This is filed pursuant to Rule 497(b).
File Nos. 333-158967 and 811-07732.
[LOGO]
ALLIANCEBERNSTEIN
Investments
ACM MANAGED DOLLAR INCOME FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
June 23, 2009
Dear Stockholders:
The Board of Directors (the "Directors") of ACM Managed Dollar Income Fund,
Inc. ("Managed Dollar") is pleased to invite you to a Special Meeting of
Stockholders of Managed Dollar (the "Meeting") to be held on Friday, August 21,
2009. At this Meeting, we are asking you to approve the acquisition of the
assets and the assumption of the liabilities of Managed Dollar by
AllianceBernstein Global High Income Fund, Inc. ("Global High Income"). We
sometimes refer to each of Managed Dollar and Global High Income as a "Fund"
and together as the "Funds".
The proposed acquisition is described in more detail in the attached
Prospectus/Proxy Statement. You should review the Prospectus/Proxy Statement
carefully and retain it for future reference. If the stockholders of Managed
Dollar approve the acquisition by Global High Income, the acquisition is
expected to take place in the third quarter of 2009.
Global High Income is a substantially larger fund than Managed Dollar. Both
Funds seek high current income and capital appreciation. Managed Dollar's
investments are currently limited to U.S. Dollar-denominated securities while
Global High Income may invest, without limitation, in
non-U.S. Dollar-denominated fixed-income securities. We anticipate that the
proposed acquisition will result in benefits to the stockholders of Managed
Dollar, including a reduction in expenses, as more fully discussed in the
Prospectus/Proxy Statement.
The Directors of Managed Dollar have given careful consideration to the
proposed acquisition and have concluded that the acquisition is in the best
interests of Managed Dollar. The Directors recommend that you vote "for" the
proposed acquisition of Managed Dollar by Global High Income.
If the acquisition of Managed Dollar by Global High Income is approved by
the stockholders of Managed Dollar, each Managed Dollar stockholder will
receive shares of Global High Income having an aggregate net asset value
("NAV") equal to the aggregate NAV of the stockholder's shares in Managed
Dollar. Managed Dollar would then cease operations and dissolve. You will not
be assessed any sales charges or other individual stockholder fees in
connection with the proposed acquisition.
We welcome your attendance at the Meeting. If you are unable to attend, we
encourage you to authorize proxies to cast your vote. Georgeson Inc. (the
"Proxy Solicitor"), a proxy solicitation firm, has been selected to assist in
the proxy solicitation process. If we have not received your proxy as the date
of the Meeting approaches, you may receive a telephone call from the Proxy
Solicitor to remind you to submit your proxy. No matter how many shares you
own, your vote is important.
Sincerely,
Robert M. Keith
President
[LOGO]
ALLIANCEBERNSTEIN
Investments
ACM MANAGED DOLLAR INCOME FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
(800) 221-5672
NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS
SCHEDULED FOR AUGUST 21, 2009
To the stockholders of ACM Managed Dollar Income Fund, Inc. ("Managed Dollar"),
a Maryland corporation:
Notice is hereby given that a Special Meeting of the Stockholders of Managed
Dollar (the "Meeting") will be held at 1345 Avenue of the Americas, 41st Floor,
New York, New York 10105 on Friday, August 21, 2009, at 3:00 p.m., Eastern
time, to consider and vote on the following proposal, which is more fully
described in the accompanying Prospectus/Proxy Statement dated June 23, 2009:
1. To approve an Agreement and Plan of Acquisition and Liquidation between
Managed Dollar and AllianceBernstein Global High Income Fund, Inc.
("Global High Income") providing for the acquisition by Global High
Income of all of the assets and assumption of all of the liabilities of
Managed Dollar in exchange for shares of Global High Income and the
subsequent dissolution of Managed Dollar and termination of its
registration under the Investment Company Act of 1940, as amended.
2. To transact any other business that may properly come before the Meeting
and any adjournments or postponements thereof.
Any stockholder of record of Managed Dollar at the close of business on
June 19, 2009 is entitled to notice of, and to vote at, the Meeting or any
adjournments or postponements thereof. Proxies are being solicited on behalf of
the Board of Directors. Each stockholder who does not expect to attend the
Meeting and vote in person is requested to complete, date, sign and promptly
return the enclosed proxy card, or to submit voting instructions by telephone
as described on the enclosed proxy card.
By Order of the Board of
Directors,
Robert M. Keith
President
New York, New York
June 23, 2009
--------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
Please indicate your voting instructions on the enclosed proxy card, sign
and date it, and return it in the envelope provided, which needs no postage if
mailed in the United States. Your vote is very important no matter how many
shares you own. In order to save any additional costs of further proxy
solicitation and to allow the Meeting to be held as scheduled, please complete,
date, sign and return your proxy card promptly.
--------------------------------------------------------------------------------
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner AllianceBernstein L.P.
PROSPECTUS/PROXY STATEMENT
Acquisition of the Assets and Assumption of the Liabilities of
ACM MANAGED DOLLAR INCOME FUND, INC.
By, and in Exchange for Shares of,
ALLIANCEBERNSTEIN GLOBAL HIGH INCOME FUND, INC.
June 23, 2009
TABLE OF CONTENTS
Questions and Answers 3
Proposal -- Approval of an Agreement and Plan of Acquisition and Liquidation between Managed Dollar
and Global High Income
6
Summary 7
Comparison of Operating Expense Ratios 7
Comparison of Investment Advisory Fees 8
Comparison of Investment Objectives and Policies 8
Mandatory Tender Offer 10
Principal Risks 10
Federal Income Tax Consequences 10
Service Providers 11
Comparison of Business Structures 11
Information about the Proposed Transaction 12
Introduction 12
Description of the Plan 12
Reasons for the Acquisition 13
Description of Securities to be Issued 16
Dividends and Other Distributions 17
Managed Dollar Stock Certificates 17
Federal Income Tax Consequences 17
Capitalization Information 18
Trading History and Share Price Data 18
Information about the Funds 19
Management of the Funds 19
Advisory Agreement and Fees 19
Administrator 20
Other Service Providers 20
Voting Information 20
Legal Matters 21
Experts 21
Financial Highlights 21
Appendix A -- Fee Table 22
Appendix B -- Comparison of Investment Objectives and Policies 24
Appendix C -- Trading History and Share Price Data 28
Appendix D -- Description of Principal Risks of the Funds 29
Appendix E -- Other Information 31
Appendix F -- Form of Agreement and Plan of Acquisition and Liquidation
between ACM Managed Dollar Income Fund, Inc. and
AllianceBernstein Global High Income Fund, Inc. 35
1
Appendix G -- Capitalization 50
Appendix H -- Legal Proceedings 51
Appendix I -- Share Ownership Information 52
Appendix J -- Financial Highlights 53
2
QUESTIONS AND ANSWERS
The following questions and answers provide an overview of key features of the
proposed acquisition and of the information contained in this Prospectus/Proxy
Statement. Please review the full Prospectus/Proxy Statement before casting
your vote.
1. What is this document and why did we send it to you?
This is a combined Prospectus/Proxy Statement that provides you with
information about the proposed acquisition (the "Acquisition") of the assets
and liabilities of ACM Managed Dollar Income Fund, Inc. ("Managed Dollar") by
AllianceBernstein Global High Income Fund, Inc. ("Global High Income"). (Global
High Income and Managed Dollar are each a "Fund" and collectively, the
"Funds"). This document also solicits your vote on the Acquisition by
requesting that you approve the Agreement and Plan of Acquisition and
Liquidation, dated as of May 8, 2009 (the "Plan"), between Managed Dollar and
Global High Income and the subsequent dissolution of Managed Dollar and
termination of its registration under the Investment Company Act of 1940, as
amended (the "Proposal").
On March 11, 2009, the Board of Directors of Managed Dollar (the "Board")
approved and declared advisable the Acquisition and the subsequent dissolution
of Managed Dollar and directed that the Acquisition and dissolution be
submitted to the stockholders for approval at a Special Meeting of Stockholders
which they subsequently determined would be held on August 21, 2009 at 3:00
p.m., Eastern time (the "Meeting"). You are receiving this Prospectus/Proxy
Statement because you own shares of Managed Dollar. The Acquisition will not
occur unless it is approved by Managed Dollar stockholders. This
Prospectus/Proxy Statement contains the information you should know before
voting on the Acquisition.
You may contact a Fund at (800) 221-5672 or write to a Fund at 1345 Avenue of
the Americas, New York, NY 10105.
2. Who is eligible to vote on the Acquisition?
Stockholders of record of Managed Dollar at the close of business on June 19,
2009 (the "Record Date") are entitled to notice of, and to vote at, the Meeting
or any adjournment or postponement of the Meeting. If you owned shares of
Managed Dollar on the Record Date, you have the right to vote even if you
subsequently sold your shares.
Each share is entitled to one vote. Shares represented by properly executed
proxies, unless revoked before or at the Meeting, will be voted according to
stockholders' instructions. If you sign and return a proxy card but do not fill
in a vote, your shares will be voted "FOR" the Proposal. If any other business
properly comes before the Meeting, your shares will be voted at the discretion
of the persons named as proxies.
3. How will the Acquisition work?
The Plan provides for (i) the transfer of all of the assets of Managed Dollar
to Global High Income, (ii) the assumption by Global High Income of all of the
liabilities of Managed Dollar, (iii) the liquidating distribution to Managed
Dollar stockholders of shares of Global High Income, equal in aggregate net
asset value ("NAV") to the NAV of their former Managed Dollar shares and
(iv) the cessation of operations and dissolution of Managed Dollar.
As a result of the Acquisition, stockholders of Managed Dollar will no longer
hold shares of Managed Dollar and, instead, will become stockholders of Global
High Income, holding shares having the same aggregate NAV as the shares of
Managed Dollar that they held immediately before the Acquisition. Please note
that Managed Dollar stockholders who do not participate in Managed Dollar's
Dividend Reinvestment Plan will receive cash in lieu of fractional shares. You
will not be assessed any sales charges or other individual stockholder fees in
connection with the Acquisition. The expenses of the Acquisition will be borne
by Managed Dollar and the Adviser.
3
Please see the Answer to Question 6 below for more information about expenses.
The Acquisition will not occur unless it is approved by the stockholders of
Managed Dollar.
4. Why is the Acquisition being proposed?
After considering the recommendation of AllianceBernstein L.P. (the "Adviser"),
the Board concluded that participation by Managed Dollar in the Acquisition is
in the best interests of Managed Dollar. The Board also concluded that the
Acquisition would not dilute stockholders' interests. In reaching this
conclusion, the Board considered, among other things, the identical investment
objectives and the similarities and differences among the investment strategies
and policies of the Funds, the expense ratio reduction expected to result from
the Acquisition, the continuity of the portfolio management team, the
comparison of fees for the Funds and the pro forma combined Fund, the trading
history of the Funds, the fact that Managed Dollar has an annual tender offer
policy whereas Global High Income does not, the costs of the Acquisition, and
the tax-free nature of the Acquisition.
5. When will the Acquisition take place?
If the stockholders of Managed Dollar approve the Acquisition on August 21,
2009, the Acquisition is expected to occur in the third quarter of this year.
6. Who will bear the expenses of the Acquisition?
The expenses of the Acquisition are estimated to be approximately $275,000. Of
this amount, $100,000 will be borne by the Adviser; the remainder will be borne
by Managed Dollar, which is estimated to equate to $.01 per share. It would
take approximately 10 months for Managed Dollar stockholders to make up the
additional cost through the lower expenses of the combined Fund.
7. Where May I Find Additional Information Regarding the Funds?
Additional information about the Funds is available in:
. the Statement of Additional Information ("SAI") dated June 23, 2009 that
has been filed with the Securities and Exchange Commission ("SEC") in
connection with this Prospectus/Proxy Statement;
. the SAI and each Fund's Annual Report to Stockholders, which contain
audited financial statements for Managed Dollar's and Global High
Income's fiscal years ended September 30, 2008 and March 31, 2009,
respectively; and
. the Semi-Annual Report for Managed Dollar for the six-month period ended
March 31, 2009.
Managed Dollar's file number is 811-07964 and Global High Income's file number
is 811-07732.
Copies of the Annual and Semi-Annual Reports are available at
www.alliancebernstein.com and are also available, along with the
Prospectus/Proxy Statement and SAI, upon request, without charge, by writing to
or calling the address and telephone number listed below.
By mail: AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
By phone: For Information: 1-800-221-5672
For Literature: 1-800-227-4618
4
All of this information is filed with the SEC. You may view or obtain these
documents from the SEC:
In person: at the SEC's Public Reference Room in Washington, D.C.
By phone: 202-551-8090 (for information on the operations of the Public Reference Room only)
By mail: Public Reference Section, Securities and Exchange Commission, Washington, DC
20549-0102 (duplicating fee required)
By electronic mail: publicinfo@sec.gov (duplicating fee required)
On the Internet: www.sec.gov
The shares of the Funds are listed and publicly traded on the New York Stock
Exchange ("NYSE") under the following symbols: Managed Dollar -- "ADF" and
Global High Income -- "AWF." Reports, proxy statements and other information
concerning the Funds may be inspected at the offices of the NYSE.
Other Important Things to Note:
. You may lose money by investing in the Funds.
. The SEC has not approved or disapproved these securities or passed upon
the adequacy of this Prospectus/Proxy Statement. Any representation to
the contrary is a criminal offense.
5
PROPOSAL
APPROVAL OF AN AGREEMENT AND PLAN OF ACQUISITION AND LIQUIDATION BETWEEN
MANAGED DOLLAR AND GLOBAL HIGH INCOME
On March 11, 2009, the Board of Directors of Managed Dollar (the
"Directors") declared advisable and voted to approve the Plan and the
Acquisition, subject to the approval of the stockholders of Managed Dollar. The
Plan provides for (i) the transfer of all of the assets of Managed Dollar to
Global High Income, (ii) the assumption by Global High Income of all of the
liabilities of Managed Dollar, (iii) the liquidating distribution to Managed
Dollar stockholders of shares of Global High Income, equal in aggregate NAV to
the NAV of their former Managed Dollar shares and (iv) the cessation of
operations and dissolution of Managed Dollar.
Each Managed Dollar stockholder will receive the number of full shares of
Global High Income, plus fractional shares for stockholders that participate in
a Dividend Reinvestment and Cash Purchase Plan ("DRIP") and cash in lieu of any
fractional shares for non-DRIP participating stockholders, having an aggregate
NAV that is equal to the aggregate NAV of the stockholder's shares of Managed
Dollar. Stockholders of Managed Dollar will recognize no gain or loss, except
with respect to cash received in lieu of fractional shares of Global High
Income by non-DRIP stockholders in connection with the Acquisition. If approved
by stockholders of Managed Dollar, the Acquisition is expected to occur in the
third quarter of this year.
An exchange of Managed Dollar shares for Global High Income shares at NAV
may result in Managed Dollar stockholders' receiving Global High Income shares
with an aggregate market value on the date of exchange that is higher or lower
than the market value of their shares immediately prior to the exchange. The
reason for this difference is that the market price for shares of the Funds in
relation to their NAVs may be different, i.e., a Fund's shares may trade at
different discounts or premiums to its NAV.
The stockholders of Managed Dollar must approve the Proposal in order for
the Acquisition to occur. Approval of the Proposal requires the affirmative
vote of the holders of a majority of the votes entitled to be cast. The
Acquisition does not require approval of the stockholders of Global High Income.
A quorum for the transaction of business by stockholders of Managed Dollar
at the Meeting will consist of the presence in person or by proxy of the
holders of a majority of the shares of Managed Dollar entitled to vote at the
Meeting.
The Directors concluded that participation by Managed Dollar in the
Acquisition is in the best interests of Managed Dollar. The Directors also
concluded that the Acquisition would not dilute stockholders' interests. In
reaching this conclusion, the Directors considered, among other things, the
identical investment objectives and the similarities and differences among the
investment strategies and policies of the Funds, the expense ratio reduction
expected to result from the Acquisition, the continuity of the portfolio
management team, the comparison of fees for the Funds and the pro forma
combined Fund, the trading history of the Funds, the fact that Managed Dollar
has an annual tender offer policy whereas Global High Income does not, the
costs of the Acquisition, and the tax-free nature of the Acquisition.
For a more complete discussion of the factors considered by the Directors in
approving the Acquisition, see "Reasons for the Acquisition" in Information
About the Proposed Transaction.
6
SUMMARY
The following summary highlights differences between the Funds. This summary
is not complete and does not contain all of the information that you should
consider before voting on the Acquisition. For more complete information,
please read this entire document. This Prospectus/Proxy Statement, the
accompanying Notice of the Meeting and the enclosed proxy card are being mailed
to stockholders of Managed Dollar on or about June 23, 2009. Note that certain
information is presented as of January 31, 2009. At the March 11, 2009 Special
Meeting of the Boards of Directors of Managed Dollar and Global High Income
referred to below ("Board Meeting"), and at subsequent regular and special
meetings of the Boards (most recently on June 16, 2009), the Adviser
represented to the Board that, if the pro forma expense and income and
portfolio repositioning information was updated (including to reflect the
effect of Managed Dollar's tender offer which expired on June 11, 2009), it
would not differ in any material respect. The Directors also considered updated
information regarding the discounts from net asset value at which the shares of
the Funds had been trading at such subsequent meetings of the Board.
Managed Dollar is a non-diversified closed-end fund, with assets of, as of
January 31, 2009, approximately $113 million, that invests in U.S. corporate
fixed-income securities and the balance in fixed-income securities issued or
guaranteed by foreign governments and non-U.S. corporate fixed-income
securities. Global High Income is a non-diversified closed-end fund and is
significantly larger than Managed Dollar, with assets of, as of January 31,
2009, approximately $736 million. Global High Income pursues investment
strategies that are similar to those of Managed Dollar. The principal
difference between the Funds is that Managed Dollar's investments are currently
limited to U.S. Dollar-denominated securities, while Global High Income may
invest, without limitation, in non-U.S. Dollar-denominated fixed-income
securities. Both Funds invest substantially all of their assets in lower-rated
fixed-income securities.
Comparison of Operating Expense Ratios
Managed Dollar, because of its relatively small asset size, has higher
operating costs and therefore a higher expense ratio than Global High Income.
The Acquisition is expected to result in an operating expense ratio for the
combined Fund that is lower than the current, actual operating expense ratio of
Managed Dollar. Each Fund uses reverse repurchase agreements to leverage its
portfolio. The use of leverage results in interest expense, which increases a
fund's expense ratio. The amount of leverage used by the Funds, and the
corresponding interest expense, varies from year to year depending on market
conditions and interest rates. Managed Dollar's interest expense is higher than
Global High Income's because it has recently been using a higher level of
leverage. The Acquisition would result in a significant decrease in the
operating expense ratio for Managed Dollar both before and after interest
expense.
The following table illustrates, as of January 31, 2009, the expected
reduction in operating expenses for Managed Dollar, including and excluding
interest expense.
Total Annual Total Annual
Expense Ratio Expense Ratio
(excluding interest (including interest
expense) expense)
------------------- -------------------
Managed Dollar 1.24% 1.39%
Global High Income 1.01% 1.08%
Global High Income (pro forma) 1.01% 1.08%
As the table indicates, the operating expenses per share would be reduced
for Managed Dollar by .23%, excluding interest expense, and by .31%, including
interest expense. The Fee Table, attached hereto as Appendix A, describes the
fees and expenses of each Fund as of January 31, 2009 and includes pro forma
expenses for the combined Fund assuming the Acquisition is approved by Managed
Dollar's stockholders.
The expenses of the Acquisition are estimated to be approximately $275,000.
Of this amount, $100,000 will be borne by the Adviser at the request of the
independent Directors of Managed Dollar; the remainder will be
7
borne by Managed Dollar, which is estimated to equate to $.01 per share. Based
on pro forma net assets after repositioning as of January 31, 2009, the Adviser
estimates that the impact of the $175,000 would be offset by lower expenses in
approximately 10 months.
Comparison of Investment Advisory Fees
Global High Income has a higher advisory fee than Managed Dollar. The higher
fee is due to the fact that Global High Income is more complicated to manage
because it is an opportunistic fund that can invest in any number of sectors
and/or currencies in any proportion. Nevertheless, although the advisory fee
for the Managed Dollar stockholders will increase by .15% as a result of the
Acquisition, the overall expense ratio will be significantly reduced, as noted
above, by .23%, excluding interest expense, and by .31%, including interest
expense. The effective advisory fee rates for the Funds, as of January 31,
2009, expressed as an annualized percentage of net average weekly assets, are
as follows:
Advisory Fee Rates
------------------
Managed Dollar .75%
Global High Income .90%
Global High Income (pro forma) .90%
In addition, both Funds reimburse the Adviser for administrative services
provided to the Funds. As of January 31, 2009, the administration fees amounted
to .12% and .02% for Managed Dollar and Global High Income, respectively.
