval of the transaction as described on such form shall be evidenced by the signature of the DPIM Compliance Officer thereon. A copy of all prior approval forms, with all required signatures, shall be retained by the DPIM Compliance Officer.
In any case where the DPIM Compliance Officer determines to grant prior approval for the acquisition by a Covered Person of securities in an initial public offering or a private placement transaction, he or she shall maintain a record of the reasons supporting such determination and retain such record with the prior approval form in accordance with the provisions of Article VII(I)(6) below. In all other cases where prior approval is granted in accordance with this Code, the DPIM Compliance Officer is not required to specify any reason for such determination.
If approval is given to the Covered Person in accordance with this Code to engage in a securities transaction, the Covered Person is under an affirmative obligation to disclose that position if such Covered Person plays a material role in the Fund's subsequent investment decision regarding the same issuer. In such circumstances, a review of the Fund's investment decision to purchase securities of the issuer by investment personnel with no personal interest in the issuer shall be conducted.
Approval granted to the Covered Person in accordance with this Code is only effective for 24 hours from the date of such approval. If the trade is not made within 24 hours, a new clearance must be obtained.
VI. Reporting
(A) Initial Holdings Reports. Every Covered Person must submit a report (a form of which is appended as Attachment C) to the DPIM Compliance Officer not later than 10 days after the person becomes a Covered Person containing the following information:
(1) the title, number of shares and principal amount of each security in which the Covered Person had any direct or indirect beneficial ownership when the person became a Covered Person;
(2) the name of any broker, dealer or bank with whom the Covered Person maintained an account in which any securities were held for the direct or indirect benefit of the Covered Person as of the date the person became a Covered Person; and
(3) the date that the report is submitted by the Covered Person.
(B) Quarterly Transaction Reports. Every Covered Person must submit a report (a form of which is appended as Attachment D) to the DPIM Compliance Officer not later than 10 days after each calendar quarter containing:
(1) the following information about any transaction during the quarter in which the Covered Person had any direct or indirect beneficial ownership:
(a) the date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each security involved;
(b) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
(c) the price at which the transaction was effected;
(d) the name of the broker, dealer or bank with or through whom the transaction was effected;
(e) the date that the report is submitted by the Covered Person;
(2) the following information about any account established by the Covered Person in which any securities were held during the quarter for the direct or indirect benefit of the Covered Person:
(a) the name of the broker, dealer or bank with whom the Covered Person established the account;
(b) the date the account was established; and
(c) the date that the report is submitted by the Covered Person.
(C) Annual Holdings Reports. Every Covered Person must submit a report (a form of which is appended as Attachment E) to the DPIM
Compliance Officer not later than January 30 of each year containing the following information:
(1) the title, number of shares and principal amount of each security in which the Covered Person had any direct or indirect beneficial ownership as of December 31 of the preceding year;
(2) the name of any broker, dealer or bank with whom the Covered Person maintains an account in which any securities are held for the direct or indirect benefit of the Covered Person as of December 31 of the preceding year; and
(3) the date that the report is submitted by the Covered Person.
(D) Exceptions from Reporting Requirements.
(1) A Covered Person shall not be required to include in any report made under this Article VI any transactions effected for, and securities held in, any account over which such person (i) does not have any direct or indirect influence or control or (ii) has given discretionary authority to an independent third party.
(2) Any person who is a Covered Person with respect to the Fund by virtue of being a director, but who is not an "interested person" (as defined in the Act) with respect to the Fund:
(a) need not make an initial holdings report under Article VI(A) above or an annual report under Article VI(C) above; and
(b) need not make a quarterly transaction report under Article VI(B) above unless such person, at the time of any transaction during the quarter, knew, or in the ordinary course of fulfilling his or her official duties as a director of the Fund should have known, that the security such person purchased or sold is or was purchased or sold by the Fund or was being considered for purchase or sale by the Fund.
(E) Any report submitted to comply with the requirements of this Article VI may contain a statement that the report shall not be construed as an admission that the person making such report has any direct or indirect beneficial ownership in the security to which the report relates.
(F) A Covered Person will be deemed to have complied with the requirements of Article VI(B) above by (i) causing to be sent to the DPIM Compliance Officer duplicate monthly brokerage statements on all transactions required to be reported thereunder, or (ii) providing to the DPIM Compliance Officer the requisite information on all transactions required to be reported hereunder through a transaction monitoring system, which may or may not be automated, each within the requisite time period and in a manner acceptable to
the DPIM Compliance Officer. All Advisory Persons shall have duplicate monthly brokerage statements sent directly to the DPIM compliance officer.
VII. Administration and Procedural Matters
The DPIM Compliance Officer shall:
(A) furnish a copy of this Code to each Covered Person;
(B) notify each Covered Person of his or her obligation to file reports as provided by this Code;
(C) report to the Board of Directors the facts contained in any reports filed with the DPIM Compliance Officer pursuant to this Code when any such report indicates that a Covered Person purchased or sold a security held or to be acquired by the Fund;
(D) supervise the implementation of this Code by the Adviser and the enforcement of the terms hereof by the Adviser;
(E) determine whether any particular securities transaction should be exempted pursuant to the provisions of this Code;
(F) issue either personally or with the assistance of counsel as may be appropriate, any interpretation of this Code which may appear consistent with the objectives of Rule 17j-1 and this Code;
(G) conduct such inspections or investigations as shall reasonably be required to detect and report any apparent violations of this Code to the Board of Directors of the Fund or any Committee appointed by them to deal with such information;
(H) furnish to the Board of Directors, no later than April 30 of each year, a written report that:
(1) describes any issues arising under this Code or related procedures since the last report to the Board of Directors, including, but not limited to:
(a) information about material violations of this Code or related procedures,
(b) sanctions imposed in response to such material violations,
(c) the number of reports filed with the DPIM Compliance Officer pursuant to this Code during the preceding calendar year,
(d) the failure during the preceding calendar year by any Covered Person to file a report pursuant to this Code when such a report should have been filed,
(e) the number of such reports filed during the preceding calendar year that indicated that a Covered Person purchased or sold a security held or to be acquired by the Fund and
(f) such other matters as the Board of Directors may request; and
(2) certifies that the Fund has adopted procedures reasonably necessary to prevent Covered Persons from violating this Code; and
(I) maintain and cause to be maintained in an easily accessible place, the following records:
(1) a copy of any Code adopted pursuant to Rule 17j-1 which has been in effect during the past five (5) years;
(2) a record of any violation of any such Code that occurred during the current year and the past five (5)calendar years and of any action taken as a result of such violation;
(3) a copy of each report made by a Covered Person during the current year and the past five (5) calendar years as required by Rule 17j-1 and Article VI of this Code, including any information provided in lieu of the reports under Article VI(F) above;
(4) a list of all persons, currently or within the past five
(5) years, who are or were required to make reports pursuant to
Rule 17j-1 under Article VI above, or who are or were responsible
for reviewing those reports, together with an appropriate
description of their title or employment;
(5) a copy of each report made by the DPIM Compliance Officer pursuant to Article VII(H) above during the current year and the past five (5) calendar years; and
(6) a record of any decision made during the current year and the past five (5) calendar years by the DPIM Compliance Officer, and the reasons supporting each such decision, to grant prior approval pursuant to Article V of this Code for the acquisition by a Covered Person of securities in an initial public offering or a private placement transaction.
VIII. Sanctions
Upon discovering that a Covered Person has not complied with the requirements of this Code, the Board of Directors of the Fund may impose on such Covered Person whatever sanctions the Board deems appropriate, including, among other things, a letter of censure, suspension or termination of such Covered Person's position with the Fund and/or restitution of an amount equal to the difference between the price paid or received by the Fund and the more advantageous price paid or received by such Covered Person.
The Board of Directors, in its discretion, may impose any of the sanctions set forth in this Article VIII for any violations of the requirements of this Code, including but not limited to, the filing by any Covered Person of any false, incomplete or untimely reports contemplated by Article VI of the Code.
IX. Confidentiality
All information obtained from any Covered Person hereunder shall be kept in strict confidence, except that reports of securities transactions hereunder will be made available to the Securities and Exchange Commission or any other regulatory or self-regulatory organization only to the extent required by law or regulation.