Global High Income's reimbursement cannot exceed .15%.
Comparison of Investment Objectives and Policies
The investment objectives and strategies of the Funds are generally similar
except, as discussed below, that Global High Income may invest in
non-U.S. Dollar-denominated fixed-income securities while Managed Dollar's
investments are limited to U.S. Dollar-denominated securities. Global High
Income invests opportunistically in any number of sectors and currencies in any
proportion. The following table shows the investment objective and principal
investment strategies of each Fund:
Investment Objective Principal Investment Strategies
------------------------------------------------------ ------------------------------------------------------
Managed Dollar Managed Dollar's primary investment objective is to As a matter of fundamental policy, Managed Dollar
seek high current income. Its secondary investment normally invests at least 35% of its total assets in
objective is capital appreciation. U.S. corporate fixed-income securities. The balance of
the Fund's investment portfolio consists of
fixed-income securities issued or guaranteed
by foreign governments and non-U.S. corporate
fixed-income securities. The Fund invests in U.S.
Dollar-denominated foreign fixed-income securities.
Substantially all of the Fund's assets are invested in
high yield, high-risk securities rated below
investment-grade and considered to be predominantly
speculative.
8
Investment Objective Principal Investment Strategies
------------------------------------------------------ ------------------------------------------------------
Global High Global High Income's primary investment objective is Global High Income is permitted to invest without
Income to seek high current income. Its secondary investment limit in debt securities, including Sovereign Debt
objective is capital appreciation. Obligations (defined as U.S. Dollar-denominated debt
securities issued or guaranteed by foreign
governments, including participations in loans between
foreign governments and financial institutions and
interests in entities organized and operated for the
purpose of restructuring the investment
characteristics of instruments issued or guaranteed by
foreign governments) and corporate debt, denominated
in non-U.S. currencies as well as in the U.S. Dollar.
In addition, the Fund may invest without limit in
emerging and developed markets and in debt securities
of U.S. and non-U.S. corporate issuers.
Global High Income will not invest 25% or more of its
total assets in the Sovereign Debt Obligations of any
one country other than the U.S.
Substantially all of the Fund's investments will be in
high yield, high risk debt securities that are
low-rated (i.e., below investment-grade) or unrated
and in both cases that are considered to be
predominantly speculative as regards the issuer's
capacity to pay interest and repay principal.
The investment strategies of the Funds are similar in that both invest in
U.S. and non-U.S. corporate fixed-income securities and sovereign debt
securities. Both Funds invest substantially all of their assets in lower-rated
securities. Both Funds are non-diversified. There are some differences in the
investment policies of the Funds, primarily that Managed Dollar's investments
are currently limited to U.S. Dollar-denominated securities whereas Global High
Income may invest, without limitation, in securities denominated in foreign
currencies (as of March 31, 2009, approximately 6.4% of Global High Income's
total assets were invested in foreign currency denominated securities). Managed
Dollar has a fundamental policy to invest at least 35% of its assets in U.S.
corporate fixed-income securities in contrast to the flexibility of Global High
Income's investment strategies, which include both U.S. and non-U.S. corporate
fixed-income securities but do not require a specific amount of the Fund's
assets to be invested in these securities. A more detailed comparison of the
investment objectives, policies and strategies of the Funds is included herein
as Appendix B. You will find additional information about Global High Income in
the SAI.
The Adviser expects to reposition Managed Dollar's portfolio prior to the
Acquisition. To facilitate this repositioning, the Directors approved the
elimination of Managed Dollar's non-fundamental policy to limit its investments
to U.S. Dollar-denominated fixed-income securities and to permit it to invest
in both U.S. Dollar-denominated securities and non-U.S. Dollar-denominated
securities. This new policy will become effective upon stockholder approval of
the Acquisition. The Adviser expects to transition a portion of Managed
Dollar's portfolio into higher-yielding, non-U.S. Dollar-denominated securities
prior to consummation of the Acquisition.
9
Mandatory Tender Offer
Managed Dollar's 1993 Prospectus for its initial public offering provides
that it will conduct an annual tender offer for its shares at NAV during the
second quarter of each year if its shares have traded at an average discount
from NAV of 3% or more determined on the basis of the discount or premium as of
the last trading day in each week during a designated 12-week period
("Measuring Period"). The most recent Measuring Period ended Friday, May 1,
2009, and the average discount from NAV exceeded 3% during the Measuring
Period. As a result, Managed Dollar commenced a tender offer for up to 924,778
shares of its common stock representing approximately 5% of the outstanding
shares. The tender offer's original expiration date was June 1, 2009 but, on
May 29, 2009, Managed Dollar increased the tender offer to 3,329,202 shares of
common stock representing 18% of the outstanding shares. The amended tender
offer expired on June 11, 2009. The price per share will be the NAV as of the
close of the regular trading session of the NYSE on June 12, 2009, the first
business day following the new expiration date. See "Voting Information" on
page 20 for more information on the tender offer.
The purpose of the tender offer commitment is to reduce or eliminate a
discount to NAV. While the Fund's experience has demonstrated that the tender
offers have no long-lasting positive effect on the discount, the tender offers
provide the Fund's stockholders with some measure of liquidity, since they
permit stockholders to sell at least a portion of their shares at NAV rather
than at market value.
Global High Income has no mandatory tender offer provision. However, Global
High Income does have a policy, at the discretion of the Directors, to effect
share repurchases or make a tender offer for its shares in any quarter if,
during the 12 calendar weeks preceding the quarter, its shares have traded at a
discount to NAV in excess of 5%. The Board of Directors of Global High Income
has not determined that it is in the best interest of the Fund to repurchase
shares or conduct a tender offer even though the Fund's shares at times have
traded at a discount to NAV in excess of 5%. The trading history and share
price data for the Funds are provided in Appendix C.
Principal Risks
Each Fund is subject to market risk, interest rate risk, credit risk,
foreign (non-U.S.) risk, leverage risk and diversification risk. Global High
Income is also subject to currency risk, as it may invest in
non-U.S. Dollar-denominated securities while Managed Dollar does not invest in
such securities. In addition, Global High Income is subject to greater foreign
(non-U.S.) risk because it may invest without limit in securities of non-U.S.
issuers whereas Managed Dollar normally invests at least 35% of its total
assets in U.S. corporate fixed-income securities. Global High Income may be a
riskier investment than Managed Dollar because of these differences, but the
Advisor believes that these risks should tend to be reduced because of Global
High Income's diversified, multi-sector investment strategy. A description of
each of these risks and other potential risks is provided in Appendix D.
Federal Income Tax Consequences
No gain or loss will be recognized by Managed Dollar or its stockholders,
except with respect to cash received in lieu of fractional shares of Global
High Income by non-DRIP stockholders in connection with the Acquisition. The
aggregate tax basis of the shares of Global High Income received by a
stockholder of Managed Dollar (including any fractional shares to which the
stockholder may be entitled) will be the same as the aggregate tax basis of the
stockholder's shares of Managed Dollar, decreased by any cash received and
increased by any gain recognized with respect to cash received in lieu of
fractional shares by non-DRIP stockholders. The holding period of the shares of
Global High Income received by a stockholder of Managed Dollar (including any
fractional shares to which the stockholder may be entitled) will include the
holding period of the shares of Managed Dollar held by the stockholder,
provided that such shares are held as capital assets by the stockholder of
Managed Dollar at the time of the Acquisition. The holding period and tax basis
of each asset of Managed Dollar in the hands of Global High Income as a result
of the Acquisition will be the same as the holding period and tax basis of each
such asset in the hands of Managed Dollar prior to the Acquisition. Any gain or
loss realized by a non-DRIP stockholder of Managed Dollar upon receipt of cash
in lieu of fractional shares of Global High Income will be recognized by the
stockholder and measured by the difference between the amount of cash received
and the basis of the factional share and, provided that the Managed Dollar
shares surrendered constitute capital assets
10
in the hands of the stockholder, will be capital gain or loss. This tax
information is based on the advice of Seward & Kissel LLP, counsel to each of
the Funds. It is a condition to the closing of the Acquisition that such advice
be confirmed in a written opinion of counsel. An opinion of counsel is not
binding on the Internal Revenue Service. Additional tax considerations are
discussed under the section on "Federal Income Tax Consequences" in Information
About the Proposed Transactions.
Managed Dollar has, as of January 30, 2009, net realized capital losses and
unrealized depreciation and substantial capital loss carryforwards as a
percentage of net assets. No distribution of capital gains to Managed Dollar
stockholders prior to the Acquisition is anticipated.
Managed Dollar has, as of January 30, 2009, capital loss carryforwards of
approximately $64 million or $3.48 per share. Global High Income has, as of
January 30, 2009, no capital loss carryforwards, although it has significant
unrealized depreciation of $225 million. After the Acquisition, the combined
Fund's capital loss carryforwards will be approximately $64 million or $.73 per
share. As a result, the amount of capital loss carryforwards available to
Managed Dollar stockholders will decrease significantly. However, the
availability of the capital loss carryforwards for Managed Dollar before the
Acquisition and in the combined Fund after the Acquisition may not be
meaningful as it is unlikely that enough capital gains would be generated in
either case to use all the capital loss carryforwards before they expire.
Service Providers
The Adviser serves as the administrator for both Funds and will continue in
this capacity after the Acquisition. State Street Bank and Trust Company is
custodian for Managed Dollar and The Bank of New York Mellon serves as
custodian for Global High Income and will continue to serve in that capacity
for the combined Fund after the Acquisition. Computershare Trust Company, N.A.
is the transfer agent for both Funds and will continue to serve in that
capacity after the Acquisition.
Comparison of Business Structures
Each Fund is organized as a Maryland corporation and is governed by its
Charter, Bylaws and Maryland law. Generally, there are no significant
differences between the Funds in terms of their respective corporate
organizational structure. For more information on the comparison of the
business structure of the Funds, see Appendix E.
11
INFORMATION ABOUT THE PROPOSED TRANSACTION
Introduction
This Prospectus/Proxy Statement is provided to you to solicit your proxy for
exercise at the Meeting to approve the acquisition of the assets and assumption
of the liabilities of Managed Dollar by Global High Income and the subsequent
liquidation and dissolution of Managed Dollar. The Meeting will be held at 1345
Avenue of the Americas, 41st Floor, New York, New York 10105 at 3:00 p.m.,
Eastern time, on August 21, 2009. This Prospectus/Proxy Statement, the
accompanying Notice of the Special Meeting of Stockholders and the enclosed
proxy card are being mailed to stockholders of Managed Dollar on or about
June 23, 2009.
Description of the Plan
As provided in the Plan, Global High Income will acquire all the assets and
assume all the liabilities of Managed Dollar at the effective time of the
Acquisition (the "Effective Time"). In return, Global High Income will issue,
and Managed Dollar will distribute to its stockholders, a number of full and
fractional shares of Global High Income (and cash in lieu of fractional shares
for non-DRIP stockholders), determined by dividing the net value of all the
assets of Managed Dollar by the NAV of one share of Global High Income. For
this purpose, the Plan provides the times for, and methods of, determining the
net value of the assets of each Fund. The Plan provides that stockholders of
Managed Dollar will be credited with shares of Global High Income (or cash in
lieu of fractional shares for non-DRIP stockholders) corresponding to the
aggregate NAV of Managed Dollar's shares that the stockholder holds of record
at the Effective Time.
Following the distribution of shares of Global High Income in full
liquidation of Managed Dollar, Managed Dollar will wind up its affairs and
liquidate and dissolve as soon as is reasonably practicable after the
Acquisition. In the event the Acquisition does not receive the required
stockholder approval, Managed Dollar will continue its operations and its
Directors will consider what future action, if any, is appropriate.
The projected expenses of the Acquisition, largely those for legal,
accounting, printing and proxy solicitation expenses, are estimated to total
approximately $275,000. Of this amount, $100,000 will be borne by the Adviser
at the request of the independent Directors of Managed Dollar; the remainder
will be borne by Managed Dollar, which is estimated to equate to $.01 per share.
The Acquisition is expected to occur in the third quarter of this year. The
Acquisition is conditioned upon approval of the Plan by Managed Dollar
stockholders and Managed Dollar satisfying the terms of the Plan. Under
applicable legal and regulatory requirements, none of Managed Dollar's
stockholders will be entitled to exercise objecting stockholders' appraisal
rights, i.e., to demand the fair value of their shares in connection with the
Acquisition. Therefore, stockholders will be bound by the terms of the
Acquisition under the Plan. However, any stockholder of Managed Dollar may sell
shares of the Fund's common stock on the NYSE prior to the Acquisition. The
shares of Managed Dollar may cease trading on the NYSE beginning several days
prior to the date of the Acquisition. Any cessation of trading will be
accomplished in compliance with NYSE rules, including issuance of a press
release.
After the Acquisition, Managed Dollar's shares of common stock will be
removed from listing on the NYSE. In addition, Managed Dollar's shares of
common stock will be withdrawn from registration under the Securities Exchange
Act of 1934. Managed Dollar will deregister as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act") and will dissolve
under Maryland law.
Completion of the Acquisition is subject to certain conditions set forth in
the Plan, some of which may be waived by a party to the Plan. The Plan may be
amended in any mutually agreed manner, except that no amendment may be made
subsequent to stockholder approval of the Acquisition that materially alters
the obligations of either party. The parties to the Plan may terminate the Plan
by mutual consent and either party has the right to terminate the Plan under
certain circumstances. Among other circumstances, either party may at any time
terminate the Plan unilaterally upon a determination by the party's Board of
Directors that proceeding with the Plan is not in the best interests of the
Fund or its stockholders.
12
A copy of a form of the Plan is attached as Appendix F.
Reasons for the Acquisition
At the Board Meeting, the Adviser recommended that the Directors approve and
recommend to Managed Dollar stockholders for their approval the proposed Plan
and the Acquisition. The Directors considered the factors discussed below from
the point of view of the interests of Managed Dollar and its stockholders.
After careful consideration, the Directors (including all Directors who are not
"interested persons" of the Fund, the Adviser or its affiliates) determined
that the Acquisition would be in the best interests of Managed Dollar and that
the interests of existing stockholders of the Funds would not be diluted as a
result of the Acquisition. The Directors approved the Plan and the Acquisition
and recommended that the stockholders of Managed Dollar vote in favor of the
Acquisition by approving the Proposal.
The Adviser presented the following reasons in favor of the Acquisition:
. The Adviser discussed with the Directors that Managed Dollar is a
relatively small fund, with net assets of $113 million as of January 31,
2009, compared to Global High Income, with net assets of approximately
$736 million as of January 31, 2009. Because of its small size, Managed
Dollar's expense ratio is approximately .23% higher than Global High
Income's, not withstanding the fact that Global High Income pays an
advisory fee that is .15% higher than that of Managed Dollar. The Funds
pursue identical investment objectives of seeking high current income,
with capital appreciation as a secondary objective. Both employ leverage
opportunistically through the use of derivative investments, such as
reverse repurchase agreements and credit default swaps. Although their
policies permit them to do so, neither Fund has outstanding bank
borrowings or issues of preferred stock.
. The Adviser also discussed with the Directors that the investment
strategies of the Funds are generally similar in that both invest in U.S.
and non-U.S. corporate fixed-income securities and sovereign debt
securities. The Adviser noted that both Funds invest substantially all of
their assets in lower-rated securities. Both Funds are non-diversified.
The Adviser explained that the Funds' investment strategies and policies
differ in two primary ways. Managed Dollar's investments are limited to
U.S. Dollar-denominated securities, whereas Global High Income may invest
without limitation in securities denominated in foreign currencies,
including emerging market debt securities denominated in local currency.
As of January 31, 2009, approximately 6.4% of Global High Income's total
assets were invested in foreign currency denominated securities. Managed
Dollar also has a fundamental policy to invest at least 35% of its assets
in U.S. corporate fixed-income securities in contrast to the flexibility
of Global High Income's investment strategies, which do not require a
specific amount of the Fund's assets to be invested in these securities.
. The Adviser also discussed with the Directors that Managed Dollar and
Global High Income were both launched in 1993, Global High Income as
Alliance World Dollar Government Fund II ("World Dollar Government").
Both Funds, intended for investors seeking high current income and
capital appreciation, were part of a succession of closed-end funds
launched by the Adviser in 1992 and 1993, employing an investment
approach that paired the relative safety of the U.S. Dollar with a higher
risk offering, which was composed of a portfolio of high yield, high risk
U.S. and U.S. Dollar-denominated non-U.S. fixed-income securities,
including investments in emerging market securities. In 2006, Global High
Income's stockholders voted to remove the investment restriction relating
to U.S. Dollar-denominated securities and the Fund adopted its present
name and more flexible investment strategy that allows it to seek high
income from many sources. The Adviser had proposed the expansion of
Global High Income's investment guidelines in response to developments in
emerging market economies, including increases in credit quality,
reductions in volatility, and the growing importance of local currency
debt as a funding medium for emerging economies.
. The Adviser also discussed with the Directors that, in their respective
initial public offerings, Global High Income raised approximately $837
million and Managed Dollar raised approximately $383 million, in each
case net of underwriting discounts and commissions. As of January 31,
2009, Global High
13
Income (which acquired the assets and liabilities of its sibling
closed-end fund, Alliance World Dollar Government Fund, in April 2007)
had net assets of approximately $736 million, while Managed Dollar had
net assets of approximately $113 million. The Adviser explained that the
decline in both Funds' assets has been affected by recent negative market
performance, but that the decline in Managed Dollar's assets is also, as
discussed below, largely attributable to the Fund's many mandatory tender
offers. Although Managed Dollar has succeeded in reducing its operating
expenses by altering its administrative arrangements and eliminating its
loan facility, the Fund's expense ratio, excluding interest expense, has
risen steadily to its current level of 1.24% as of January 31, 2009.
. The Adviser also discussed with the Directors that Managed Dollar's 1993
Prospectus for its initial public offering provides that the Fund would
conduct an annual tender offer for its shares at NAV during the second
quarter of each year if the Fund's shares have traded at an average
discount from NAV of 3% or more determined on the basis of the discount
or premium as of the last trading day in each week during a designated
12-week period ("Measuring Period"). Under this provision, six tender
offers have been conducted since 1995 (1997, 2001, 2005, 2006, 2007 and
2008).
. The Adviser also discussed with the Directors that, as noted above, the
tender offers have been the principal cause of the reduction in Managed
Dollar's asset size from approximately $383 million at the time of its
initial public offering in 1993 to approximately $113 million as of
January 31, 2009. According to the Adviser, the long-term viability of
Managed Dollar, given the steady decrease in assets since 2004 due to its
undertaking to conduct these annual tender offers, is questionable. The
Adviser advised the Directors that a tender offer would likely be
required as a result of the most recent Measuring Period, leading to a
further reduction in Managed Dollar's assets. (As discussed above in the
Summary, in 2009 a tender offer was required, and has been conducted, as
a result of the Measuring Period.)
. The Adviser also discussed with the Directors that Global High Income
does not have a mandatory tender offer policy, and has never made a
tender offer for its shares, although at the discretion of the Directors,
the Fund may effect share repurchases or make a tender offer for its
shares in any quarter if, during the 12 calendar weeks preceding the
quarter, the Fund's shares have traded at a discount to NAV in excess of
5%. The Directors of Global High Income have not determined that it is in
the best interest of the Fund to repurchase shares or conduct a tender
offer even though the Fund's shares at times have traded at a discount to
NAV in excess of 5%.
. The Adviser also discussed with Directors that, despite weaker short-term
performance during the past year, Global High Income over the long-term
has outperformed Managed Dollar by .65%, .08%, and 4.72%, on an average
annual returns basis, for the 3-, 5-, and 10-year periods ended
January 31, 2009, respectively. The longer-term outperformance of Global
High Income relative to Managed Dollar is attributable to the previous
investment mandate, when Global High Income was World Dollar Government.
Under this mandate, Global High Income invested predominantly in emerging
market debt, which outperformed other sectors, such as U.S. corporate
fixed-income securities, during much of the last ten years. For the
one-year period ended January 31, 2009, Global High Income underperformed
Managed Dollar by 4.09%, due to the relative weakness of
non-U.S. Dollar-denominated securities, a higher degree of leverage than
Managed Dollar during a period of difficult credit, and lower exposure to
emerging markets relative to Managed Dollar. On a calendar year basis,
Global High Income outperformed Managed Dollar in six out of the last ten
years by an average of 8.85% and, in the other four calendar years,
underperformed Managed Dollar by an average of 2.05%.