X. Other Laws, Rules and Statements of Policy
Nothing contained in this Code shall be interpreted as relieving any Covered Person from acting in accordance with the provision of any applicable law, rule or regulation or any other statement of policy or procedure governing the conduct of such person adopted by the Fund.
XI. Further Information
If any person has any question with regard to the applicability of the provisions of this Code generally or with regard to any securities transaction or transactions, he or she should consult the DPIM Compliance Officer.
XII. Certification By Covered Persons
All Covered Persons of the Fund must submit a certificate (the form of which is included as Section III of Attachment C) that they have read and understand this Code and recognize that as a Covered Person they are subject to the terms of this Code. All Covered Persons of the Fund shall agree to certify on an annual basis that they have complied with the requirements of this Code and that they have disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of this Code.
Dated: February 21, 2003.
Attachment A
The term "beneficial ownership" as used in the attached Code of Ethics (the "Code") is to be interpreted by reference to Rule 16a-1 under the Securities Exchange Act of 1934, as amended (the "Rule"), except that the determination of direct or indirect beneficial ownership for purposes of the Code must be made with respect to all securities that a Covered Person has or acquires. Under the Rule, a person is generally deemed to have beneficial ownership of securities if: (1) the person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares (a) voting power, which includes the power to vote, or to direct the voting of, the securities and/or (b) investment power, which includes the power to dispose of, or to direct the disposition of, the securities; and (2) the person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the securities. A person is deemed to have voting and/or investment power with respect to securities within the meaning of the Rule if the person has the right to acquire beneficial ownership of the security within 60 days, including any right to acquire the security; through the exercise of any option, warrant or right; through the conversion of a security; pursuant to the power to revoke a trust, discretionary account or similar arrangement; or pursuant to the automatic termination of a trust, discretionary account or similar arrangement.
The term "pecuniary interest" in particular securities is generally defined in the Rule to mean the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the securities. A person is deemed to have an "indirect pecuniary interest" within the meaning of the Rule in any securities held by members of the person's immediate family sharing the same household, the term "immediate family" including any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, as well as adoptive relationships. Under the Rule, an indirect pecuniary interest also includes, among other things: a general partner's proportionate interest in the portfolio securities held by a general or limited partnership; a person's right to dividends that is separated or separable from the underlying securities; a person's interest in certain trusts; and a person's right to acquire equity securities through the exercise or conversion of any derivative security, whether or not presently exercisable, the term "derivative security" being generally defined as any option, warrant, convertible security, stock appreciation right or similar right with an exercise or conversion privilege at a price related to an equity security, or similar securities with, or value derived from, the value of an equity security. For purposes of the Rule, a person who is a shareholder of a corporation or similar entity is not deemed to have a pecuniary interest in portfolio securities held by the corporation or entity, so long as the shareholder is not a controlling shareholder of the corporation or the entity and does not have or share investment control over the corporation's or the entity's portfolio.
Attachment B
PERSONAL TRADING - REQUEST FOR PRE-CLEARANCE
PERSONAL & CONFIDENTIAL Fax: Attn: Joyce Riegel 312-630-2460
Questions: (312) 630-4641
From: ________________________________ Tel:____________________
(print name)
Office Code: (circle one) CHI / IND Return Fax: ________________________
|
In accordance with the Code of Ethics for the Fund, I hereby:
No. of ______ request trade clearance for ________________________ Shares___________ stocks (common or preferred); bonds (coupon/maturity); options
(strike/expiration)
______ Purchase _______ Sale ______ Short Sale
______ check here if proposed Purchase is in an Initial Public Offering.
This trade to be placed to ________________________ account #: _______________ Name of Broker - Dealer _______________
__ request trade clearance for private placement of __________________________
__ request authorization to serve on Board of public company:_________________
__ notify of brokerage account* #_____________ Name of broker/dealer:_________
I am a: ______ Portfolio Manager ______ Advisory Person ______ Access Person
I certify that:
1. I have received and read the Code within the past year and believe that the consummation of this transaction is consistent with the Code's policy of requiring disclosure, detection and avoidance of conflicts of interest in personal trading activities.