. The Adviser also discussed with the Directors that, at the close of
trading on December 31, 2008 and January 30, 2009, Managed Dollar's
shares were trading at discounts of 20.67% and 17.02%, respectively,
while Global High Income's shares were trading at discounts of 19.64% and
4.05%, respectively. The Adviser noted that Global High Income's shares
have historically traded at a lower premium or higher discount than
Managed Dollar's shares. According to the Adviser, Global High Income's
shares began to trade at less of a discount than Managed Dollar's shares
in September of 2007. In March 2008, the Funds' shares reached trading
parity again, but from that time to the present Global
14
High Income's shares have continued to trade at less of a discount than
Managed Dollar's shares. The Advisor believed that, while no assurances
can be given that the recent discount performance of Global High Income
will persist, the type of discount differential that has existed in the
past 18 months is significant. For example, the Adviser noted that the
dollar value of reducing Managed Dollar's discount from 21.55% (the level
on February 20, 2009) to 17.53% (Global Income's on the same date) would
have been $4.4 million. For current information on the Funds' trading
discounts, see Appendix C.
. In recommending the Acquisition and Plan for approval, the Adviser noted
to the Directors that it believed that the Acquisition would offer
Managed Dollar stockholders a similar investment alternative in the
leveraged closed-end fund structure with which they are familiar, with
lower total expenses, greater earnings power, and a more robust share
price than Managed Dollar. In particular, the Adviser believed that
Global High Income's more flexible, opportunistic investment approach
should benefit Managed Dollar's stockholders in the long-term.
At the Board Meeting, the Directors (with the advice and assistance of
independent counsel) also considered, among other things:
. that Global High Income's investment advisory fee of .90% is higher than
Managed Dollar's fee of .75%, which the Adviser believed is warranted
because Global High Income is a more complicated fund to manage in that
it invests in a number of sectors and currencies and requires a greater
contribution from the Adviser's portfolio managers and research staff;
. that both Funds reimburse the Adviser for administrative services (as of
January 31, 2009, the administrative fees amounted to .12% for Managed
Dollar and .02% for Global High Income) and that Global High Income's
reimbursement cannot exceed .15%;
. potential stockholder benefits including (i) the fact that, while Global
High Income's advisory fee is higher than Managed Dollar's advisory fee,
total expenses before and after interest expense of the combined Fund
would be significantly lower than the current expenses before and after
interest expense of Managed Dollar (an expense ratio reduction of .23%
before interest expense and .31% after interest expense), (ii) the
potential for Managed Dollar's stockholders to benefit from increased
earnings of the combined Fund due to the potential higher earnings of
Global High Income because of Global High Income's greater flexibility to
seek high income from foreign and domestic corporate and sovereign debt
securities denominated either in the U.S. Dollar or in local currencies,
and (iii) the redeployment of Managed Dollar's portfolio prior to the
Acquisition to take advantage of Global High Income's ability to invest
in non-U.S. Dollar-denominated fixed-income securities;
. the current asset levels of Managed Dollar and the combined pro forma
asset levels of Global High Income;
. the identical investment objectives and similar principal investment
strategies of the Funds, as well as the fact that Global High Income may
also invest in non-U.S. Dollar-denominated fixed-income securities rather
than being restricted to U.S. Dollar-denominated fixed-income securities
as is Managed Dollar;
. the distribution and trading history of the Funds (trading price
information for the Funds is provided in Appendix C);
. the amount and type of leverage used by the Funds;
. the portfolio management team of each Fund, which includes members of the
Adviser's Global Fixed Income Team and Global Credit Investment Team, and
that the portfolio management team of Global High Income will continue to
manage the combined portfolios after the Acquisition;
. that Managed Dollar has net realized capital losses and unrealized
depreciation, and loss carryforwards of approximately $64 million, or
$3.48 per share, and that Global High Income has no capital loss
carryforwards, although it does have significant unrealized depreciation
of $225 million; that the combined Fund will have, as a result of the
Acquisition (if it had occurred as of January 31, 2009), net capital loss
15
carryforwards of approximately $64 million, or $.73 per share, which means
that the capital loss carryforwards available to Managed Dollar's
stockholders will decrease significantly; and that the availability of
these capital loss carry forwards, either before or after the
Acquisition, may not, in the Adviser's view, be meaningful as it is
unlikely that enough capital gains would be generated in either case to
use the capital loss carryforwards before they expire;
. the form of the Plan and the terms and conditions of the Acquisition;
. whether the Acquisition would result in the dilution of stockholders'
interests;
. the number of stockholder accounts and average account sizes of the Funds;
. no changes in service providers will result from the Acquisition, with
the exception that The Bank of New York Mellon, which is the custodian
for Global High Income, will serve in that capacity after the Acquisition
in lieu of Managed Dollar's current custodian, which is State Street Bank
and Trust Company (Brown Brothers Harriman & Co. will become Global High
Income's custodian and accounting agent prior to the end of 2009);
. that realignment of the investment holdings of Managed Dollar before the
effective date of the Acquisition is anticipated and that associated
costs would be borne by Managed Dollar;
. the benefits of the Acquisition to persons other than Managed Dollar and
its stockholders, in particular, the Adviser, which will benefit from the
elimination of monitoring and administering the relatively small Managed
Dollar and from increased advisory fees on the acquired assets;
. that Global High Income will assume all the liabilities of Managed Dollar;
. the expected federal income tax consequences of the Acquisition;
. the Adviser's representation that none of the financial information
presented to the Directors had changed materially since January 31, 2009;
. whether the Acquisition would be preferable to acquisition of Managed
Dollar by potential acquirers other than Global High Income, including
funds that are not sponsored by the Adviser, or the liquidation of
Managed Dollar;
. that the costs of the Acquisition will be shared by Managed Dollar and
the Adviser; and
. that the Adviser has agreed to indemnify Global High Income for a
three-year period against any liability not disclosed or not reflected in
the NAV of Managed Dollar at the time of the Acquisition, to reimburse
Global High Income for any reasonable legal or other costs and expenses
costs in connection with investigating any such liability, and to
continue certain insurance coverage for a six-year period.
At the Board Meeting (and at subsequent regular and special meetings), the
Adviser represented to the Board that if the pro forma expense and income and
portfolio repositioning information was updated (including to reflect the
effect of Managed Dollar's tender offer which expired on June 11, 2009), it
would not differ in any material respect. The Directors also considered updated
information regarding the discounts from net asset value at which the shares of
the Funds had been trading at such subsequent meetings of the Board.
At the Board Meeting, the Board of Directors of Global High Income
(comprised of the same members as the Directors of Managed Dollar) approved the
proposed Plan. No vote of Global High Income stockholders is required to
approve the Acquisition.
Description of Securities to be Issued
Under the Plan, Global High Income will issue additional shares of common
stock for distribution to Managed Dollar. Under its Charter, Global High Income
may issue up to 100,000,000 shares of common stock, par value $.01 per share.
Each share of Global High Income represents an equal, proportionate interest
with other shares of the Fund. Each share has equal earnings, assets and voting
privileges and is entitled to dividends and
16
other distributions out of the income earned and gain realized on the assets
belonging to Global High Income as authorized by the Board of Directors. Shares
of Global High Income entitle their holders to one vote per full share and
fractional votes for fractional shares held. Shares of Global High Income
received by stockholders of Managed Dollar will be issued at NAV without a
sales charge, fully paid and non-assessable.
Dividends and Other Distributions
On or before the Closing Date, as defined in the Plan, Managed Dollar will,
if necessary, declare and pay as a distribution substantially all of its
undistributed net investment income, net short-term capital gain, net long-
term capital gain and net gains from foreign currency transactions, as
applicable, to maintain its treatment as a regulated investment company.
Managed Dollar Stock Certificates
After the Plan's Effective Time, each holder of a certificate (or
certificates) formerly representing shares of Managed Dollar will not receive,
upon surrender of the certificate, a certificate representing the number of
Global High Income shares distributable as a result of the Acquisition since
Global High Income will not issue certificates representing Global High Income
shares in connection with the Acquisition. Ownership of Global High Income's
shares will be shown on the books of Global High Income's transfer agent. If
you currently hold certificates representing shares of Managed Dollar, it is
not necessary to surrender the certificates.
Federal Income Tax Consequences
Subject to certain stated assumptions contained therein, Managed Dollar will
receive an opinion of Seward & Kissel LLP, its counsel, substantially to the
following effect: (i) the Acquisition will constitute a "reorganization" within
the meaning of Section 368(a) of the United States Internal Revenue Code of
1986, as amended (the "Code") and that Managed Dollar and Global High Income
will each be "a party to a reorganization" within the meaning of Section 368(b)
of the Code; (ii) a stockholder of Managed Dollar will recognize no gain or
loss on the exchange of the stockholder's shares of Managed Dollar solely for
shares of Global High Income, except with respect to cash received in lieu of a
fractional share of Global High Income by non-DRIP stockholders in connection
with the Acquisition; (iii) neither Managed Dollar nor Global High Income will
recognize any gain or loss upon the transfer of all of the assets of Managed
Dollar to Global High Income in exchange for shares of Global High Income (plus
cash in lieu of certain fractional shares by non-DRIP stockholders) and the
assumption by Global High Income of the liabilities of Managed Dollar pursuant
to the Plan or upon the distribution of shares of Global High Income to
stockholders of Managed Dollar (and cash to non-DRIP stockholders for their
fractional shares) in exchange for their respective shares of Managed Dollar;
(iv) the holding period and tax basis of the assets of Managed Dollar acquired
by Global High Income will be the same as the holding period and tax basis that
Managed Dollar had in such assets immediately prior to the Acquisition; (v) the
aggregate tax basis of shares of Global High Income received in connection with
the Acquisition by each stockholder of Managed Dollar (including any fractional
share to which the stockholder may be entitled) will be the same as the
aggregate tax basis of the shares of Managed Dollar surrendered in exchange
therefore; (vi) the holding period of shares of Global High Income received in
connection with the Acquisition by each stockholder of Managed Dollar
(including any fractional share to which the stockholder may be entitled) will
include the holding period of the shares of Managed Dollar surrendered in
exchange therefore, provided that such Managed Dollar shares constitute capital
assets in the hands of the stockholder as of the Closing Date; (vii) Global
High Income will succeed to the capital loss carryovers of Managed Dollar, if
any, under Section 381 of the Code, but the use by Global High Income of any
such capital loss carryovers (and of capital loss carryovers of Global High
Income) may be subject to limitation under certain sections of the Code; and
(viii) any gain or loss realized by a non-DRIP stockholder of Managed Dollar
upon the receipt of cash for a fractional share of Global High Income to which
the stockholder is entitled will be recognized to the stockholder and measured
by the difference between the amount of cash received and the basis of the
fractional share and, provided that the Managed Dollar shares surrendered
constitute capital assets in the hands of the stockholder, will be capital gain
or loss. This opinion of counsel will not be binding on the Internal Revenue
Service or a court and there is no assurance that the Internal Revenue Service
or a court will not take a view contrary to those expressed in the opinion.
17
Stockholders of Managed Dollar are encouraged to consult their tax advisers
regarding the effect, if any, of the Acquisition in light of their individual
circumstances. Because the foregoing only relates to the federal income tax
consequences of the Acquisition, those stockholders also should consult their
tax advisers as to state and local tax consequences, if any, of the Acquisition.
Capitalization Information
For information on the existing and pro forma capitalization of the Funds,
see Appendix G.
Trading History and Share Price Data
For information on the trading history and share price data for the Funds,
see Appendix C.
18
INFORMATION ABOUT THE FUNDS
Managed Dollar and Global High Income are each a non-diversified, closed-end
management investment company registered under the 1940 Act and organized as a
Maryland corporation in 1993.
Management of the Funds
The Board of Directors of each Fund directs the management of the business
and affairs of the Fund. Each Board of Directors approves all significant
agreements between the respective Fund and persons or companies furnishing
services to it, including a Fund's agreements with the Adviser and the Fund's
administrator, custodian and transfer and dividend disbursing agent. The
day-to-day operations of a Fund are delegated to its officers and the Fund's
administrator, subject to the Fund's investment objective and policies and to
general supervision by the Fund's Board of Directors. Subsequent to the
consummation of the Acquisition, the directors and officers of Global High
Income will continue to serve as the directors and officers of the combined
Fund.
The day-to-day management of, and investment decisions for, each of Managed
Dollar and Global High Income are made by members of the Global Fixed Income
Team and Global Credit Investment Team. Messrs. Paul J. DeNoon and Gershon M.
Distenfeld, members of the Global Fixed Income Team and Global Credit
Investment Team, are primarily responsible for the day-to-day management of
Managed Dollar's portfolio. Messrs. Paul J. DeNoon, Fernando Grisales, Michael
Mon, Douglas J. Peebles, and Matthew S. Sheridan, members of the Global Fixed
Income Team and Global Credit Investment Team, are primarily responsible for
the day-to-day management of Global High Income's portfolio. Mr. DeNoon is a
Senior Vice President of the Adviser, with which he has been associated in a
substantially similar capacity to his current position since prior to 2004.
Messrs. Distenfeld, Mon and Sheridan are Vice Presidents of the Adviser, with
which they have been associated in a substantially similar capacity to their
current positions since prior to 2004. Mr. Grisales is an Assistant Vice
President of the Adviser, with which he has been associated in a substantially
similar capacity to his current position since prior to 2004. Mr. Peebles is an
Executive Vice President of the Adviser, with which he has been associated in a
substantially similar capacity to his current position since prior to 2004.
Mr. DeNoon is also Director of Emerging Market Debt, and Mr. Peebles is also
Chief Investment Officer and Head of Fixed Income.
Subsequent to the consummation of the Acquisition, Messrs. Paul J. DeNoon,
Fernando Grisales, Michael Mon, Douglas J. Peebles, and Matthew S. Sheridan
will continue to be primarily responsible for the day-to-day management of the
combined Fund. The SAI provides additional information about the portfolio
managers' compensation, other accounts managed by the portfolio managers, and
the portfolio managers' ownership of securities in the Funds.
Advisory Agreement and Fees
Each Fund's investment adviser is AllianceBernstein L.P. (the "Adviser"),
whose address is 1345 Avenue of the Americas, New York, New York 10105. The
Adviser is a leading international investment adviser managing client accounts
with assets, as of December 31, 2008, totaling more than $462 billion (of which
approximately $65 billion represented the assets of investment companies). As
of December 31, 2008, the Adviser managed retirement assets for many of the
largest public and private employee benefit plans (including 49 of the nation's
FORTUNE 100 companies), for public employee retirement funds in 38 states, for
investment companies, and for foundations, endowments, banks and insurance
companies worldwide. The 36 registered investment companies managed by the
Adviser, comprising 104 separate investment portfolios, have approximately
4.0 million retail accounts. The Adviser also serves as administrator for each
Fund.
Under each Fund's advisory agreement with the Adviser (the "Advisory
Agreement"), the Adviser provides investment advisory services to the Funds.
Under the Advisory Agreement of Managed Dollar, the Fund paid the Adviser an
advisory fee at an annual rate of .75 of 1% of the average weekly adjusted net
assets of the Fund. Such fee is accrued daily and paid monthly. Under the
Advisory Agreement of Global High Income, the Fund paid the Adviser an advisory
fee at an annual rate of .90% of the Fund's average weekly net assets. Such fee
is accrued daily and paid monthly.
19
The Advisory Agreements by their terms continue in effect from year to year
if such continuance is specifically approved, at least annually, by a majority
vote of the directors of a Fund who neither are interested persons of the Fund
nor have any direct or indirect financial interest in the Advisory Agreement,
cast in person at a meeting called for the purpose of voting on such approval.
A discussion regarding the basis for the Board of Directors approving the
advisory agreements of Managed Dollar and Global High Income is available in
Managed Dollar's Semi-Annual Report to Shareholders for the six-month period
ended March 31, 2009 and Global High Income's Annual Report to Shareholders for
its fiscal year ended March 31, 2009, respectively.
Administrator
The Adviser serves as administrator for Managed Dollar and Global High
Income and performs standard administration services for the Funds. Pursuant to
an Administration Agreement, Managed Dollar reimburses the Adviser for its
costs incurred for providing administrative services. The amount reimbursed by
Managed Dollar, as of January 31, 2009, was .12% of average weekly net assets.
Pursuant to the Advisory Agreement, Global High Income reimburses the Adviser
for its costs incurred for providing administrative services. The amount
reimbursed by Global High Income, as of January 31, 2009, was .02% of average
weekly net assets.
Other Service Providers
State Street Bank and Trust Company, One Lincoln Street, Boston, MA 02111,
serves as custodian for Managed Dollar and The Bank of New York Mellon, 100
Church Street, New York, NY 10286, serves as custodian for Global High Income.
Computershare Trust Company, N.A., P.O. Box 43010, Providence, RI 02940, serves
as dividend paying agent, transfer agent and registrar and accounting agent for
the Funds. After the Acquisition, The Bank of New York Mellon and Computershare
Trust Company will serve, respectively, as custodian and transfer agent for the
combined Fund. AllianceBernstein Investor Services, Inc. ("ABIS"), an affiliate
of the Adviser, provides shareholder services for the Funds. The Funds
compensate ABIS for these services.
VOTING INFORMATION
The Directors have fixed the close of business on June 19, 2009 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Meeting and at any adjournments thereof. Appendix I to this
Prospectus/Proxy Statement lists the total number of Managed Dollar shares
outstanding entitled to vote at the Meeting. It also identifies holders of more
than five percent of shares of each Fund, and contains information about the
executive officers and Directors of the Funds and their shareholdings in the
Funds.
Those stockholders who hold shares directly and not through a broker or
nominee (that is, a stockholder of record) may authorize their proxies to cast
their votes by completing a Proxy Card and returning it by mail in the enclosed
postage-paid envelope as well as by telephoning toll free 1-800-652-8683.
Shares held for a stockholder through a broker or nominee (who is the
stockholder of record for those shares) should be voted by following the
instructions provided to the stockholder by the broker or nominee. The
telephone and Internet voting instructions to be followed by a stockholder of
record, including use of the Control Number on the stockholder's Proxy Card,
are designed to verify stockholder identities, to allow stockholders to give
voting instructions and to confirm that stockholder instructions have been
recorded properly. Stockholders who authorize proxies by telephone or through
the Internet should not also return a Proxy Card. Stockholders who authorize
proxies through the Internet should be aware that they are responsible for any
applicable telecommunication and access charges. A stockholder of record may
revoke that stockholder's proxy at any time prior to exercise thereof by giving
written notice to the Secretary of Managed Dollar at 1345 Avenue of the
Americas, New York, New York 10105, by authorizing a later-dated proxy (either
by signing and mailing another Proxy Card or, by telephone or through the
Internet as indicated above), or by personally attending and voting at the
Meeting.
Properly executed proxies may be returned with instructions to abstain from
voting or to withhold authority to vote (an "abstention") or represent a broker
"non-vote" (which is a proxy from a broker or nominee indicating that the
broker or nominee has not received instructions from the beneficial owner or
other person entitled to vote shares on a particular matter with respect to
which the broker or nominee does not have the discretionary power to vote).
20
Approval of the Proposal by the stockholders of Managed Dollar requires the
affirmative vote of a majority of the votes entitled to be cast.
Abstentions and broker non-votes will be considered present for purposes of
determining the existence of a quorum for the transaction of business at the
Meeting but will have the effect of a vote against the Proposal. If any
proposal, other than the Proposal to be voted on by the stockholders of Managed
Dollar, properly comes before the Meeting, the shares represented by proxies
will be voted on all such proposals in the discretion of the person or persons
voting the proxies. Managed Dollar has not received notices of, and is not
aware of, any other matter to be presented at the Meeting.
On May 18, 2009, Bulldog Investors General Partnership ("BIGP"), whose
affiliates beneficially owned approximately 5.9% of Managed Dollar's
outstanding shares of common stock as of May 19, 2009, filed preliminary proxy
materials with the SEC to solicit proxies in opposition to the Acquisition.
After discussions with BIGP and its principals, Phillip Goldstein and Andrew
Dakos, the Directors determined that it was in the best interests of Managed
Dollar to enter into an agreement with BIGP. Under the agreement between BIGP
and Managed Dollar, dated May 29, 2009 (the "Agreement"), (1) BIGP agreed,
among other things, to abandon its proxy solicitation and to vote its shares in
favor of the Acquisition and (2) Managed Dollar agreed to increase the tender
offer for its shares, which was scheduled to expire on June 1, 2009, from 5% of
the shares of its common stock issued and outstanding on May 1, 2009, or
924,778 shares, to approximately 18% of its shares, or 3,329,202 shares. As a
result of the Agreement, the tender offer was extended to June 11, 2009. In
their discussions of the tender offer and the potential agreement in meetings
on May 21, 2009 and May 29, 2009, the Directors were advised, and took into
consideration, that the proposed increase in the tender offer for Managed
Dollar's shares would have no material effect on the pro forma expense and
income and portfolio repositioning information reviewed by them at the Board
Meeting.
A quorum for the transaction of business by the stockholders of Managed
Dollar at the Meeting will consist of the presence in person or by proxy of the
holders of a majority of the shares of Managed Dollar entitled to vote at the
Meeting. In the event that a quorum is not represented at the Meeting or, even
if a quorum is so present, in the event that sufficient votes in favor of the
position recommended by the Directors on the Proposal are not timely received,
the persons named as proxies may propose and vote in favor of one or more
adjournments of the Meeting, with no other notice than an announcement at the
Meeting, for up to 120 days after the Record Date, in order to permit further
solicitation of proxies. Shares represented by proxies indicating a vote
against the Proposal will be voted against adjournment.
Managed Dollar has engaged Georgeson Inc. (the "Proxy Solicitor"), 199 Water
Street, 26/th/ Floor, New York, NY 10038, to assist in soliciting proxies for
the Meeting. The Proxy Solicitor will receive a fee of approximately $43,000
for its solicitation services, plus reimbursement of out-of-pocket expenses.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for Managed
Dollar by Seward & Kissel LLP.
EXPERTS
The audited financial statements and financial highlights in the
Prospectus/Proxy Statement and the SAI have been included in reliance on the
reports of Ernst & Young LLP, 5 Times Square, New York, New York 10036, the
registered public accounting firm for the Funds, given on their authority as
experts in auditing and accounting.
FINANCIAL HIGHLIGHTS
Financial highlights information for each of the Funds is available at
Appendix J.
THE DIRECTORS RECOMMEND THAT YOU VOTE FOR THE PROPOSAL
21
APPENDIX A
FEE TABLE
The purpose of the tables below is to assist an investor in understanding
the various costs and expenses that a stockholder bears directly and indirectly
from an investment in the Funds. The tables allow you to compare the sales
charges and expenses of each Fund as of January 31, 2009, and the estimates for
the pro forma combined Fund in its first year following the Acquisition.
Global High Income
Managed Dollar Global High Income (pro forma)
-------------- ------------------ ------------------
Shareholder Transaction Expenses
Sales Load (as a percentage of offering price) None None None
Dividend Reinvestment Plan Fees(a) None None None
Annual Expenses (as a percentage of net assets attributable to
common shares)
Management Fees .75% .90% .90%
Interest Payments on Borrowed Funds .15% .07% .07%
Other Expenses .49% .11% .11%
Total Annual Expenses(b) 1.39% 1.08% 1.08%
Total Annual Expenses Excluding Interest Payment on
Borrowed Funds 1.24% 1.01% 1.01%
--------
(a)There are no charges with respect to shares issued directly by a Fund to
satisfy the dividend reinvestment requirements. However, each participant
will pay a pro-rata share of brokerage commissions incurred with respect to
a Fund's dividend reinvestment plan agent's open market purchases of shares.
In each case, the cost per share of shares purchased for each stockholder's
account will be the average cost, including brokerage commissions, of any
shares purchased in the open market plus the cost of any shares issued by a
Fund.
(b)In connection with the Acquisition, there are certain other transaction
expenses, largely those for legal, accounting, printing and proxy
solicitation expenses, and costs associated with the repositioning of
Managed Dollar's portfolio to align it with the investment strategies of
Global High Income prior to the effective date of the Acquisition. The Board
of Directors (the "Directors") of each Fund reviewed the fees and expenses
that will be borne directly or indirectly by the Funds in connection with
the Acquisition. After considering various alternatives for allocating these
costs, the Directors of Managed Dollar agreed that, in the event the
Acquisition is approved and completed, the portfolio repositioning costs,
which are expected to be between $27,000 and $54,000, will be borne by
Managed Dollar. The Acquisition expenses are estimated to be approximately
$275,000. Of this amount, $100,000 will be borne by the Adviser; the
remainder will be borne by Managed Dollar, which is estimated to equate to
$.01 per share. Managed Dollar and the Adviser would bear these costs even
if the Acquisition is not approved by Managed Dollar stockholders. The
projected annual expense savings are generally not expected to be
immediately realized and it would take approximately 10 months for Managed
Dollar stockholders to make up the additional cost through the lower
expenses of the combined Fund. If a Managed Dollar stockholder sells his or
her shares prior to the estimated pay-back period, then that stockholder may
not realize any of the projected expense savings resulting from the reduced
expense ratio of the combined Fund.
22
EXAMPLE
You would pay the following on a $1,000 investment assuming a 5% annual
return. The Example assumes the reinvestment of all dividends and distributions
at net asset value and reflects all recurring and nonrecurring fees.
Global High Income
Managed Dollar Global High Income (pro forma)
-------------- ------------------ ------------------
After 1 Year $ 14 $ 11 $ 11
After 3 Years $ 44 $ 34 $ 34
After 5 Years $ 76 $ 60 $ 60
After 10 Years $167 $132 $132
The projected post-Acquisition pro forma Annual Fund Expenses and Example
presented above are based upon numerous material assumptions, including that
(1) the current contractual agreements will remain in place and (2) certain
fixed costs involved in operating Managed Dollar are eliminated. Although these
projections represent good faith estimates, there can be no assurance that any
particular level of expenses or expense savings will be achieved, because
expenses depend on a variety of factors, including the future level of fund
assets, many of which are beyond the control of Global High Income or the
Adviser. Consequently, the Example should not be considered a representation of
future expenses. Actual expenses may be greater or less than those shown.
23
APPENDIX B
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES/1/
Managed Dollar Global High income
----------------------------- -----------------------------
Investment Objective The Fund's primary investment Same.
objective is to seek high
current income. Its secondary
investment objective is
capital appreciation. (F)
Investment Policies
-------------------------------------------------------------
Status The Fund is a Same.
non-diversified, closed-end
investment company.
80% Policy The Fund will invest, under
normal circumstances, at
least 80% of its net assets
in income producing
securities.
Investment Policies The Fund normally invests at The Fund is permitted to
least 35% of its total assets invest without limit in debt
in U.S. corporate securities, including
fixed-income securities. (F) Sovereign Debt Obligations
(defined as U.S.
The balance of the Fund's Dollar-denominated debt
investment portfolio consists securities issued or
of fixed-income securities guaranteed by foreign
issued or guaranteed by governments, including
foreign governments and participations in loans
non-U.S. corporate between foreign governments
fixed-income securities. The and financial institutions
Fund invests in U.S. and interests in entities
Dollar-denominated foreign organized and operated for
fixed-income securities. the purpose of restructuring
the investment
characteristics of
instruments issued or
guaranteed by foreign
governments), and corporate
debt, denominated in non-U.S.
currencies as well as in the
U.S. Dollar. In addition, the
Fund may invest without limit
in emerging and developed
markets and in debt
securities of U.S. and
non-U.S. corporate issuers.
The Fund will not invest 25%
or more of its total assets
in the Sovereign Debt
Obligations of any one
country other than the U.S.
High Yield Debt Securities Substantially all of the Substantially all of the
Fund's assets are invested in Fund's investments will be in
high-yield, high-risk high yield, high risk debt
securities rated below securities that are low-rated
investment-grade and (i.e., below
considered to be investment-grade) or unrated
predominantly speculative. and in both cases that are
considered to be
predominantly speculative as
regards the issuer's capacity
to pay interest and repay
principal.
Currency Hedging The Fund may, but is not
required to, hedge against
currency fluctuations, where
appropriate, to reduce
currency risk.
Derivatives For hedging purposes and For hedging purposes, the
investment purposes, the Fund Fund may purchase and write
may write covered put and put and call options on U.S.
call options and purchase put and foreign securities and
and call options on U.S. and foreign currencies that are
foreign securities that are traded on U.S. and foreign
traded on U.S. and foreign securities exchanges and
securities exchanges and over-the-counter markets. The
over-the-counter markets. The Fund may also use options
Fund may also write call transactions for non-hedging
options for cross hedging purposes as a means of making
purposes. The Fund may also direct investments in foreign
use options transactions for currencies.
non-hedging purposes as a
means of making direct The Fund may enter into
investments in foreign interest rate swaps and
currencies. interest rate caps and floors
to hedge its exposure to
The Fund may enter into interest rates and credit
interest rate swaps and risk. The Fund may also enter
interest rate caps and floors into swaps for non-hedging
to hedge its exposure to purposes as a means of making
interest rates and credit direct investments in foreign
risk. The Fund may also enter currencies.
into swaps for non-hedging
purposes as a means of making
direct investments in foreign
currencies.
Credit Default Swaps The Fund may enter into Same.
credit default swaps.
24
Managed Dollar Global High income
----------------------------- -----------------------------
Structured Securities The Fund may invest up to 25% Same.
of its total assets in
interests in entities
organized and operated solely
for the purpose of
restructuring the investment
characteristics of Sovereign
Debt Obligations.
Loan Participations and The Fund may invest up to 25% Same.
Assignments of its total assets in loan
participations and
assignments.
Convertible Securities The Fund may invest in Same.
convertible securities.
Preferred Stock The Fund may invest in Same.
preferred stock.
Concentration The Fund will not invest 25% The Fund will not invest 25%
or more of its total assets or more of its total assets
in securities of companies (valued at the time of
engaged principally in any investment) in securities of
one industry. (F) issuers conducting their
principal business activities
in the same industry, except
that this restriction does
not apply to U.S. Government
securities. (F)
Loans The Fund will not make loans Same.
except through (i) the
purchase of debt obligations
in accordance with its
investment objective and
policies; (ii) the lending of
portfolio securities; or
(iii) the use of repurchase
agreements. (F)
Borrowings and Senior The Fund may not borrow money The Fund may not borrow money
Securities or issue senior securities, or issue senior securities,
except that the Fund may, in except that (a) the Fund may
accordance with provisions of borrow from a bank or other
the Investment Company Act of entity in a privately
1940, as amended (the "1940 arranged transaction for (i)
Act"), (a) borrow from a bank the repurchase and/or tenders
or other entity in a for its shares or to pay
privately arranged dividends for purposes of
transaction and issue complying with the Internal
commercial paper, bonds, Revenue Code of 1986, as
debentures or notes, in amended, if after such
series or otherwise, with borrowing there is asset
such interest rates, coverage of at least 300% as
conversion rights and other defined in the 1940 Act and
terms and provisions as are (ii) temporary purposes in an
determined by the Board, if amount not exceeding 5% of
after such borrowing or the value of the total assets
issuance there is asset of the Fund; (b) the Fund may
coverage of at least 300% as enter into reverse repurchase
defined in the 1940 Act; (b) agreements and dollar rolls;
issue preferred stock with and (c) the Fund may write
such preferences, conversion put and call options. (F)
and other rights, voting
powers, restrictions,
limitations as to dividends,
qualifications, and terms and
conditions of redemption as
are determined by the Fund's
Board, if after such issuance
there is asset coverage of at
least 200% as defined in the
1940 Act; (c) borrow for
temporary or defensive
purposes in an amount not
exceeding 5% of the value of
the total assets of the Fund;
(d) enter into reverse
repurchase agreements and
dollar rolls; and (e) write
put and call options. (F)
Money Market Instruments The Fund may also at any
time, with respect to up to
20% of its total assets,
temporarily invest funds
awaiting reinvestment or held
for reserves for dividends
and other distributions to
stockholders in U.S.
Dollar-denominated money
market instruments.
Warrants The Fund may invest in Same.
warrants.
Illiquid Securities The Fund may invest up to 50% Same.
of its total assets in
securities that are not
readily marketable,
including, among others, (i)
direct placements or other
securities which are subject
to legal or contractual
restrictions on resale or for
which there is no readily
available market, and (ii)
repurchase agreements not
terminable within seven days.
25
Managed Dollar Global High income
----------------------------- -----------------------------
Interest Rate Transactions The Fund may enter into Same.
interest rate swaps and may
purchase or sell (i.e.,
write) interest rate caps and
floors. The Fund expects to
enter into these transactions
primarily to preserve a
return or spread on a
particular investment or
portion of its portfolio. The
Fund may also enter into
these transactions to protect
against any increase in the
price of securities the Fund
anticipates purchasing at a
later date. The Fund does not
intend to use these
transactions in a speculative
manner.
Forward Commitments The Fund may enter into Same.
forward commitments for the
purchase or sale of
securities.
Loans of Portfolio The Fund may make secured Same.
Securities loans of its portfolio
securities to entities with
which it can enter into
repurchase agreements,
provided that cash and/or
U.S. Government securities
equal to at least 100% of the
market value of the
securities loaned are
deposited and maintained by
the borrower with the Fund.
The Fund will not lend
portfolio securities in
excess of 30% of the value of
its total assets.
Repurchase Agreements The Fund may enter into The Fund may enter into
repurchase agreements repurchase agreements
pertaining to the types of pertaining to the types of
securities in which it securities in which it
invests with member banks of invests with member banks of
the Federal Reserve System or the Federal Reserve System or
"primary dealers" in "primary dealers" in
securities in which the Fund securities in which the Fund
may invest. may invest. The Fund may
enter into repurchase
agreements with respect to up
to 35% of its total assets.
Reverse Repurchase The Fund may also use reverse Same.
Agreements and repurchase agreements and
Dollar Rolls dollar rolls as part of its
investment strategy.
Standby Commitment The Fund may from time to Same.
Agreements time enter into standby
commitment agreements.
Pledge, Hypothecate, The Fund may not pledge, Same.
Mortgage or Encumber hypothecate, mortgage or
Assets otherwise encumber its
assets, except to secure
permitted borrowings. (F)
Investments for Control The Fund may not invest in Same.
companies for the purpose of
exercising control. (F)
Short Sales The Fund may not make short Same.
sales of securities or
maintain a short position,
unless at all times when a
short position is open it
owns an equal amount of such
securities or securities
convertible into or
exchangeable for, without
payment of any further
consideration, securities of
the same issuer as, and equal
in amount to, the securities
sold short ("short sales
against the box"), and unless
not more than 10% of the
Fund's net assets (taken at
market value) is held as
collateral for such sales at
any one time (it being the
Fund's present intention to
make such sales only for the
purpose of deferring
realization of gain or loss
for federal income tax
purposes). (F)
Real Estate The Fund may not purchase or Same.
sell real estate, except that
it may purchase and sell
securities of companies which
deal in real estate or
interests therein and
securities that are secured
by real estate, provided such
securities are securities of
the type in which the Fund
may invest. (F)
26
Managed Dollar Global High income
------------------------------ -----------------------------
Oil, Gas and Minerals The Fund may not invest in Same.
interests in oil, gas, or
other mineral exploration or
development programs. (F)
Margin The Fund may not purchase Same.
securities on margin, except
for such short-term credits
as may be necessary for the
clearance of transactions. (F)
Underwriting Securities The Fund may not act as an Same.
underwriter of securities,
except that the Fund may
acquire restricted securities
under circumstances in which,
if such securities were sold,
the Fund might be deemed to
be an underwriter for
purposes of the Securities
Act of 1933, as amended. (F)
Commodities The Fund may not purchase or Same.
sell commodities or commodity
contracts, including futures
contracts (except forward
commitment contracts or
contracts for the future
acquisition or delivery of
debt securities). (F)
Investments in Other The Fund may invest in other Same.
Investment Companies investment companies, as
permitted under the 1940 Act
or the rules and regulations
thereunder. The Fund intends
to invest uninvested cash
balances in an affiliated
money market fund as
permitted by Rule 12d1-1
under the 1940 Act.
27
APPENDIX C
TRADING HISTORY AND SHARE PRICE DATA
Shares of each of the Funds are traded on the New York Stock Exchange
("NYSE") under the following symbols: Managed Dollar - "ADF" and Global High
Income - "AWF." Shares of closed-end management companies frequently trade at
discounts from their NAVs, and the Funds' shares have also traded at a discount
in recent times. The following tables set forth for each Fund's fiscal quarter
within the two most recent fiscal years and each Fund's fiscal quarter since
the beginning of the current fiscal year: (a) the per share high and low sales
prices as reported by the NYSE; (b) the NAV per share, based on the Fund's
computation as of 4:00 p.m. on the NYSE business day corresponding to the dates
on which the respective high and low prices were recorded; and (c) the discount
or premium to NAV represented by the high and low sales prices shown. The range
of NAVs and of premiums and discounts for the shares during the periods shown
may be broader than is shown in this table. On March 31, 2009, the closing
price per share was $4.88 and $8.29, the NAV per share was $6.03 and $9.58 and
the discount to NAV was (19.07)% and (13.47)%, for Managed Dollar and Global
High Income, respectively. As of June 19, 2009, the closing price per share was
$6.07 and $10.32, the NAV per share was $6.74 and $11.35 and the discount to
NAV was (9.94)% and (9.07)%, for Managed Dollar and Global High Income,
respectively. For the second quarter of 2009, as of June 19, 2009, Managed
Dollar traded at a discount from a high of (20.23)% to a low of (3.99)% and
Global High Income traded at a discount from a high of (15.47)% to a low of
(6.04)%.
(Discount) or
Managed Dollar Corresponding Premium to
FYE: September 30 Sales Price Net Asset Value Net Asset Value
----------------- ----------- --------------- ---------------
Quarter Ended High Low High Low High Low
------------- ----- ----- ----- ----- ------ ------
12/31/06 $7.88 $7.34 $8.45 $8.23 (6.75)% (10.81)%
3/31/07 $8.15 $7.83 $8.50 $8.44 (4.12)% (7.23)%
6/30/07 $8.19 $7.76 $8.52 $8.35 (3.87)% (7.07)%
9/30/07 $7.78 $6.50 $8.30 $7.99 (6.27)% (18.65)%
12/31/07 $7.33 $7.03 $8.33 $8.10 (12.00)% (13.21)%
3/31/08 $7.29 $6.83 $8.02 $7.83 (9.10)% (12.77)%
6/30/08 $7.56 $6.89 $8.05 $7.75 (6.09)% (11.10)%
9/30/08 $6.86 $5.06 $7.71 $7.23 (11.02)% (30.01)%
12/31/08 $5.40 $3.47 $6.90 $5.36 (21.74)% (35.26)%
3/31/09 $5.23 $4.08 $6.05 $5.69 (13.55)% (28.30)%
(Discount) or
Global High Income Corresponding Premium to
FYE: March 31 Sales Price Net Asset Value Net Asset Value
------------------ ------------- --------------- ---------------
Quarter Ended High Low High Low High Low
------------- ------ ------ ------ ------ ------ ------
6/30/07 $14.25 $13.23 $15.20 $14.61 (5.32)% (9.45)%
9/30/07 $13.83 $11.45 $14.67 $13.79 (5.73)% (16.97)%
12/31/07 $13.67 $12.38 $14.76 $14.43 (7.38)% (14.21)%
3/31/08 $13.41 $12.59 $13.99 $14.24 (4.15)% (11.59)%
6/30/08 $14.09 $12.78 $14.08 $13.59 (0.07)% (5.96)%
9/30/08 $12.72 $ 8.60 $13.35 $12.52 (4.72)% (31.31)%
12/31/08 $10.30 $ 5.97 $11.97 $ 9.00 (13.95)% (33.67)%
3/31/09 $ 9.32 $ 6.50 $ 9.46 $ 8.89 (1.48)% (26.88)%
28
APPENDIX D
DESCRIPTION OF PRINCIPAL RISKS OF THE FUNDS
Each Fund is subject to market risk, interest rate risk, credit risk,
leverage risk, foreign (non-U.S.) risk and diversification risk. Global High
Income is also subject to emerging market risk and currency risk because it may
invest more of its assets in emerging market and non-U.S. Dollar-denominated
fixed-income securities. Each of these risks and other potential risks are more
fully described below. Each Fund could become subject to additional risks
because the types of investments made by each Fund can change over time.
Market Risk and Net This is the risk that the value of a Fund's
Asset Value of Shares investments will fluctuate as the stock or bond
markets fluctuate and that prices overall will
decline over shorter- or longer-term periods. Shares
of common stock of closed-end investment companies,
such as the Funds, frequently trade at a discount to
their NAVs. Whether an investor will realize gains
or losses upon the sale of shares of a Fund does not
depend directly upon changes in the Fund's NAV, but
rather upon whether the market price of the shares
at the time of sale is above or below the investor's
purchase price for the shares. The market price of
the shares of each Fund is determined by such
factors as relative demand for and supply of the
shares in the market, general market and economic
conditions, changes in the Fund's NAV and other
factors beyond the control of the Fund. This market
risk is separate and distinct from the risk that
each Fund's NAV may decrease.
Interest Rate Risk Changes in interest rates will affect the value of a
Fund's investments in fixed-income securities. When
interest rates rise, the value of a Fund's
investments tends to fall and this decrease in value
may not be offset by higher interest income from new
investments. Interest rate risk is generally greater
for Funds that invest in fixed-income securities
with longer maturities or durations.
Credit Risk This is the risk that the issuer or the guarantor of
a fixed-income security, or the counterparty to a
derivatives or other contract, will be unable or
unwilling to make timely payments of interest or
principal, or to otherwise honor its obligations.
The issuer or guarantor may default, causing a loss
of the full principal amount of a security and any
accrued interest. The degree of risk for a
particular security may be reflected in its credit
rating. There is the possibility that the credit
rating of a fixed-income security may be downgraded
after purchase of the security, which may adversely
affect the value of the security. Investments in
fixed-income securities with lower ratings tend to
have a higher probability that an issuer will
default or fail to meet its payment obligations.