2. If approved, I will execute the trade within 1 business day of approval and have my broker-deliver confirmation of execution within 3 business days.
Signature:_________________________________ Date:____________________ APPROVED: _________________________________ Date:____________________ NOT APPROVED/REASON: _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ |
Attachment C
INITIAL REPORT OF PERSONAL SECURITIES HOLDINGS
and CODE OF ETHICS CERTIFICATION
FROM: ________________________________________
Print Your Name
Section I.
1. The following securities are owned by me or members of my immediate family.
2. Please include securities such as private placements. You do not need to include open-end mutual funds.
3. In lieu of completing the table, you may check the box at the bottom of the table.
4. If you hold NO securities, please write "NONE" in the table.
NO. OF SHARES NAME OF SECURITY BROKER(S) ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- ------------------ -------------------------------- -------------------------- |
____ I certify that I have instructed my broker to provide duplicate confirmations and periodic brokerage statements directly to you and that, except as listed above, there are no other holdings to report.
Section II.
BROKERAGE ACCOUNT LISTING
1. The following is a list of all my securities brokerage accounts. Be advised that the securities firms identified below have been instructed to provide duplicate confirmations and statements to the Compliance Officer, Duff & Phelps Investment Management. If you need more space, please make and attach an additional copy of this form. Please print or type.
2. If you do not have a securities brokerage account, please write "NONE" in the table.
NAME, ADDRESS, AND TELEPHONE NUMBER ACCOUNT MANAGED ACCOUNT NAMES OF FIRM WHERE ACCOUNT IS HELD (e.g. NUMBER ACCOUNT? (e.g. John Smith IRA) PaineWebber) Y/N ------------------------------------ -------- ------------ -------------------- ------------------------------------ -------- ------------ -------------------- ------------------------------------ -------- ------------ -------------------- ------------------------------------ -------- ------------ -------------------- ------------------------------------ -------- ------------ -------------------- ------------------------------------ -------- ------------ -------------------- |
Section III.
I certify that I have read and understood the Code of Ethics and have complied, and shall continue to comply, with its terms.
Signature: ______________________________ Date: ____________________
After you sign and date this form, please return this form to:
Joyce Riegel
Compliance Officer
Duff & Phelps Investment Management Co.
55 E. Monroe Street, 36th Floor
Chicago, IL 60603
Attachment D
PLEASE BE ADVISED,
ONLY EMAIL RESPONSES FOR QUARTERLY REPORTING WILL BE ACCEPTED.
QUARTERLY SECURITIES TRANSACTIONS REPORT
For Period Ending:__________, 2003
Please complete and return via email by __________ to Reports, Code in the PXP mailbox. E-Sign and date at the bottom.
Please check all items below that apply:
____ From ______ to _______, neither I nor my immediate family members made reportable securities transactions.
____ From ______ to _____, I and/or my immediate family members made reportable securities transactions through a broker, and:
____ A. I have advised Compliance of my brokerage account(s) and any brokerage account(s) of my immediate family members, and I have instructed the broker(s) to send duplicate confirms and statements to the Compliance Dept.
____ B. I have not yet advised Compliance of my brokerage account(s) or any brokerage account(s) of my immediate family members, and I have not yet instructed the broker(s) to send duplicate confirms and statements to the Compliance Dept. (see below for additional instructions)
If you selected "B" above, please reply to this email and request A Quarterly Securities Transactions Reporting Form. Upon receipt of the form, fill in as necessary and EMAIL your reply to Joyce Riegel or Reports, Code in the PXP mailbox. You may also request a form by calling Joyce Riegel at 312-630-4641.
____ From _______ to ________, I and/or my immediate family members made reportable securities transactions that would not be included on a brokerage statement (for example, a direct purchase from an issuer or a private placement or limited partnership transaction). (see below for additional instructions)
If you selected this last item, please reply to this email and request a Quarterly Securities Transactions Reporting Form. Upon receipt of the form, fill in as necessary and EMAIL your reply to Joyce Riegel or Reports, Code in the PXP mailbox. You may also request a form by calling Joyce Riegel at 312-630-4641
Signature: Please type your name here Date: Please type date executed here
FROM: ________________________________________
Print Your Name
Please provide the information requested under each section.