Leverage Risk When a Fund borrows money or otherwise leverages its
portfolio, it may be volatile because leverage tends
to exaggerate the effect of any increase or decrease
in the value of a Fund's investments. A Fund may
create leverage through the use of reverse
repurchase arrangements, forward contracts or dollar
rolls or by borrowing money.
Foreign (Non-U.S.) Risk A Fund's investments in securities of non-U.S.
issuers may experience more rapid and extreme
changes in value than investments in securities of
U.S. issuers. The securities markets of many
non-U.S. countries are relatively small, with a
limited number of companies representing a small
number of securities. Non-U.S. issuers usually are
not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting, and auditing
standards of countries differ, in some cases
significantly,
29
from U.S. standards. Nationalization, expropriation
or confiscatory taxation, currency blockage,
political changes, or diplomatic developments could
adversely affect a Fund's investments in a country
other than the U.S. To the extent a Fund invests in
a particular country or geographic region, the Fund
may have more significant risk due to market changes
or other factors affecting that country or region,
including political instability and unpredictable
economic conditions.
Emerging Market Risk Foreign investment risk may be particularly high to
the extent a Fund invests in emerging market
securities of issuers based in countries with
developing economies. These securities may present
market, credit, currency, liquidity, legal,
political and other risks different from, or greater
than, the risks of investing in developed foreign
(non-U.S.) countries.
Currency Risk This is the risk that fluctuations in the exchange
rates between the U.S. Dollar and foreign (non-U.S.)
currencies may negatively affect the value of a
Fund's investments or reduce the returns of a Fund.
Derivatives Risk The Funds may use derivatives. These investment
strategies may be riskier than other investment
strategies and may result in greater volatility for
a Fund, particularly during periods of market
declines.
Liquidity Risk Liquidity risk exists when particular investments
are difficult to purchase or sell, possibly
preventing a Fund from selling out of these illiquid
securities at an advantageous time or price.
Derivatives and securities involving substantial
market and credit risk tend to involve greater
liquidity risk.
Non-Diversification Risk A Fund may have more risk if it is "non-diversified"
meaning that it can invest more of its assets in a
smaller number of companies than many other funds.
Management Risk Each Fund is subject to management risk because it
is an actively managed investment portfolio. The
Adviser will apply its investment techniques and
risk analyses in making investment decisions for
each Fund, but there can be no guarantee that its
decisions will produce the desired results.
30
APPENDIX E
OTHER INFORMATION
The following information provides only a summary of the key features of the
organizational structure, governing documents, and stockholder services of the
Funds.
Each Fund is organized as a Maryland corporation. The Bylaw provisions that
govern each of the Funds are the same. Unless noted below, there are no
significant differences between the Funds in terms of their respective
corporate organizational structures.
The procedures available to a Fund's stockholders for calling stockholders'
meetings and for the removal of directors are the same. Under the Funds'
charters, a director may be removed only for cause at a meeting duly called and
at which a quorum is present by the affirmative vote of the holders of 75% of
all the votes entitled to be cast for the election of directors.
Stockholder-requested special meetings of stockholders for any purpose may be
called by a Fund's Secretary only upon the written request of holders of shares
entitled to cast not less than a majority of the votes entitled to be cast at a
meeting.
Except as otherwise required by law, the presence in person or by proxy of
the holders of a majority of the shares entitled to be cast constitutes a
quorum at any meeting of stockholders of a Fund. Under Maryland law, a Maryland
corporation generally cannot dissolve, amend its charter, merge, sell all or
substantially all of its assets, engage in a share exchange or engage in
similar transactions outside the ordinary course of business, unless approved
by the affirmative vote of stockholders entitled to cast at least two-thirds of
the votes entitled to be cast on the matter. However, a Maryland corporation
may provide in its charter for approval of these matters by a lesser
percentage, but not less than a majority of all of the votes entitled to be
cast on the matter. Subject to various exceptions, each Fund's charter
generally provides for approval of charter amendments and extraordinary
transactions by the stockholders entitled to cast at least a majority of the
votes entitled to be cast on the matter. The Bylaws of each Fund provides that
each director shall be elected by the affirmative vote of the holders of a
majority of the votes entitled to be cast thereon. For other matters not
requiring a vote under the Investment Company Act of 1940 (the "1940 Act"),
when a quorum is present, the affirmative vote of a majority of the votes cast
shall decide any question brought before such meeting unless a statute or
charter requires a higher voting margin.
Shares of Common Stock of the Funds
There are no subscription/preemptive or exchange rights under any of the
charters. Each share of a Fund has equal voting, dividend, distribution and
liquidation rights. Stockholders are entitled to one vote per share. All voting
rights for the election of directors are non-cumulative, which means that the
holders of more than 50% of the shares of common stock of a Fund can elect 100%
of the directors then nominated for election if they choose to do so and, in
such event, the holders of the remaining shares of common stock will not be
able to elect any directors. Under the rules of the New York Stock Exchange
applicable to listed companies, each Fund is required to hold an annual meeting
of stockholders each year.
Distributions
The Funds intend to distribute all of their net investment income. Dividends
from such net investment income will be declared and paid monthly to
stockholders. All net realized long- or short-term capital gains, if any, will
be distributed at least annually. To permit a Fund to maintain a more stable
monthly distribution, a Fund may, from time to time, pay out less than the
entire amount of net investment income and net realized short-term capital
gains earned in any particular period. Any such amount retained by a Fund would
be available to stabilize future distributions. As a result, distributions paid
by a Fund for any particular period may be more or less than the amount of net
investment income and net realized short-term capital gains actually earned by
the Fund during such period. There are no assurances that a Fund will be able
to maintain a constant level of monthly distributions to stockholders.
31
Distributions are taxable to stockholders as ordinary income or capital
gains. Stockholders may be proportionately liable for taxes on income and gains
of a Fund but stockholders not subject to tax on their income will not be
required to pay tax on amounts distributed to them. A Fund distributes written
notice to stockholders regarding the tax status of all distributions made
during each calendar year.
Dividend Reinvestment Plans
Stockholders of a Fund whose shares are registered in their own names may
elect to be participants in a Fund's Dividend Reinvestment and Cash Purchase
Plan (the "DRIP"), under which dividends and capital gain distributions to
stockholders will be paid or reinvested in additional shares of the Fund (the
"Dividend Shares"). Assuming the Acquisition is approved, the DRIP stockholders
of Managed Dollar will automatically be enrolled in the DRIP for Global High
Income. Computershare Trust Company N.A. acts as the agent for participants
under the Global High Income DRIP. Stockholders whose shares are held in the
name of a broker or nominee will automatically have distributions reinvested by
the broker or nominee in additional shares under the DRIP, unless the automatic
reinvestment service is not provided by the particular broker or nominee or the
stockholder elects to receive distributions in cash.
Stockholders who do not elect to participate in the DRIP will receive all
distributions in cash paid by check mailed directly to the stockholder of
record (or, if the shares are held in street or other nominee name, then to the
nominee) by Computershare Trust Company N.A. as dividend paying agent.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
A stockholder who has elected to participate in the DRIP may withdraw from
the DRIP at any time. There will be no penalty for withdrawal from the DRIP and
stockholders who have previously withdrawn from the DRIP may rejoin it at any
time. Changes in elections must be in writing and should include the
stockholder's name and address as they appear on the share certificate. An
election to withdraw from the DRIP will, until such election is changed, be
deemed to be an election by a stockholder to take all subsequent distributions
in cash. An election will be effective only for a distribution declared and
having a record dated of at least 10 days after the date on which the election
is received. A stockholder whose shares are held in the name of a broker or
nominee should contact such broker or nominee concerning changes in that
stockholder's election.
All correspondence concerning the DRIP for Global High Income should be
directed to Computershare Trust Company N.A., P.O. Box 43010, Providence, RI
02940-3010.
Repurchase of Shares
Each Fund's Board of Directors ("Directors") has determined that it would be
in the interest of stockholders of a Fund to attempt to reduce or eliminate any
market value discount should it exist. To that end, Managed Dollar has a policy
to conduct annual tender offer in the second quarter of each year if its shares
trade at a discount from net asset value ("NAV") of 3% or more determined on
the basis of the discount or premium as of the last trading day in each week
during a designated 12-week period. Global High Income has no mandatory tender
offer provision. However, Global High Income has a policy that the Fund would
take such actions and the Directors would only consider such actions if the
Fund's shares had been trading at a discount to NAV in excess of 5% as of the
last day of each week in the 12 weeks preceding a Board meeting. The Directors
of Global High Income presently intend each quarter to consider the making of a
tender offer. The Directors may at any time, however, decide that the Fund
should not make a tender offer. The Directors of Global High Income have not
determined that it is in the best interest of the Fund to repurchase shares or
conduct a tender offer even though the Fund's shares at times have traded at a
discount to NAV in excess of 5%.
Any tender offer made by a Fund will be at a price equal to the NAV of the
shares on a date subsequent to receipt by the Fund of all tenders. Each offer
will be made and stockholders notified in accordance with the requirements of
the Securities and Exchange Act of 1934 and the 1940 Act, either by publication
or mailing or both. Each offering document will contain such information as is
prescribed by such laws and the rules and regulations
32
promulgated thereunder. When a tender offer is authorized to be made by the
Directors, a stockholder wishing to accept the offer will be required to tender
all (and not less than all) of the shares owned by such stockholder (or
attributed to the stockholder for federal income tax purposes under Section 318
of the United States Internal Revenue Code of 1986, as amended). A Fund will
purchase all shares tendered in accordance with the terms of the offer unless
it determines to accept none of them (based upon one of the conditions set
forth above). When the number of shares tendered exceeds the number of shares
offered for purchase, a Fund will purchase shares from tendering stockholders
on a pro rata basis, unless the Fund determines not to purchase any shares.
Each person tendering shares will be required to submit a check in the amount
of $25.00, payable to the Fund, which will be used to help defray the costs
associated with effecting the tender offer. This $25.00 fee will be imposed
upon each tendering stockholder any of whose tendered shares are purchased in
the offer, and will be imposed regardless of the number of shares purchased. A
Fund expects the cost to the Fund of effecting a tender offer will exceed the
aggregate of all such fees received from those who tender offer their shares.
Costs associated with the tender offer will be charged against capital. During
the period of the tender offer, a Fund's stockholders will be able to obtain
the Fund's current NAV by use of a toll-free telephone number.
Certain Anti-Takeover Provisions of the Funds' Charters and Bylaws
The Funds presently have provisions in their Charters and Bylaws (together,
the "Charter Documents") that are intended to limit (i) the ability of other
entities or persons to acquire control of a Fund, (ii) a Fund's freedom to
engage in certain transactions, or (iii) the ability of a Fund's directors or
stockholders to amend the Charter Documents or effect changes in the Fund's
management. These provisions of the Charter Documents may be regarded as
"anti-takeover" provisions.
The Directors of each Fund is divided into three classes, each having a term
of three years. Each class of Directors serves for a three year term.
Accordingly, only those directors in one class may be changed in any one year,
and it would require two years to change a majority of the Directors (although
under Maryland law procedures are available for the removal of directors even
if they are not then standing for reelections and under the SEC regulations
procedures are available for including stockholder proposals in management's
annual proxy statement). Such a system of electing directors may have the
effect of maintaining the continuity of management and, thus, make it more
difficult for a Fund's stockholders to change the majority of directors.
Generally, under a Fund's Charter, the affirmative vote of the holders of a
majority of the votes entitled to be cast is required for the consolidation of
the Fund with another corporation, a merger of the Fund with or into another
corporation (except for certain mergers in which the Fund is the successor), a
statutory share exchange in which the Fund is not the successor, a sale or
transfer of all or substantially all of the Fund's assets, the dissolution of
the Fund and certain amendments to the Fund's Charter. In addition, the
affirmative vote of 75% (which is higher than that required under Maryland law
or the 1940 Act) of the outstanding shares of common stock of a Fund is
required generally to authorize any of the following transactions or to amend
the provisions of the Charter relating to such transactions:
(i)merger, consolidation or statutory share exchange of the Fund with or
into any corporation, person or other entity;
(ii)issuance of any securities of the Fund to any corporation, person or
other entity for cash;
(iii)sale, lease or exchange of all or any substantial part of the assets
of the Fund to any corporation, person or other entity (except assets
having an aggregate fair market value of less than $1,000,000); or
(iv)sale, lease or exchange to the Fund, in exchange for securities of
the Fund, of any assets of any corporation, person or other entity
(except assets having an aggregate fair market value of less than
$1,000,000);
if such corporation, person or entity is directly, or indirectly through
affiliates, the beneficial owner of more than 5% of the outstanding shares of
the Fund (a "principal stockholder"). However, such vote would not be required
where, under certain conditions, the Directors approves the transaction,
although in certain cases involving merger, consolidation or statutory share
exchange or sale of all or substantially all of a Fund's assets the affirmative
vote of a majority of the outstanding shares of the Fund would nevertheless be
required.
33
The provisions of the Charter Documents described above and a Fund's right
to repurchase or make a tender offer for its common stock could have the effect
of depriving the owners of shares of opportunities to sell their shares at a
premium over prevailing market prices, by discouraging a third party from
seeking to obtain control of the Fund in a tender offer or similar transaction.
The overall effect of these provisions is to render more difficult the
accomplishment of a merger or the assumption of control by a principal
stockholder. However, they provide the advantage of potentially requiring
persons seeking control of the Fund to negotiate with its management regarding
the price to be paid and facilitating the continuity of the Fund's management
and investment objective and policies. The Directors of each Fund has
considered the foregoing anti-takeover provisions and concluded that they are
in the best interests of the Fund and its stockholders.
Indemnification and Liability of Directors and Officers
The charters of each of the Funds generally provides for the indemnification
of officers and directors, as applicable, to the full extent permitted by law.
This indemnification does not protect any such person against any liability to
a Fund or any stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the satisfaction of such person's
office.
Maryland law permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (i) actual receipt of an improper benefit or profit in money,
property or services or (ii) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. Each Fund's charter
contains such a provision which eliminates directors' and officers' liability
to the maximum extent permitted by Maryland law. This indemnification does not
protect any such person against any liability to a Fund or any stockholder
thereof to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the satisfaction of such person's office.
34
APPENDIX F
FORM OF AGREEMENT AND PLAN OF ACQUISITION AND LIQUIDATION
BETWEEN ACM MANAGED DOLLAR INCOME FUND, INC. AND ALLIANCEBERNSTEIN GLOBAL HIGH
INCOME FUND, INC.
This Agreement and Plan of Acquisition and Liquidation (the "Plan") is made
as of this 8th day of May, 2009, by and between AllianceBernstein Global High
Income Fund, Inc. (the "Acquiring Fund"), a Maryland corporation, ACM Managed
Dollar Income Fund, Inc. (the "Acquired Fund"), a Maryland corporation, and
AllianceBersntein L.P. (the "Adviser").
WHEREAS, the Acquiring Fund and the Acquired Fund are closed-end management
investment companies registered with the Securities and Exchange Commission
(the "SEC") under the Investment Company Act of 1940, as amended (the "1940
Act") and the Securities Exchange Act of 1934, as amended (the "1934 Act") and
shares of common stock of each Fund are currently purchased and sold on the New
York Stock Exchange (the "NYSE");
WHEREAS, the parties desire that the Acquiring Fund acquire the assets and
assume the liabilities of the Acquired Fund in exchange for shares of equal net
asset value of the Acquiring Fund ("Acquisition Shares") and the distribution
of such shares of the Acquiring Fund to the stockholders of the Acquired Fund
(the "Acquisition") and that the Acquired Fund thereafter dissolve; and
WHEREAS, the parties intend that the Acquisition qualify as a
"reorganization" within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and any successor
provisions, and that with respect to the Acquisition, the Acquiring Fund and
the Acquired Fund will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code;
Now, therefore, the Acquiring Fund and the Acquired Fund agree as follows:
1. Definitions.
In addition to the terms elsewhere defined herein, each of the following
terms shall have the meaning indicated for that term as follows:
1933 Act Securities Act of 1933, as amended.
Assets All assets of any kind and all interests, rights,
privileges and powers of or attributable to the
Acquired Fund or its shares, as appropriate, whether
or not determinable at the appropriate Effective
Time and wherever located, including, without
limitation, all cash, cash equivalents, securities,
claims (whether absolute or contingent, known or
unknown, accrued or unaccrued or conditional or
unmatured), contract rights and receivables
(including dividend and interest receivables) owned
by the Acquired Fund or attributable to its shares
and any deferred or prepaid expense, other than
unamortized organizational expenses, shown as an
asset on the Acquired Fund's books.
Closing Date Such date as the parties may agree.
Effective Time 5:00 p.m., Eastern time, on the Closing Date, or
such other time as the parties may agree to in
writing.
Financial Statement The audited financial statements of the relevant
Fund for its most recently completed fiscal year
and, if applicable, the unaudited financial
statements of that Fund for its most recently
completed semi-annual period.
35
Fund The Acquiring Fund and/or the Acquired Fund, as the
case may be.
Liabilities All liabilities, expenses and obligations of any
kind whatsoever of the Acquired Fund, whether known
or unknown, accrued or unaccrued, absolute or
contingent or conditional or unmatured.
N-14 Registration
Statement The Registration Statement of the Acquiring Fund on
Form N-14 under the 1940 Act that will register the
Acquisition Shares to be issued in the Acquisition.
Valuation Time The close of regular session trading on the NYSE on
the Closing Date, when for purposes of the Plan, the
Acquiring Fund determines its net asset value per
Acquisition Share and the Acquired Fund determines
the net value of the Assets.
NAV A Fund's net asset value is calculated by valuing
and totaling assets and then subtracting liabilities
and then dividing the balance by the number of
shares that are outstanding.
2. Regulatory Filings.
The Acquiring Fund shall promptly prepare and file the N-14 Registration
Statement with the SEC, and the Acquiring Fund and the Acquired Fund also shall
make any other required or appropriate filings with respect to the actions
contemplated hereby.
3. Stockholder Action.
As soon as practicable after the effective date of the N-14 Registration
Statement, the Acquired Fund shall hold a stockholders meeting to consider and
approve the Acquisition and this Plan and such other matters as the Board of
Directors may determine. Such approval by the stockholders of the Acquired Fund
shall, to the extent necessary to permit the consummation of the transactions
contemplated herein without violating any investment objective, policy or
restriction of the Acquired Fund, be deemed to constitute approval by the
stockholders of a temporary amendment of any investment objective, policy or
restriction that would otherwise be inconsistent with or violated upon the
consummation of such transactions solely for the purpose of consummating such
transactions.
4. Transfer of the Acquired Fund's Assets.
The Acquiring Fund and the Acquired Fund shall take the following steps with
respect to the Acquisition, as applicable:
(a)On or prior to the Closing Date, the Acquired Fund shall pay or provide
for the payment of all of the Liabilities, expenses, costs and charges
of or attributable to the Acquired Fund that are known to the Acquired
Fund and that are due and payable prior to or as of the Closing Date.
(b)Prior to the Effective Time, except to the extent prohibited by Rule
19b-1 under the 1940 Act, the Acquired Fund will declare to Acquired
Fund stockholders of record a dividend or dividends which, together with
all previous such dividends, shall have the effect of distributing
(a) all the excess of (i) Acquired Fund's investment income excludable
from gross income under Section 103(a) of the Code over (ii) Acquired
Fund's deductions disallowed under Section 265 and 171(a)(2) of the
Code, (b) all of Acquired Fund's investment company taxable income (as
defined in Code Section 852), (computed in each case without regard to
any deduction for dividends paid), and (c) all of Acquired Fund's net
realized capital gain (as defined in Code Section 1222), if any (after
reduction for any capital loss carryover), in each case for both the
taxable year ended on September 30, 2008, and for the short taxable year
beginning on October 1, 2008, and ending on the Closing Date. Such
dividends will be declared and paid to ensure continued qualification of
the Acquired Fund as a "regulated investment company" for tax purposes
and to eliminate fund-level tax.
36
(c)At the Effective Time, pursuant to Articles of Transfer accepted for
record by the State Department of Assessments and Taxation of Maryland
(the "SDAT"), the Acquired Fund shall assign, transfer, deliver and
convey the Assets to the Acquiring Fund, subject to the Liabilities. The
Acquiring Fund shall then accept the Assets and assume the Liabilities
such that at and after the Effective Time (i) the Assets at or after the
Effective Time shall become and be assets of the Acquiring Fund, and
(ii) the Liabilities at the Effective Time shall attach to the Acquiring
Fund, and shall be enforceable against the Acquiring Fund to the same
extent as if initially incurred by the Acquiring Fund.
(d)Within a reasonable time prior to the Closing Date, the Acquired Fund
shall provide, if requested, a list of the Assets to the Acquiring Fund.