SECTION I - Brokerage Account Listing:
1. The following is a list of all my securities brokerage accounts. Be
advised that the securities firms identified below have been instructed
to provide duplicate confirmations and statements to DPIM Compliance. (If
you need more space, please make and attach an additional copy of this
form) Please print or type.
2. If you do not have a securities brokerage account, please write "NONE" in
the table.
NAME, ADDRESS, AND TELEPHONE NUMBER ACCOUNT MANAGED ACCOUNT NAMES OF FIRM WHERE ACCOUNT IS HELD (e.g. NUMBER ACCOUNT? (e.g. John Smith, PaineWebber) Y/N IRA) ------------------------------------ ------- -------- ------------------ ------------------------------------ ------- -------- ------------------ ------------------------------------ ------- -------- ------------------ ------------------------------------ ------- -------- ------------------ ------------------------------------ ------- -------- ------------------ ------------------------------------ ------- -------- ------------------ ------------------------------------ ------- -------- ------------------ |
SECTION II - Holdings:
1. The following securities are owned by me or members of my immediate
family as of 12/31/2002. Please include securities such as private
placements. You do not need to include open-end mutual funds.
2. In lieu of completing the table, you may check the box at the bottom of
the table.
3. If you hold NO securities, please write "NONE" in the
table.
NUMBER NAME OF SECURITY PRINCIPAL BROKER(S) OF SHARES AMOUNT ----------- ----------------------- --------------- -------------------------- ----------- ----------------------- --------------- -------------------------- ----------- ----------------------- --------------- -------------------------- ----------- ----------------------- --------------- -------------------------- ----------- ----------------------- --------------- -------------------------- ----------- ----------------------- --------------- -------------------------- ----------- ----------------------- --------------- -------------------------- |
_____I certify that I have instructed my broker to provide duplicate confirmations and periodic brokerage statements directly to you and that, except as listed above, there are no other holdings to report.
SECTION III - Execution:
I certify that I have read and understood the Code of Ethics and have complied,
and shall continue to comply, with its terms.
Signature:______________________________ Date: ____________________
After you sign and date this form, please return this form by January 30, 200_
to:
Compliance Department - Joyce Riegel
Duff & Phelps Investment Management Co.
55 East Monroe Street, 36th Floor
Chicago, IL 60448
|
Attachment E
ANNUAL REPORT OF PERSONAL SECURITIES HOLDINGS
and CODE OF ETHICS CERTIFICATION
January ___, 200_
SECTION I - Brokerage Account Listing: Additional Form
NAME, ADDRESS, AND TELEPHONE ACCOUNT MANAGED ACCOUNT NAMES NUMBER OF FIRM WHERE ACCOUNT IS NUMBER ACCOUNT? e.g. John Smith, HELD (e.g. PaineWebber) Yes / No IRA) -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- -------------------------------- ---------- ------------- -------------------- |
Attachment E
ANNUAL REPORT OF PERSONAL SECURITIES HOLDINGS
and CODE OF ETHICS CERTIFICATION
January ___, 200_
SECTION II - Holdings: Additional Form
NUMBER NAME OF SECURITY PRINCIPAL BROKER(S) OF SHARES AMOUNT ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- ------------ --------------------------- ------------- ----------------------- |
Exhibit r.2
DUFF & PHELPS INVESTMENT MANAGEMENT CO.
AMENDED AND RESTATED
CODE OF ETHICS (September 30, 2001)
1. Statement of Ethical Principles
When Adviser Access Persons covered by the terms of this Code of Ethics engage in personal securities transactions, they must adhere to the following general principles as well as to the Code's specific provisions:
A. At all times, the interests of Adviser Clients must be paramount;
B. Personal transactions must be conducted consistent with this Code of Ethics in a manner that avoids any actual or potential conflict of interest; and
C. No inappropriate advantage should be taken of any position of trust and responsibility.
2. Definitions
A. "Access Person" means any director, officer, general partner, or Advisory Person of the Adviser. The Compliance Department shall maintain a list of the Adviser's Access Persons.
B. "Adviser" means Duff & Phelps Investment Management Co.
C. "Advisory Person" means (i) any employee of the Adviser or of any company in a control relationship to the Adviser, who, in connection with his regular functions or duties, makes, participates in or obtains information regarding the purchase or sale of a security by the Adviser for the Client, or whose functions relate to the making of any recommendations with respect to such purchases or sales; and (ii) any natural person in a control relationship to the Adviser who obtains information concerning recommendations made to the Client with regard to the purchase or sale of a security. This grouping customarily includes the Portfolio Manager and other investment personnel comprising an investment team, such as an analyst or trader, who provide information and advice that enter into the investment decision to buy or sell a security for a Client.
D. A security is "being considered for purchase or sale" when a recommendation to purchase or sell a security has been made and communicated and, with respect to the Advisory Person making the recommendation, when such person seriously considers making such a recommendation.
E. "Beneficial ownership" shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in determining whether a person is the beneficial owner of a security for purposes of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder.
F. Client means each and every investment company, or series thereof, or other account managed by the Adviser, individually and collectively.
G. "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the Investment Company Act, as amended.
H. "Initial Public Offering" means a public sale of an issue not previously offered to the public.
I. "Managed Fund" shall mean those Clients, individually and collectively, for whom the Portfolio Manager makes buy and sell decisions.
J. "Portfolio Manager" means the person (or one of the persons) entrusted with the day-to-day management of the Client's portfolio.
K. "Private Placement" shall have the same meaning as that set forth in Section 4(2) of the Securities Exchange Act.
L. "Purchase or sale of a security" includes inter alia, the writing of an option or the purchase or sale of a security that is exchangeable for or convertible into, a security that is held or to be acquired for a Client.
M. "Security" shall have the meaning set forth in Section 2(a)(36) of the Investment Company Act, as amended, except that it shall not include securities issued by the Government of the United States, bankers' acceptances, bank certificates of deposit, commercial paper and shares of registered open-end investment companies.
3. Exempted Transactions
The prohibitions of Section 4 of this Code shall not apply to:
A. Purchases or sales effected in any account over which the Access Person has no direct or indirect influence or control in the reasonable estimation of the Compliance Officer.
B. Purchases or sales of securities (1) not eligible for purchase or sale by the Client; or (2) specified from time to time by the Directors, subject to such rules, if any, as the Directors shall specify.
C. Purchases or sales which are non-volitional on the part of either the Access Person or the Client.
D. Purchases of shares necessary to establish an automatic dividend reinvestment plan or pursuant to an automatic dividend reinvestment plan, and subsequent sales of such securities.
E. Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired.
F. Purchase or sale of securities issued under an employee stock purchase or incentive program unless otherwise restricted.
4. Prohibited Activities
A. IPO Rule: No Access Person may purchase securities in an Initial Public Offering, except with the prior approval of the Compliance Department. This rule also applies to IPO's offered through the Internet.
B. Private Placement Rule: No Access Person may purchase securities in a Private Placement unless such purchase has been approved by the Compliance Department. Any such approved purchase should be disclosed to the Client if that issuer's securities are being considered for purchase or sale by the Client.
C. Preclearance Rule: No Access Person may purchase or sell a security unless such purchase or sale has been precleared by the Compliance Department. Preclearance is required prior to executing a trade through a personal Internet brokerage account. Preclearance is required for transactions in puts, calls and well-known stock indices (e.g. the S&P 500). Preclearance is valid through the business day next following the day preclearance is given.
Exceptions: The following securities transactions do not require preclearance:
1. Purchases or sales of up to 500 shares of securities of issuers ranked in the Standard & Poor's 500 Composite Stock Index (S&P 500) at the time of purchase or sale. The Compliance Department maintains this list on the Intranet web site and updates it after the end of each quarter.
2. Purchase orders sent directly to the issuer via mail (other than in connection with a Private Placement) or sales of such securities which are redeemed directly by the issuer via mail.