The Acquired Fund may sell any asset on such list prior to the Effective
Time. After the Acquired Fund provides such list, the Acquired Fund will
not acquire any additional securities or permit to exist any
encumbrances, rights, restrictions or claims not reflected on such list,
without the approval of the Acquiring Fund. Within a reasonable time
after receipt of the list and prior to the Closing Date, the Acquiring
Fund will advise the Acquired Fund in writing of any investments shown
on the list that the Acquiring Fund has determined to be inconsistent
with its investment objective, policies and restrictions. The Acquired
Fund will dispose of any such securities prior to the Closing Date to
the extent practicable and consistent with applicable legal
requirements, including the Acquired Fund's investment objectives,
policies and restrictions. In addition, if the Acquiring Fund determines
that, as a result of the Acquisition, the Acquiring Fund would own an
aggregate amount of an investment that would exceed a percentage
limitation applicable to the Acquiring Fund, the Acquiring Fund will
advise the Acquired Fund in writing of any such limitation and the
Acquired Fund shall dispose of a sufficient amount of such investment as
may be necessary to avoid the limitation as of the Effective Time, to
the extent practicable and consistent with applicable legal
requirements, including the Acquired Fund's investment objectives,
policies and restrictions.
(e)The Acquired Fund shall assign, transfer, deliver and convey the Assets
to the Acquiring Fund at the Effective Time on the following basis:
(1)The value of the Assets less the Liabilities of the Acquired Fund,
determined as of the Valuation Time, shall be divided by the then NAV
of one Acquisition Share, and, in exchange for the transfer of the
Assets, the Acquiring Fund shall simultaneously issue and deliver to
the Acquired Fund the number of full Acquisition Shares so determined
that are allocable to all shares held by or for those stockholders of
the Acquired Fund on a stockholder by stockholder basis plus
fractional Acquisition Shares, rounded to the second decimal place or
such other decimal place as the parties may agree to in writing,
allocable to those stockholders of the Acquired Fund that at the
Effective Time participate in the Acquired Fund's Dividend
Reinvestment Plan ("DRIP Stockholders"), regardless of whether the
shares of the Acquired Fund with respect to which such fractional
Acquisition Shares are to be issued and delivered are held by or for
the DRIP Stockholders directly or in the Acquired Fund's Dividend
Reinvestment Plan. The Acquiring Fund shall at the same time deliver
to the Acquired Fund cash in lieu of any fractional Acquisition
Shares allocable to those stockholders of the Acquired Fund that are
not DRIP Stockholders;
(2)The NAV of the Acquisition Shares to be delivered to the Acquired
Fund shall be determined as of the Valuation Time in accordance with
the Acquiring Fund's then applicable valuation procedures, and the
net value of the Assets to be conveyed to the Acquiring Fund shall be
determined as of the Valuation Time in accordance with the then
applicable valuation procedures of the Acquired Fund; and
(3)The portfolio securities of the Acquired Fund shall be made available
by the Acquired Fund to The Bank of New York, as custodian for the
Acquiring Fund (the "Custodian"), for examination no later than five
business days preceding the Valuation Time. On the Closing Date, such
portfolio securities and all the Acquired Fund's cash shall be
delivered by the Acquired Fund to the Custodian for the account of
the Acquiring Fund, such portfolio securities to be duly endorsed in
proper form for transfer in such manner and condition as to
constitute good delivery thereof in
37
accordance with the custom of brokers or, in the case of portfolio
securities held in the U.S. Treasury Department's book-entry system
or by The Depository Trust Company, Participants Trust Company or
other third party depositories, by transfer to the account of the
Custodian in accordance with Rule 17f-4, Rule 17f-5 or Rule 17f-7, as
the case may be, under the 1940 Act and accompanied by all necessary
federal and state stock transfer stamps or a check for the
appropriate purchase price thereof. The cash delivered shall be in
the form of currency or certified or official bank checks, payable to
the order of the Custodian, or shall be wired to an account pursuant
to instructions provided by the Acquiring Fund.
(f)Promptly after the Closing Date, the Acquired Fund will deliver to the
Acquiring Fund a Statement of Assets and Liabilities of the Acquired
Fund as of the Closing Date.
5. Liquidation and Dissolution of the Acquired Fund, Registration of
Acquisition Shares and Access to Records.
The Acquired Fund and the Acquiring Fund also shall take the following
steps, as applicable:
(a)At or as soon as reasonably practical after the Effective Time, the
Acquired Fund shall liquidate by transferring pro rata to its
stockholders of record, the Acquisition Shares and cash it receives
pursuant to Section 4(e)(1) of this Plan. The Acquiring Fund shall
establish accounts on its share records and note on such accounts the
names of the former Acquired Fund stockholders and the amounts of
Acquisition Shares that the former Acquired Fund stockholders are due
based on their respective holdings of shares of the Acquired Fund as of
the close of business on the Closing Date. Fractional Acquisition Shares
shall be carried to the second decimal place. The Acquiring Fund shall
not issue certificates representing Acquisition Shares in connection
with such exchange. All issued and outstanding shares in connection with
such exchange will be simultaneously cancelled on the books of the
Acquired Fund. Ownership of Acquired Fund's shares will be shown on the
books of the Acquiring Fund's transfer agent.
Following distribution by the Acquired Fund to its stockholders of all
the Acquisition Shares delivered to the Acquired Fund, the Acquired Fund
shall wind up its affairs and shall take all steps as are necessary and
proper to dissolve as soon as is reasonably possible after the Effective
Time, including filing of Articles of Dissolution with SDAT.
(b)At and after the Closing Date, the Acquired Fund shall provide the
Acquiring Fund and its transfer agent with immediate access to: (i) all
records containing the names, addresses and taxpayer identification
numbers of all of the Acquired Fund's stockholders and the number and
percentage ownership of the outstanding shares of the Acquired Fund
owned by stockholders as of the Effective Time, and (ii) all original
documentation (including all applicable Internal Revenue Service forms,
certificates, certifications and correspondence) relating to the
Acquired Fund stockholders' taxpayer identification numbers and their
liability for or exemption from back-up withholding. The Acquired Fund
shall preserve and maintain, or shall direct its service providers to
preserve and maintain, records with respect to the Acquired Fund as
required by Section 31 of, and Rules 31a-1 and 31a-2 under, the 1940 Act.
6. Certain Representations and Warranties of the Acquired Fund.
The Acquired Fund represents and warrants to the Acquiring Fund as follows:
(a)The Acquired Fund is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Maryland. The
Acquired Fund is registered with the SEC as a closed-end management
investment company under the 1940 Act and is duly registered with the
SEC under the 1934 Act, and such registrations will be in full force and
effect as of the Effective Time.
(b)The Acquired Fund has the power and all necessary federal, state and
local qualifications and authorizations to own all of the Assets, to
carry on its business, to enter into this Plan and to consummate the
transactions contemplated herein.
38
(c)The Board of Directors of the Acquired Fund has duly authorized the
execution and delivery of this Plan and the transactions contemplated
herein. Duly authorized officers of the Acquired Fund have executed and
delivered the Plan. The Plan represents a valid and binding contract,
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, arrangement, moratorium, and
other similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The execution and
delivery of this Plan does not, and, subject to the approval of
stockholders referred to in Section 3 hereof, the consummation of the
transactions contemplated by this Plan will not, violate the Acquired
Fund's Charter (the "Acquired Fund Charter"), its Bylaws (the "Acquired
Fund Bylaws") or any material agreement to which the Acquired Fund is
subject. Except for the approval of its stockholders, the Acquired Fund
does not need to take any other action to authorize its officers to
effectuate this Plan and the transactions contemplated herein.
(d)The Acquired Fund has qualified as a regulated investment company under
Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, in respect
of each taxable year since the commencement of its operations and
intends to continue to qualify as a regulated investment company for its
taxable year ending upon its liquidation.
(e)The information pertaining to the Acquired Fund included within the N-14
Registration Statement when filed with the SEC, when Part A of the N-14
Registration Statement is distributed to stockholders, at the time of
the stockholders meeting of the Acquired Fund for approval of the
Acquisition and at the Effective Time shall (i) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act
and the 1940 Act, and the rules and regulations thereunder and
applicable state securities laws, and (ii) not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein
not misleading.
(f)The Acquired Fund has duly authorized and validly issued all of its
issued and outstanding shares of common stock, and all such shares are
fully paid and non-assessable and were offered for sale and sold in
conformity with the registration requirements of all applicable federal
and state securities laws. There are no outstanding options, warrants or
other rights to subscribe for or purchase any of the shares of the
Acquired Fund, nor are there any securities convertible into shares of
the Acquired Fund.
(g)The Acquired Fund shall operate its business in the ordinary course
between the date hereof and the Effective Time. Such ordinary course of
business will include the declaration and payment of customary dividends
and distributions and any other dividends and distributions referred to
in Section 4(b) hereof.
(h)At the Effective Time, the Acquired Fund will have good and marketable
title to the Assets and full right, power and authority to assign,
transfer, deliver and convey the Assets.
(i)The Financial Statements of the Acquired Fund, a copy of which has been
previously delivered to the Acquiring Fund, fairly present the financial
position of the Acquired Fund as of the Acquired Fund's most recent
fiscal year-end and the results of the Acquired Fund's operations and
changes in the Acquired Fund's net assets for the periods indicated.
(j)To the knowledge of the Acquired Fund, the Acquired Fund has no
liabilities, whether or not determined or determinable, other than the
Liabilities disclosed or provided for in its Financial Statements or
Liabilities incurred in the ordinary course of business subsequent to
the date of the most recent Financial Statement referencing Liabilities.
(k)To the knowledge of the Acquired Fund, except as has been disclosed in
writing to the Acquiring Fund, no claims, actions, suits, investigations
or proceedings of any type are pending or threatened against the
Acquired Fund or any of its properties or assets or any person whom the
Acquired Fund may be obligated to indemnify in connection with such
litigation, proceeding or investigation. Subject to the foregoing, there
are no facts that the Acquired Fund has reason to believe are likely to
form the basis for the institution of any such claim, action, suit,
investigation or proceeding against the Acquired Fund. The Acquired Fund
is not a party to nor subject to the provisions of any order, decree or
judgment of
39
any court or governmental body that adversely affects, or is reasonably
likely to adversely affect, its financial condition, results of
operations, or the Assets or its ability to consummate the transactions
contemplated by the Plan.
(l)Except for agreements entered into or granted in the ordinary course of
its business, in each case under which no material default exists, and
this Plan, the Acquired Fund is not a party to or subject to any
material contract or other commitments, that if terminated, may result
in material liability to the Acquired Fund or under which (whether or
not terminated) any material payment for periods subsequent to the
Closing Date will be due from the Acquired Fund.
(m)The Acquired Fund has filed its federal income tax returns, copies of
which have been previously made available to the Acquiring Fund, for all
taxable years for which such returns are due and has paid all taxes
payable pursuant to such returns. All of the Acquired Fund's tax
liabilities will have been adequately provided for on its books. No such
return is currently under audit and no unpaid assessment has been
asserted with respect to such returns. To the best of the Acquired
Fund's knowledge, it will not have any tax deficiency or liability
asserted against it or question with respect thereto raised, and it will
not be under audit by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already paid. The
Acquired Fund will timely file its federal income tax return for each
subsequent taxable year including its current taxable year.
(n)For federal income tax purposes, the Acquired Fund qualifies as a
"regulated investment company," and the provisions of Sections 851
through 855 of the Code apply to the Acquired Fund for the remainder of
its current taxable year beginning October 1, 2008, and will continue to
apply through the Closing Date.
(o)Since the date of the Financial Statements of the Acquired Fund, there
has been no material adverse change in its financial condition, results
of operations, business, or Assets. For this purpose, negative
investment performance shall not be considered a material adverse change.
(p)The Acquired Fund's investment operations from inception to the date
hereof have been in compliance in all material respects with the
investment policies and investment restrictions set forth in its
prospectus or prospectuses and statement or statements of additional
information as in effect from time to time, except as previously
disclosed in writing to the Acquiring Fund.
(q)The Acquisition Shares to be issued to the Acquired Fund pursuant to
paragraph 4(e)(1) will not be acquired for the purpose of making any
distribution thereof other than to the Acquired Fund Stockholders as
provided in paragraph 4(e)(1).
(r)The Acquired Fund, or its agents, (i) holds a valid Form W-8Ben,
Certificate of Foreign Status of Beneficial Owner for United States
Withholding (or other appropriate series of Form W-8, as the case may
be) or Form W-9, Request for Taxpayer Identification Number and
Certification, for each Acquired Fund stockholder of record, which Form
W-8 or Form W-9 can be associated with reportable payments made by the
Acquired Fund to such stockholder, and/or (ii) has otherwise timely
instituted the appropriate backup withholding procedures with respect to
such stockholder as provided by Section 3406 of the Code and the
regulations thereunder.
7. Certain Representations and Warranties of Acquiring Fund.
The Acquiring Fund represents and warrants to the Acquired Fund as follows:
(a)The Acquiring Fund is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Maryland. The
Acquiring Fund is registered with the SEC as a closed-end management
investment company under the 1940 Act and is duly registered with the
SEC under the 1934 Act, and such registrations will be in full force and
effect as of the Effective Time.
(b)The Acquiring Fund shall operate its business in the ordinary course
between the date hereof and the Effective Time. Such ordinary course of
business will include the declaration and payment of customary dividends
and distributions and any other dividends and distributions referred to
in Section 4(b) hereof.
40
(c)The Acquiring Fund has the power and all necessary federal, state and
local qualifications and authorizations to own all of its assets, to
carry on its business, to enter into this Plan and to consummate the
transactions contemplated herein.
(d)The Board of Directors of the Acquiring Fund has duly authorized
execution and delivery of this Plan and the transactions contemplated
herein. Duly authorized officers of the Acquiring Fund have executed and
delivered the Plan. The Plan represents a valid and binding contract,
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, arrangement, moratorium and
other similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The execution and
delivery of this Plan does not, and the consummation of the transactions
contemplated by this Plan will not violate the Charter of the Acquiring
Fund (the "Acquiring Fund Charter"), its Bylaws (the "Acquiring Fund
Bylaws") or any material agreement to which the Acquiring Fund is
subject. Except for the approval of its Board, the Acquiring Fund does
not need to take any other action to authorize its officers to
effectuate the Plan and the transactions contemplated herein.
(e)The Acquiring Fund has qualified as a regulated investment company under
Part I of Subchapter M of Subtitle A, Chapter 1, of the Code, in respect
of each taxable year since the commencement of its operations and
qualifies and intends to continue to qualify as a regulated investment
company for its current taxable year.
(f)The N-14 Registration Statement, when filed with the SEC, when Part A of
the N-14 Registration Statement is distributed to stockholders, at the
time of the stockholder meeting of the Acquired Fund for approval of the
Acquisition and at the Effective Time, insofar as it relates to the
Acquiring Fund shall (i) comply in all material respects with the
applicable provisions of the 1933 Act, the 1934 Act and the 1940 Act,
and the rules and regulations thereunder and applicable state securities
laws and (ii) not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(g)The Acquiring Fund has duly authorized and validly issued all issued and
outstanding Acquisition Shares, and all such shares are fully paid and
non-assessable and were offered for sale and sold in conformity with the
registration requirements of all applicable federal and state securities
laws. The Acquiring Fund has duly authorized the Acquisition Shares
referred to in Section 4(e) hereof to be issued and delivered to the
Acquired Fund as of the Effective Time. When issued and delivered, such
Acquisition Shares shall be validly issued, fully paid and
non-assessable, and no stockholder of the Acquiring Fund shall have any
preemptive right of subscription or purchase in respect of any such
share. There are no outstanding options, warrants or other rights to
subscribe for or purchase any Acquisition Shares, nor are there any
securities convertible into Acquisition Shares.
(h)To the knowledge of the Acquiring Fund, except as has been disclosed in
writing to the Acquiring Fund, no claims, actions, suits, investigations
or proceedings of any type are pending or threatened against the
Acquiring Fund or any of its properties or assets or any person whom the
Acquiring Fund may be obligated to indemnify in connection with such
litigation, proceeding or investigation. Subject to the foregoing, there
are no facts that the Acquiring Fund currently has reason to believe are
likely to form the basis for the institution of any such claim, action,
suit, investigation or proceeding against the Acquiring Fund. The
Acquiring Fund is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body that
adversely affects, or is reasonably likely to adversely affect its
financial condition, results of operations, its assets or its ability to
consummate the transactions contemplated by this Plan.
(i)Except for agreements entered into or granted in the ordinary course of
its business, in each case under which no material default exists, the
Acquiring Fund is not a party to or subject to any material contract,
debt instrument, employee benefit plan, lease, franchise, license or
permit of any kind or nature whatsoever.
41
(j)The Acquiring Fund has filed its federal income tax returns, copies of
which have been previously made available to the Acquired Fund, for all
taxable years for which such returns are due and has paid all taxes
payable pursuant to such returns. All of the Acquiring Fund's tax
liabilities will have been adequately provided for on its books. No such
return is currently under audit and no unpaid assessment has been
asserted with respect to such returns. To the best of the Acquiring
Fund's knowledge, it will not have any tax deficiency or liability
asserted against it or question with respect thereto raised, and it will
not be under audit by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already paid. The
Acquiring Fund will timely file its federal income tax return for each
subsequent taxable year including its current taxable year.
(k)For federal income tax purposes, the Acquiring Fund qualifies as a
"regulated investment company," and the provisions of Sections 851
through 855 of the Code apply to the Acquiring Fund for the remainder of
its current taxable year beginning April 1, 2009, and will continue to
apply through the Closing Date.
(l)The Financial Statements of the Acquiring Fund, a copy of which has been
previously delivered to the Acquired Fund, fairly present the financial
position of the Acquiring Fund's most recent fiscal year-end and the
results of the Acquiring Fund's operations and changes in the Acquiring
Fund's net assets for the period indicated.
(m)Since the date of the Financial Statements of the Acquiring Fund, there
has been no material adverse change in its financial condition, results
of operations, business or assets. Negative investment performance shall
not be considered a material adverse change.
(n)The Acquiring Fund's investment operations from inception to the date
hereof have been in compliance in all material respects with the
investment policies and investment restrictions set forth in its
prospectus or prospectuses and statement or statements of additional
information as in effect from time to time, except as previously
disclosed in writing to the Acquired Fund.
(o)The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and
such other state securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
8. Conditions to the Obligations of the Acquiring Fund and the Acquired Fund.
The obligations of the Acquiring Fund and the Acquired Fund with respect to
the Acquisition shall be subject to the following conditions precedent:
(a)The stockholders of the Acquired Fund shall have approved the
Acquisition in the manner required by the Acquired Fund Charter, the
Acquired Fund Bylaws and applicable law. If stockholders of the Acquired
Fund fail to approve the Acquisition as required, that failure shall
release the Funds of their obligations under this Plan.
(b)The Acquiring Fund and the Acquired Fund shall have delivered to the
other party a certificate dated as of the Closing Date and executed in
its name by its Secretary or an Assistant Secretary, in a form
reasonably satisfactory to the receiving party, stating that the
representations and warranties of the Acquiring Fund or the Acquired
Fund, as applicable, in this Plan that apply to the Acquisition are true
and correct in all material respects at and as of the Valuation Time.
(c)The Acquiring Fund and the Acquired Fund shall have performed and
complied in all material respects with each of its representations and
warranties required by this Plan to be performed or complied with by it
prior to or at the Valuation Time and the Effective Time.
(d)There has been no material adverse change in the financial condition,
results of operations, business, properties or assets of the Acquiring
Fund or the Acquired Fund since the date of the most recent Financial
Statements. Negative investment performance shall not be considered a
material adverse change.