Note: The Compliance Department may deny approval of any transaction requiring preclearance under this Preclearance Rule, even if nominally permitted under this Code of Ethics, if it is believed that denying preclearance is necessary for the protection of the Adviser. Any such denial may be appealed to the Adviser's Counsel. The decision of Counsel shall be final.
D. Open Order Rule: No Access Person may purchase or sell, directly or indirectly, any security in which he has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, when the Client has a pending "buy" or "sell" order for that security of the same type (i.e. buy or sell) as the proposed personal trade, until the Client's order is executed or withdrawn.
Exceptions: The following securities transactions are exempt from the Open Order Rule:
1. Purchases or sales of securities of issuers in the S&P 500 at the time of the transaction.
2. Purchases or sales approved by the Compliance Department in his/her discretion.
Any profits realized on a personal trade in violation of this
Section 4D must be disgorged.
E. Blackout Rule: If a Portfolio Manager's Managed Fund holds a security that is the subject of a proposed personal trade by that Portfolio Manager, such personal trade may be permitted only as follows:
1. If the proposed personal trade is on the same side as the last Managed Fund transaction in that security, the personal trade cannot occur within two days of such Managed Fund transaction (i.e. neither at T nor T + 1 calendar day).
2. If the proposed personal trade is on the opposite side of the last Managed Fund transaction in that security, the personal trade cannot occur unless (a) it is more than two days after the Managed Fund transaction (i.e. T + 2 calendar days or later) and (b) the Preclearance Request, if required for such personal transaction (i.e. it is not eligible for the exception of securities listed in the S&P 500 to the Preclearance Rule) sets forth, to the reasonable satisfaction of the Compliance Department, an explanation of the reasons the Managed Fund is not effecting a similar transaction.
Any profits realized by a Portfolio Manager on a personal trade in violation of this Section 4E must be disgorged.
F. Holding Period Rule: Access Persons must hold each Security, for a period of not less than sixty (60) days, whether or not the purchase of such Security was an exempt transaction under any other provision of Section 4.
Any profits realized on trading in contravention of this policy must be disgorged.
G. No Access Person shall accept any gift or other item of more than $100 in value from any person or entity that does business with or on behalf of the Client or the Adviser.
H. No Advisory Person shall serve on the board of directors of a publicly traded company without prior authorization from Counsel or the Compliance Department. If board service is authorized, such Advisory Person shall have no role in making investment decisions with respect to the publicly traded company.
5. Compliance Procedures
A. All Access Persons shall direct their brokers to supply, at the same time that they are sent to the Access Person, a copy of the confirmation for each personal securities trade and a copy of each periodic account statement to the Compliance Department.
B. Every Access Person shall report to the Adviser the information described in Section 5C of this Code with respect to transactions in any security in which such Access Person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership in the security; provided, however, that an Access Person shall not be required to make a report with respect to transactions effected for any account over which such person does not have any direct or indirect influence.
C. Every report required pursuant to Section 5B above shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information:
(i) The date of the transaction, the title and the number of shares, and the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale, or any other type of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the transaction was effected; and
(v) The date of approval of the transaction and the person who approved it as required by Section 4B or C above.
E. Each Access Person shall submit a report listing all personal securities holdings to the Compliance Department upon the commencement of service and annually thereafter. The annual report shall be as of December 31 and include a certification by the Access Person that he or she has read and understood the Code of Ethics and has complied with the Code's requirements. The annual report and certification will be submitted to the Compliance Department by January 30.
F. Any report made under this Section 5 may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial ownership in the security to which the report relates.
G. The Compliance Officer shall submit an annual report to the Adviser's Board of Directors that summarizes the current Code of Ethics procedures, identifies any violations requiring significant remedial action, and recommends appropriate changes to the Code, if any.]
H. Any Access Person shall immediately report any potential violation of this Code of which he or she becomes aware to the Compliance Department.
6. Sanctions
Upon discovering a violation of this Code, the Board of Directors of the Adviser, in addition to any remedial action already taken by the respective adviser or related entity, may impose such sanctions as it deems appropriate, including inter alia, a letter of censure or suspension or termination of employment, or suspension of personal trading privileges for such period as it may deem appropriate.