42
(e)The Acquiring Fund and the Acquired Fund shall have received an opinion
of Seward & Kissel LLP reasonably satisfactory to each of them,
substantially to the effect that for federal income tax purposes:
(1)the Acquisition will constitute a "reorganization" within the meaning
of Section 368(a) of the Code and that the Acquiring Fund and the
Acquired Fund will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code;
(2)a stockholder of the Acquired Fund will recognize no gain or loss on
the exchange of the stockholder's shares of the Acquired Fund solely
for Acquisition Shares, except with respect to cash received in lieu
of a fractional share of the Acquiring Fund in connection with the
Acquisition;
(3)neither the Acquired Fund nor the Acquiring Fund will recognize any
gain or loss upon the transfer of all of the Assets to the Acquiring
Fund in exchange for Acquisition Shares (plus cash in lieu of
fractional shares) and the assumption by Acquiring Fund of the
Liabilities pursuant to this Plan or upon the distribution of
Acquisition Shares and cash to stockholders of the Acquired Fund in
exchange for their respective shares of the Acquired Fund;
(4)the holding period and tax basis of the Assets acquired by the
Acquiring Fund will be the same as the holding period and tax basis
that the Acquired Fund had in such Assets immediately prior to the
Acquisition;
(5)the aggregate tax basis of the Acquisition Shares received in
connection with the Acquisition by each stockholder of the Acquired
Fund (including any fractional share to which the stockholder may be
entitled) will be the same as the aggregate tax basis of the shares
of the Acquired Fund surrendered in exchange therefor, decreased by
any cash received and increased by any gain recognized on the
exchange;
(6)the holding period of the Acquisition Shares received in connection
with the Acquisition by each stockholder of the Acquired Fund
(including any fractional share to which the stockholder may be
entitled) will include the holding period of the shares of the
Acquired Fund surrendered in exchange therefor, provided that such
Acquired Fund shares constitute capital assets in the hands of the
stockholder as of the Closing Date;
(7)The Acquiring Fund will succeed to the capital loss carryovers of the
Acquired Fund, if any, under Section 381 of the Code, but the use by
the Acquiring Fund of any such capital loss carryovers (and of
capital loss carryovers of the Acquiring Fund) may be subject to
limitation under Section 383 of the Code; and
(8)any gain or loss realized by a stockholder of the Acquired Fund upon
the sale of a fractional share of the Acquiring Fund to which the
stockholder is entitled will be recognized to the stockholder and
measured by the difference between the amount of cash received and
the basis of the fractional share and, provided that the Acquired
Fund shares surrendered constitute capital assets in the hands of the
stockholder, will be a capital gain or loss.
The opinion will be based on certain factual certifications made by
officers of the Funds and will also be based on customary assumptions
and subject to certain qualifications. The opinion is not a guarantee
that the tax consequences of the Acquisition will be as described
above.
Notwithstanding this subparagraph (e), Seward & Kissel LLP will
express no view with respect to the effect of the Acquisition on any
transferred asset as to which any unrealized gain or loss is required
to be recognized at the end of a taxable year (or on the termination
or transfer thereof) under federal income tax principles. Each Fund
shall agree to make and provide additional representations to
Seward & Kissel LLP with respect to the Funds that are reasonably
necessary to enable Seward & Kissel LLP to deliver the tax opinion.
Notwithstanding anything in this Plan to the contrary, neither Fund
may waive in any material respect the conditions set forth under this
subparagraph (e).
43
(f)The N-14 Registration Statement shall have become effective under the
1933 Act as to the Acquisition Shares, and the SEC shall not have
instituted and to the knowledge of the Acquiring Fund is not
contemplating instituting, any stop order suspending the
effectiveness of the N-14 Registration Statement.
(g)No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection
with, the Acquisition.
(h)The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the Acquisition under Section 25(c) of the
1940 Act.
(i)Neither party shall have terminated this Plan with respect to the
Acquisition pursuant to Section 13 of this Plan.
(j)The NYSE shall have approved, upon official notice of issuance, the
listing of the Acquisition Shares to be issued and delivered to the
Acquired Fund pursuant hereto.
9. Conditions to the Obligations of the Acquired Fund.
The obligations of the Acquired Fund with respect to the Acquisition shall
be subject to the following conditions precedent:
(a)The Acquired Fund shall have received an opinion of Seward & Kissel LLP,
counsel to the Acquiring Fund, in form and substance reasonably
satisfactory to the Acquired Fund and dated as of the Closing Date,
substantially to the effect that:
(1)The Acquiring Fund is a corporation duly incorporated, existing and
in good standing under the laws of the State of Maryland and is a
closed-end, management investment company registered under the 1940
Act and duly registered under the 1934 Act;
(2)This Plan has been duly authorized, executed and delivered by the
Acquiring Fund and, assuming the N-14 Registration Statement referred
to in Section 2 of this Plan does not contain any material
misstatements or omissions, and assuming due authorization, execution
and delivery of this Plan by the Acquired Fund, represents a legal,
valid and binding contract, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and transfer and similar laws relating to or
affecting creditors' rights generally and court decisions with
respect thereto, and further subject to the application of equitable
principles in any proceeding, whether at law or in equity or with
respect to the enforcement of provisions of the Plan and the effect
of judicial decisions which have held that certain provisions are
unenforceable when their enforcement would violate an implied
covenant of good faith and fair dealing or would be commercially
unreasonable or when default under the Plan is not material;
(3)The Acquisition Shares to be delivered as provided for by this Plan
are duly authorized and, when issued in accordance with this Plan and
the resolutions of the Board of Directors authorizing the issuance
thereof, will be validly issued, fully paid and non-assessable;
(4)The execution and delivery of this Plan did not, and the consummation
of the Acquisition will not, violate the Acquiring Fund Charter or
the Acquiring Fund Bylaws or any agreement of the Acquiring Fund
known to such counsel, after reasonable inquiry; and
(5)To the knowledge of such counsel, no consent, approval, authorization
or order of any federal or state court or administrative or
regulatory agency, other than the acceptance of record of Articles of
Transfer by the SDAT, is required for the Acquiring Fund to enter
into this Plan or carry out its terms, except those that have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act and the rules
and regulations under those Acts or that may be required under state
securities laws or
44
subsequent to the Effective Time or when the failure to obtain the
consent, approval, authorization or order would not have a material
adverse effect on the operation of the Acquiring Fund.
In rendering such opinion, Seward & Kissel LLP may (i) rely on the
opinion of Venable LLP as to matters of Maryland law to the extent set
forth in such opinion, (ii) make assumptions regarding the authenticity,
genuineness and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to applicable
federal and state law, (iv) define the word "knowledge" and related
terms to mean the knowledge of attorneys then with such firm who have
devoted substantive attention to matters directly related to this Plan
and (v) rely on certificates of officers or directors of the Acquiring
Fund as to factual matters.
(b)The Acquired Fund shall have received a letter from the Adviser with
respect to insurance matters in form and substance satisfactory to the
Acquired Fund.
10.Conditions to the Obligations of the Acquiring Fund.
The obligations of the Acquiring Fund with respect to the Acquisition shall
be subject to the following conditions precedent:
(a)The Acquiring Fund shall have received an opinion of Seward & Kissel
LLP, counsel to the Acquired Fund, in form and substance reasonably
satisfactory to the Acquiring Fund and dated as of the Closing Date,
substantially to the effect that:
(1)The Acquired Fund is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland
and is a closed-end management investment company registered under
the 1940 act and duly registered under the 1934 Act;
(2)This Plan has been duly authorized, executed and delivered by the
Acquired Fund and, assuming the N-14 Registration Statement referred
to in Section 2 of this Plan does not contain any material
misstatements or omissions, and assuming due authorization, execution
and delivery of this Plan by the Acquiring Fund, represents a legal,
valid and binding contract, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and transfer and similar laws relating to or
affecting creditors' rights generally and court decisions with
respect thereto, and further subject to the application of equitable
principles in any proceeding, whether at law or in equity or with
respect to the enforcement of provisions of the Plan and the effect
of judicial decisions which have held that certain provisions are
unenforceable when their enforcement would violate an implied
covenant of good faith and fair dealing or would be commercially
unreasonable or when default under the Plan is not material;
(3)The execution and delivery of this Plan did not, and the consummation
of the Acquisition will not, violate the Acquired Fund Charter or the
Acquired Fund Bylaws or any agreement of the Acquired Fund known to
such counsel, after reasonable inquiry; and
(4)To the knowledge of such counsel, no consent, approval, authorization
or order of any federal or state court or administrative or
regulatory agency, other than the acceptance of record of Articles of
Transfer by the SDAT, is required for the Acquired Fund to enter into
the Plan or carry out its terms, except those that have been obtained
under the 1933 Act, the 1934 Act, the 1940 Act and the rules and
regulations under those Acts or that may be required under state
securities laws or subsequent to the Effective Time or when the
failure to obtain the consent, approval, authorization or order would
not have a material adverse effect on the operation of the Acquired
Fund.
In rendering such opinion, Seward & Kissel LLP may (i) rely on the
opinion of Venable LLP as to matters of Maryland law, (ii) make
assumptions regarding the authenticity, genuineness and/or conformity
of documents and copies thereof without independent verification
thereof, (iii) limit such opinion to applicable federal and state
law, (iv) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with such firm who have devoted
substantive
45
attention to matters directly related to this Plan and (v) rely on
certificates of officers or directors of the Acquired Fund as to
factual matters.
(b)The Acquiring Fund shall have received a letter from the Adviser
agreeing to indemnify the Acquiring Fund in respect of certain
liabilities of the Acquired Fund in form and substance satisfactory to
the Acquiring Fund.
11.Closing.
(a)The Closing shall be held at the offices of the Funds, 1345 Avenue of
the Americas, New York, New York 10105, or at such other time place as
the parties may agree.
(b)In the event that at the Valuation Time (a) the NYSE shall be closed to
trading or trading thereon shall be restricted, or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so
that accurate appraisal of the value of the net assets of the Acquired
Fund or the Acquiring Fund is impracticable, the Closing Date shall be
postponed until the first business day after the day when trading shall
have been fully resumed and reporting shall have been restored; provided
that if trading shall not be fully resumed and reporting restored within
three business days of the Valuation Time, this Plan may be terminated
by either the Acquired Fund or the Acquiring Fund upon the giving of
written notice to the other party.
(c)The Acquiring Fund will provide to the Acquired Fund evidence
satisfactory to the Acquired Fund that the Acquisition Shares issuable
pursuant to the Acquisition have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. After the Closing Date, the
Acquiring Fund will provide to the Acquired Fund evidence satisfactory
to the Acquired Fund that such Shares have been credited pro rata to
open accounts in the names of the Acquired Fund Stockholders.
(d)At the Closing each party shall deliver to the other such bills of sale,
instruments of assumption of liabilities, checks, assignments, stock
certificates, receipts or other documents as such other party or its
counsel may reasonably request in connection with the transfer of
assets, assumption of liabilities and liquidation contemplated by the
Plan.
12.Survival of Representations and Warranties.
No representations, warranties or covenants in or pursuant to this Plan
(including certificates of officers) hereto shall survive the completion of the
transactions contemplated herein.
13.Termination of Plan.
A majority of either Fund's Board of Directors may terminate this Plan with
respect to that Fund at any time before the applicable Effective Time if:
(i) the Fund's conditions precedent set forth in Sections 8, 9 or 10 as
appropriate, are not satisfied; or (ii) the Board of Directors determines that
the consummation of the Acquisition is not in the best interests of the Fund or
its stockholders and gives notice of such termination to the other party.
14.Governing Law.
This Plan and the transactions contemplated hereby shall be governed,
construed and enforced in accordance with the laws of the State of New York,
except to the extent preempted by federal law, without regard to conflicts of
law principles.
15.Brokerage Fees.
Each party represents and warrants that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for in the Plan.
46
16.Amendments.
The parties may, by agreement in writing authorized by their respective
Board of Directors, amend this Plan at any time before or after the
stockholders of the Acquired Fund approve the Acquisition. However, after
stockholders of the Acquired Fund approve the Acquisition, the parties may not
amend this Plan in a manner that materially alters the obligations of the other
party. This Section shall not preclude the parties from changing the Closing
Date or the Effective Time by mutual agreement.
17.Waivers.
At any time prior to the Closing Date, either party may by written
instrument signed by it (i) waive the effect of any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the agreements, covenants or conditions made for its
benefit contained herein. Any waiver shall apply only to the particular
inaccuracy or requirement for compliance waived, and not any other or future
inaccuracy or lack of compliance.
18.Indemnification of Directors.
The Acquiring Fund agrees that all rights to indemnification and all
limitations of liability existing in favor of the Acquired Fund's current and
former Directors and officers, acting in their capacities as such, under the
Acquired Fund Charter and the Acquired Fund Bylaws as in effect as of the date
of this Plan shall survive the Acquisition as obligations of the Acquiring Fund
and shall continue in full force and effect, without any amendment thereto, and
shall constitute rights which may be asserted against the Acquiring Fund, its
successors or assigns.
19.Other Matters.
Pursuant to Rule 145 under the 1933 Act, and in connection with the issuance
of any shares to any person who at the time of the Acquisition is, to the
Acquiring Fund's knowledge, an affiliate of a party to the Acquisition pursuant
to Rule 145(c), the Acquiring Fund will cause to be affixed upon the
certificate(s) issued to such person (if any) a legend as follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT TO ACQUIRING FUND (OR ITS STATUTORY SUCCESSOR) UNLESS (I) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SHARES IS EFFECTIVE UNDER
THE SECURITIES ACT OF 1933 OR (II) IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE FUND, SUCH REGISTRATION IS NOT REQUIRED.
20.Cooperation and Further Assurances.
Each party will cooperate with the other in fulfilling its obligations under
this Plan and will provide such information and documentation as is reasonably
requested by the other in carrying out the Plan's terms. Each party will
provide such further assurances concerning the performance of its obligations
hereunder and execute all documents for or in connection with the consummation
of the Acquisition as, with respect to such assurances or documents, the other
shall deem necessary or appropriate.
21.Updating of N-14 Registration Statement.
If at any time prior to the Effective Time, a party becomes aware of any
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements made not
misleading in the N-14 Registration Statement, the party discovering the item
shall notify the other party and the parties shall cooperate in promptly
preparing, filing and clearing with the SEC and, if appropriate, distributing
to stockholders appropriate disclosure with respect to the item.
47
22.Limitation on Liabilities.
The obligations of the Acquired Fund and the Acquiring Fund shall not bind
any of the directors, stockholders, nominees, officers, agents, employees or
agents of the Acquired Fund or the Acquiring Fund personally, but shall bind
only the Acquired Fund or Acquiring Fund, as appropriate. The execution and
delivery of this Plan by an officer of either party shall not be deemed to have
been made by the officer individually or to impose any liability on the officer
personally, but shall bind only the Acquired Fund or the Acquiring Fund, as
appropriate.
23.Termination of the Acquired Fund.
If the parties complete the Acquisition, the Acquired Fund shall terminate
its registration under the 1940 Act, the 1933 Act, and the 1934 Act and will
liquidate and dissolve.
24.Notices.
Any notice, report, statement, certificate or demand required or permitted
by any provision of the Plan shall be in writing and shall be given in person
or by telecopy, certified mail or overnight express courier to:
For the Acquired Fund:
ACM Managed Dollar Income Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
For the Acquiring Fund:
AllianceBernstein Global High Income Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
25.Expenses.
The Acquisition expenses shall be shared by the Acquired Fund and the
Adviser. The Adviser will pay the first $100,000 of the Acquisition expenses
and the Acquired Fund will pay all amounts in excess of that amount.
26.General.
This Plan supersedes all prior agreements between the parties with respect
to the subject matter hereof and may be amended only in writing signed by both
parties. The headings contained in this Plan are for reference only and shall
not affect in any way the meaning or interpretation of this Plan. Whenever the
context so requires, the use in the Plan of the singular will be deemed to
include the plural and vice versa. Nothing in this Plan, expressed or implied,
confers upon any other person any rights or remedies under or by reason of this
Plan. Neither party may assign or transfer any right or obligation under this
Plan without the written consent of the other party.
48
In Witness Whereof, the parties hereto have executed this Plan as of the day
and year first above written.
AllianceBernstein Global High Income Fund, Inc.
Attest:
By:
--------------------------------------------- -------------------------------------------
Name: Name:
------------------------------------ -----------------------------------
Title: Title:
------------------------------------ -----------------------------------
ACM Managed Dollar Income Fund, Inc.
Attest:
By:
--------------------------------------------- -------------------------------------------
Name: Name:
------------------------------------ -----------------------------------
Title: Title:
------------------------------------ -----------------------------------
Accepted and agreed with respect to Section 25 only:
AllianceBernstein L.P.
By:AllianceBernstein Corporation, its General Partner
By:
--------------------------------------------
Name:
------------------------------------
Title:
------------------------------------
49
APPENDIX G
CAPITALIZATION
The following table sets forth (i) the capitalization of the Funds and
(ii) the pro forma capitalization of the combined Fund as adjusted giving
effect to the proposed acquisition of assets at net asset value as of April 10,
2009:
Global High
Managed Global High Income
Dollar Income Adjustments (pro forma)/(1)/
------------ ------------ ----------- ---------------
Total Net Assets $114,486,560 $754,946,994 $ (40,000)* $869,393,554
Shares Outstanding 18,495,567 76,336,108 (6,919,474)/(2)/ 87,912,201
NAV Per Share $ 6.19/(3)/ $ 9.89 -- $ 9.89
--------
* Portfolio repositioning costs.
(1)Assumes the Acquisition was consummated on April 10, 2009 and is for
information purposes only. No assurance can be given as to how many shares
of Global High Income will be received by stockholders of Managed Dollar on
the date the Acquisition takes place, and the foregoing should not be relied
upon to reflect the number of shares of Global High Income that will
actually be received on or after such date.
(2)In connection with the Acquisition, shares of Global High Income will be
issued to the stockholders of Managed Dollar. The number of shares assumed
to be issued is equal to the net asset value of Managed Dollar divided by
the net asset value per share of Global High Income as of April 20, 2009.
(3)Estimated costs associated with the Acquisition in the amount of $175,000
were assumed to have been borne by Managed Dollar and reflected in the NAV
of Managed Dollar as of April 10, 2009.
50
APPENDIX H
LEGAL PROCEEDINGS
On October 2, 2003, a purported class action complaint entitled Hindo et al.
v. AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was
filed against the Adviser; AllianceBernstein Holding L.P. ("Holding");
AllianceBernstein Corporation; AXA Financial, Inc.; certain of the
AllianceBernstein Mutual Funds; certain officers of the Adviser
("AllianceBernstein defendants"); and certain other unaffiliated defendants as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Mutual Funds. The Hindo Complaint
alleges that certain of the AllianceBernstein defendants failed to disclose
that they improperly allowed certain hedge funds and other unidentified parties
to engage in "late trading" and "market timing" of AllianceBernstein Mutual
Fund securities, violating Sections 11 and 15 of the Securities Act of 1933,
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Sections
206 and 215 of the Investment Advisers Act of 1940. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Following October 2, 2003, additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. On
September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Holding; and claims
brought under ERISA by participants in the Profit Sharing Plan for Employees of
the Adviser. All four complaints include substantially identical factual
allegations, which appear to be based in large part on the Order of the
Securities and Exchange Commission dated December 18, 2003 as amended and
restated January 15, 2004 and the New York State Attorney General Assurance of
Discontinuation dated September 1, 2004.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the
mutual fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding containing their
agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date. The settlement amount ($30 million), which the Adviser previously accrued
and disclosed, has been disbursed. The derivative claims brought on behalf of
Holding, in which plaintiffs seek an unspecified amount of damages remain
pending.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of a Fund's shares or other
adverse consequences to a Fund. This may require the Funds to sell investments
to provide for sufficient liquidity and could also have an adverse effect on
the investment performance of the Funds. However, the Adviser believes that
these matters are not likely to have a material adverse effect on its ability
to perform advisory services relating to the Funds.
51
APPENDIX I
SHARE OWNERSHIP INFORMATION
Shares Outstanding
As of June 19, 2009 each Fund had the following number of shares of common
stock outstanding.
Number of Outstanding
Shares of
Fund Common Stock
---- ---------------------
Managed Dollar 15,166,366
Global High Income 76,336,108
Ownership of Shares
As of June 19, 2009, the directors and officers of each Fund as a group
beneficially owned less than 1% of the outstanding shares of common stock of
that Fund and, to the knowledge of each Fund, no person owned, either of record
or beneficially, 5% or more of the outstanding shares of the Fund.
52
APPENDIX J
FINANCIAL HIGHLIGHTS TABLE
The financial highlights table is intended to help you understand each
Fund's financial performance for the past 5 years. Certain information reflects
financial results for a single share of each Fund. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Ernst & Young LLP, the
independent registered public accounting firm for the Funds, whose reports,
along with each Fund's financial statements, are included in each Fund's annual
report, which is available upon request.
Global High Income
Year Ended March 31,
--------------------------------------------------------
2009 2008 2007 2006 2005
-------- ---------- ---------- -------- --------
Net asset value, beginning of period........................... $ 13.81 $ 15.19 $ 14.54 $ 13.55 $ 13.59
-------- ---------- ---------- -------- --------
Income From Investment Operations
Net investment income(a)....................................... 1.07 1.07 .91 .90 .87
Net realized and unrealized gain (loss) on investment
transactions.................................................. (3.77) (.77) .72 .99 (.08)
-------- ---------- ---------- -------- --------
Net increase (decrease) in net asset value from operations..... (2.70) .30 1.63 1.89 .79
-------- ---------- ---------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income........................... (1.10) (1.13) (.98) (.90) (.83)
Distributions from net realized gain on investment and foreign
currency transactions......................................... (.43) (.55) 0.00 0.00 0.00
-------- ---------- ---------- -------- --------
Total dividends and distributions.............................. (1.53) (1.68) (.98) (.90) (.83)
-------- ---------- ---------- -------- --------
Net asset value, end of period................................. $ 9.58 $ 13.81 $ 15.19 $ 14.54 $ 13.55
======== ========== ========== ======== ========
Market value, end of period.................................... $ 8.29 $ 13.10 $ 13.85 $ 12.59 $ 11.80
Premium/(Discount)............................................. (13.47)% (5.14)% (8.82)% (13.41)% (12.92)%
Total Return...................................................
Total investment return based on:(b)...........................
Market value................................................. (25.76)% 7.09% 18.52% 14.62% (1.96)%
Net asset value.............................................. (18.61)% 2.94% 12.55% 15.28% 6.94%
Ratios/Supplemental Data
Net assets, end of period (000's omitted).................... $731,148 $1,054,559 $1,027,252 $983,788 $916,838
Ratio to average net assets of:
Expenses.................................................... 1.07% 1.53% 1.68% 1.23% 1.30%
Expenses, excluding interest expense(c)..................... 1.01% 1.00% 1.06% 1.15% 1.28%
Net investment income....................................... 9.18% 7.34% 6.24% 6.33% 6.50%
Portfolio turnover rate........................................ 39% 67% 68% 79% 147%
53
Managed Dollar
Six Months
Ended Year Ended September 30,
March 31, 2009 -----------------------------------------------------
(unaudited) 2008 2007 2006 2005 2004(d)
-------------- -------- -------- -------- -------- --------
Net asset value, beginning of period.................. $ 7.00 $ 8.29 $ 8.22 $ 8.28 $ 7.87 $ 7.68
-------- -------- -------- -------- -------- --------
Income From Investment Operations
Net investment income(a).............................. .26 .55 .54 .58 .65 .76
Net realized and unrealized gain (loss) on investment
transactions......................................... (.95) (1.28) .09 (.05) .43 .23
Contributions from Adviser............................ 0.00 0.00(e) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value from
operations........................................... (.69) (.73) .63 .53 1.08 .99
-------- -------- -------- -------- -------- --------
Less: Dividends
Dividends from net investment income.................. (.28) (.56) (.56) (.59) (.67) (.80)
-------- -------- -------- -------- -------- --------
Net asset value, end of period........................ $ 6.03 $ 7.00 $ 8.29 $ 8.22 $ 8.28 $ 7.87
-------- -------- -------- -------- -------- --------
Market value, end of period........................... $ 4.88 $ 5.22 $ 7.31 $ 7.37 $ 7.74 $ 7.87
======== ======== ======== ======== ======== ========
Premium/(Discount).................................... (19.07)% (25.43)% (11.82)% (10.34)% (6.52)% 0%
Total Return
Total investment return based on:(b)..................
Market value........................................ (.74)% (22.66)% 6.55% 3.07% 7.10% 6.91%
Net asset value..................................... (8.54)% (8.53)%* 8.34% 7.46% 14.57% 13.45%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)........... $111,614 $129,449 $161,317 $168,449 $178,560 $178,735
Ratio to average net assets of:
Expenses........................................... 1.68%(f) 1.40% 1.56% 1.71% 1.49% 1.44%
Expenses, excluding interest expense(g)............ 1.56%(f) 1.12% 1.13% 1.13% 1.13% 1.15%
Net investment income.............................. 8.87%(f) 6.91% 6.42% 7.10% 8.06% 9.76%
Portfolio turnover rate............................... 6% 26% 42% 55% 63% 95%
--------
(a)Based on average shares outstanding.
(b)Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed, for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's Dividend Reinvestment Plan. Generally, total investment return based
on net asset value will be higher than total investment return based on
market value in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such periods. Conversely, total investment return
based on net asset value will be lower than total investment return based on
market value in periods where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such periods. Total investment return calculated for
a period of less than one year is not annualized.
(c)Excludes net interest expense of .06%, .53%, .62%, and .08%, respectively,
on borrowings.
(d)As of October 1, 2003, the Fund has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. These interim payments are reflected
within net realized and unrealized gain(loss) on swap contracts, however,
prior to October 1, 2003, these interim payments were reflected within
interest income/expense on the statement of operations. The effect of this
change for the year ended September 30, 2004, was to decrease net investment
income per share by $0.01 and increase net realized and unrealized gain
(loss) on investment transactions per share by $0.01, and decrease the
ratios of net investment income and expenses to average net assets by 0.15%.
(e)Amount is less than $0.005.
(f)Annualized.
(g)Excludes net interest expense of .12%, .28%, .43%, .58%, .36%, and .29%,
respectively, on borrowings.
* Includes the impact of proceeds received and credited to the Fund resulting
from the class action settlements, which enhanced the Fund's performance for
the year ended September 30, 2008 by 0.02%.
54
ALLIANCEBERNSTEIN GLOBAL HIGH INCOME FUND, INC.
1345 Avenue of the Americas
New York, New York
Toll Free (800) 221-5672
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
June 23, 2009
This Statement of Additional Information ("SAI") relates to the proposed
acquisition (the "Acquisition") of all of the assets and liabilities of ACM
Managed Dollar Income Fund, Inc. ("Managed Dollar") by AllianceBernstein Global
High Income Fund, Inc. ("Global High Income") in exchange solely for shares of
Global High Income, and cash in lieu of fractional shares for those stockholders
who do not participate in Managed Dollar's Dividend Reinvestment and Cash
Purchase Plan ("DRIP"). (Global High Income and Managed Dollar are each a "Fund"
and collectively, the "Funds").
AllianceBernstein, L.P. (the "Adviser") serves as investment adviser
to the Funds. This SAI contains information which may be of interest to
shareholders but which is not included in the Prospectus/Proxy Statement dated
June 23, 2009 (the "Prospectus/Proxy Statement") of Global High Income which
relates to the Acquisition. As described in the Prospectus/Proxy Statement, the
Acquisition would involve the transfer of all the assets of Managed Dollar in
exchange for shares of Global High Income and the assumption by Global High
Income of all the liabilities of Managed Dollar. Managed Dollar would distribute
the Global High Income shares it receives to its shareholders in complete
liquidation of the Fund. Global High Income will be the survivor for accounting
purposes.
This SAI is not a prospectus and should be read in conjunction with
the Prospectus/Proxy Statement. The Prospectus/Proxy Statement has been filed
with the Securities and Exchange Commission ("SEC") and is available upon
request and without charge by writing to a Fund at 1345 Avenue of the Americas,
New York, New York 10105, or by calling 1-800-221-5672. This SAI incorporates by
reference the entire Prospectus/Proxy Statement.
-------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVES AND POLICIES............................................2
INVESTMENT PRACTICES..........................................................6
INVESTMENT RESTRICTIONS......................................................11
RISK FACTORS AND SPECIAL CONSIDERATIONS......................................12
MANAGEMENT OF THE FUNDS......................................................18
VALUATION OF PORTFOLIO SECURITIES............................................31
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN.................................33
DESCRIPTION OF COMMON STOCK..................................................35
PORTFOLIO TRANSACTIONS.......................................................36
DISTRIBUTIONS................................................................37
TAXATION.....................................................................38
PROXY VOTING.................................................................41
LEGAL MATTERS................................................................42
EXPERTS......................................................................42
FINANCIAL STATEMENTS.........................................................43
APPENDIX A - BOND RATINGS...................................................A-1
The following supplements the information contained in the
Prospectus/Proxy Statement concerning the Funds. Global High Income and Managed
Dollar are each a non-diversified closed-end investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act").
INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The Funds are non-diversified, closed-end management investment
companies. The primary investment objective of the Funds is to seek high current
income, with a secondary investment objective of capital appreciation. In
seeking to achieve its investment objectives, each Fund invests principally in
fixed-income securities issued or guaranteed by foreign governments and U.S. and
non-U.S. corporate fixed-income securities and utilizes certain other investment
techniques, including options, futures, forwards and swaps, intended to enhance
income and reduce market risk. Global High Income may also invest in non-U.S.
Dollar-denominated fixed-income securities. The Funds are designed primarily for
long term investment and investors should not consider any Fund to be a
short-term trading vehicle. As with all investment companies, there can be no
assurance that a Fund's objective will be achieved.
Global High Income is permitted to invest without limit in fixed-income
securities, including Sovereign Debt Obligations (as defined below) and
corporate fixed-income securities, denominated in non-U.S. currencies as well as
in the U.S. Dollar. In addition, the Fund may invest without limit in emerging
and developed markets and in fixed-income securities of U.S. and non-U.S.
corporate issuers. Managed Dollar has adopted a fundamental policy that, under
normal circumstances, the Fund will invest at least 35% of its total assets in
U.S. corporate fixed-income securities. The balance of the Fund's investment
portfolio consists of Sovereign Debt Obligations (as defined below) and non-U.S.
corporate fixed-income securities. Managed Dollar invests in U.S.
Dollar-denominated foreign fixed-income securities. Each Fund's investment
objective and Managed Dollar's fundamental policies (and each Fund's investment
restrictions set forth below under "Investment Restrictions") may be changed
only with the approval of the holders of a "majority of the Fund's outstanding
voting securities," which means the lesser of (i) 67% of the shares of the Fund
represented at a meeting at which more than 50% of the outstanding shares are
present in person or represented by proxy, or (ii) more than 50% of the
outstanding shares. A Fund's other investment policies described below, except
as set forth under "Investment Restrictions," are not fundamental and may be
changed by the Fund without stockholder approval.
SOVEREIGN DEBT OBLIGATIONS. Sovereign Debt Obligations are U.S.
Dollar-denominated debt securities issued or guaranteed by foreign governments,
including participations in loans between foreign governments and financial
institutions and interests in entities organized and operated for the purpose of
restructuring the investment characteristics of instruments issued or guaranteed
by foreign governments.
Sovereign Debt Obligations held by the Funds will take the form of bonds, notes,
bills, debentures, warrants, short-term paper, loan participations, loan
assignments and interests issued by entities organized and operated for the
purpose of restructuring the investment characteristics of other Sovereign Debt
Obligations.
HIGH YIELD DEBT SECURITIES. Substantially all of Global High Income's and
Managed Dollar's assets will be in high yield, high risk debt securities that
are low-rated (i.e., below investment grade) or unrated and in both cases that
are considered to be predominantly speculative as regards the issuer's capacity
to pay interest and repay principal.
STRUCTURED SECURITIES. The Funds may invest in securities issued in structured
financing transactions, which generally involve aggregating various types of
debt in a pool or special purpose entity and then issuing new securities. Each
Fund may invest up to 25% of its total assets in interests in entities organized
and operated solely for the purpose of restructuring the investment
characteristics of Sovereign Debt Obligations. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified instruments (such as commercial bank loans) and the issuance
by that entity of one or more classes of securities ("Structured Securities")
backed by, or representing interests in, the underlying instruments. The cash
flow on the underlying instruments may be apportioned among the newly issued
Structured Securities to create securities with different investment
characteristics such as varying maturities, payment priorities and interest rate
provisions, and the extent of the payments made with respect to Structured
Securities is dependent on the extent of the cash flow on the underlying
instruments. Because Structured Securities of the type in which a Fund
anticipates it will invest typically involve no credit enhancement, their credit
risk generally will be equivalent to that of the underlying instruments.
The Funds are permitted to invest in a class of Structured Securities that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated Structured Securities typically have higher yields and present
greater risks than unsubordinated Structured Securities.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Funds may invest in fixed and floating
rate loans ("Loans") arranged through private negotiations between an issuer of
Sovereign Debt Obligations and one or more financial institutions ("Lenders").
The Funds' investments in Loans are expected in most instances to be in the form
of participations in Loans ("Participations") and assignments of all or a
portion of Loans ("Assignments") from third parties. Each Fund may invest up to
25% of its total assets in Participations and Assignments. The government that
is the borrower on the Loan will be considered by a Fund to be the issuer of a
Participation or Assignment for purposes of the Fund's fundamental investment
policy that it will not invest 25% or more of its total assets in securities of
issuers conducting their principal business activities in the same industry (for
this purpose, each foreign government is treated as a separate industry).
A Fund's investment in Participations typically will result in the Fund having a
contractual relationship only with the Lender and not with the borrower. Each
Fund will have the right to receive payments of principal, interest and any fees
to which it is entitled only from the Lender selling the Participation and only
upon receipt by the Lender of the payments from the borrower. In connection with
purchasing Participations, a Fund generally will have no right to enforce
compliance by the borrower with the terms of the loan agreement relating to the
Loan, nor any rights of set-off against the borrower, and the Fund may not
directly benefit from any collateral supporting the Loan in which it has
purchased the Participation. As a result, the Fund may be subject to the credit
risk of both the borrower and the Lender that is selling the Participation. In
the event of the insolvency of the Lender selling a Participation, the Fund may
be treated as a general creditor of the Lender and may not benefit from any
set-off between the Lender and the borrower. Certain Participations may be
structured in a manner designed to avoid purchasers of Participations being
subject to the credit risk of the Lender with respect to the Participation; but
even under such a structure, in the event of the Lender's insolvency, the
Lender's servicing of the Participation may be delayed and the assignability of
the Participation impaired. The Fund will acquire Participations only if the
Lender interpositioned between the Fund and the borrower is a Lender having
total assets of more than $25 billion and whose senior unsecured debt is rated
investment grade (i.e., Baa3 or higher by Moody's or BBB- or higher by S&P) or
higher.
When a Fund purchases Assignments from Lenders it will acquire direct rights
against the borrower on the Loan. Because Assignments are arranged through
private negotiations between potential assignees and potential assignors,
however, the rights and obligations acquired by the Fund as the purchaser of an
assignment may differ from, and be more limited than, those held by the
assigning Lender. The assignability of certain obligations is restricted by the
governing documentation as to the nature of the assignee such that the only way
in which the Fund may acquire an interest in a Loan is through a Participation
and not an Assignment. The Fund may have difficulty disposing of Assignments and
Participations because to do so it will have to assign such securities to a
third party. Because there is no liquid market for such securities, the Fund
anticipates that such securities could be sold only to a limited number of
institutional investors. The lack of a liquid secondary market may have an
adverse impact on the value of such securities and the Fund's ability to dispose
of particular Assignments or Participations when necessary to meet the Fund's
liquidity needs in response to a specific economic event such as a deterioration
in the creditworthiness of the borrower. The lack of a liquid secondary market
for Assignments and Participations also may make it more difficult for the Fund
to assign a value to these securities for purposes of valuing the Fund's
portfolio and calculating its asset value.
ZERO COUPON OBLIGATIONS. The funds may invest in Zero Coupon Obligations,
including Treasury bills and the principal components of U.S. Treasury bonds,
U.S. Treasury notes and obligations of U.S. government agencies or
instrumentalities. A zero coupon security pays no interest to its holder during
its life. An investor acquires a zero coupon security at a discounted price from
the face value of the security, which is generally based upon its present value,
and which, depending upon the time remaining until maturity, may be
significantly less than its face value (sometimes referred to as a "deep
discount" price). Upon maturity of the zero coupon security, the investor
receives the face value of the security.
Currently, the only U.S. Treasury security issued without coupons is the
Treasury bill. The zero coupon securities purchased by a Fund may consist of
principal components held in STRIPS form issued through the U.S. Treasury's
STRIPS program, which permits the beneficial ownership of the component to be
recorded directly in the Treasury book-entry system. In addition, in the last
few years a number of banks and brokerage firms have separated ("stripped") the
principal portions ("corpus") from the coupon portions of the U.S. Treasury
bonds and notes and sold them separately in the form of receipts or certificates
representing undivided interests in these instruments (which instruments are
generally held by a bank in a custodial or trust account). The staff of the
Securities and Exchange Commission (the "Commission") has indicated that, in its
view, these receipts or certificates should be considered as securities issued
by the bank or brokerage firm involved and, therefore, unlike those obligations
issued under the U.S. Treasury's STRIPS program, should not be included in the
Fund's categorization of U.S. Government Securities. The Fund disagrees with the
staff's interpretation but has undertaken that it will not invest in such
securities until final resolution of the issue. If such securities are deemed to
be U.S. Government Securities, the Fund will not be subject to any limitations
on their purchase.
Because zero coupon securities trade at a discount from their face or par value
but pay no periodic interest, they are subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities which make periodic distributions of interest.
Current federal tax law requires that a holder (such as the Funds) of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the holder receives no interest
payment in cash on the security during the year (generally referred to as
"original issue discount" or "OID"). As a result, in order to make the
distributions necessary for a Fund not to be subject to federal income or excise
taxes, the Fund may be required to pay out as an income distribution each year
an amount, obtained by liquidation of portfolio securities or borrowings if
necessary, greater than the total amount of cash that the Fund has actually
received as interest during the year. The Funds believe, however, that it is
highly unlikely that it would be necessary to liquidate portfolio securities or
borrow money in order to make such required distributions or to meet their
investment objective.
REPURCHASE AGREEMENTS. A repurchase agreement is an agreement by which a Fund
purchases a security and obtains a simultaneous commitment from the seller to
repurchase the security at an agreed upon price and date, normally one day or a
few days later. The resale price is greater than the purchase price, reflecting
an agreed-upon "interest rate" that is effective for the period of time the
buyer's money is invested in the security, and which is related to the current
market rate of the purchased security rather than its coupon rate. During the
term of the repurchase agreement, a Fund monitors on a daily basis the market
value of the securities subject to the agreement and, if the market value of the
securities falls below the resale amount provided under the repurchase
agreement, the seller under the repurchase agreement is required to provide
additional securities equal to the amount by which the market value of the
securities falls below the resale amount. Because a repurchase agreement permits
the Fund to invest temporarily available cash on a fully-collateralized basis,
repurchase agreements permit the Fund to earn a return on temporarily available
cash while retaining "overnight" flexibility in pursuit of investments of a
longer-term nature. Repurchase agreements may exhibit the characteristics of
loans by the Fund.
The obligation of the seller under the repurchase agreement is not guaranteed,
and there is a risk that the seller may fail to repurchase the underlying
security, whether because of the seller's bankruptcy or otherwise. In such
event, a Fund would attempt to exercise its rights with respect to the
underlying security, including possible sale of the securities. The Fund may
incur various expenses in the connection with the exercise of its rights and may
be subject to various delays and risks of loss, including (a) possible declines
in the value of the underlying securities, (b) possible reduction in levels of
income and (c) lack of access to the securities (if they are held through a
third-party custodian) and possible inability to enforce the Fund's rights. Each
Fund's Board of Directors has established procedures, which are periodically
reviewed by the Board, pursuant to which the Adviser monitors the
creditworthiness of the dealers with which the Fund enters into repurchase
agreement transactions.
Each Fund may enter into repurchase agreements pertaining to the types of
securities in which it invests with member banks of the Federal Reserve System
or "primary dealers" (as designated by the Federal Reserve Bank of New York) in
securities in which the Fund may invest. Each Fund may enter into repurchase
agreements with respect to up to 35% of its total assets. Each Fund currently
enters into repurchase agreements only with its custodian and such primary
dealers.
U.S. CORPORATE FIXED-INCOME SECURITIES. The Funds may invest in U.S. corporate
fixed income securities which include debt securities, convertible securities
and preferred stocks of corporate issuers. Differing yields on fixed-income
securities of the same maturity are a function of several factors, including the
relative financial strength of the issuers. Higher yields are generally
available from securities in the lower rating categories. When the spread
between the yields of lower rated obligations and those of more highly rated
issues is relatively narrow, a Fund may invest in the latter since they may
provide attractive returns with somewhat less risk. Each Fund expects to invest
in high yield, high risk lower rated securities (i.e., securities rated lower
than Baa3 by Moody's or BBB- by S&P) and in unrated securities of comparable
credit quality. Unrated securities will be considered for investment by a Fund
when the Adviser believes that the financial condition of the issuers of such
obligations and the protection afforded by the terms of the obligations
themselves limit the risk to the Fund to a degree comparable to that of rated
securities which are consistent with the Fund's investment objectives and
policies.
OTHER SECURITIES. While the principal investment strategies of the Funds
emphasize investment in Sovereign Debt Obligations, a Fund may, where consistent
with its investment objective, invest in securities other than Sovereign Debt
Obligations, including options, warrants, reverse repurchase agreements and
swaps, as discussed below under the caption "Investment Practices."
The Funds may also at any time temporarily invest funds awaiting reinvestment or
held for reserves for dividends and other distributions to stockholders in such
U.S. Dollar-denominated money market instruments.
Illiquid Securities. Each Fund may invest up to 50% of its total assets in
illiquid securities. These securities include, among others, (i) direct
placements or other securities which are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
trading in the security is suspended or, in the case of unlisted securities,
market makers do not exist or will not entertain bids of offers), and (ii)
repurchase agreements not terminable within seven days. Securities eligible for
resale under Rule 144A under the Securities Act of 1933, as amended (the "1933
Act"), that have legal or contractual restrictions on resale but have a readily
available market are not deemed to be illiquid for purposes of this limitation.
The Adviser will monitor such securities and in reaching decisions concerning
their marketability will consider, among other things, the following factors:
(i) the frequency of trades and quotes for the security; (ii) the number of
dealers wishing to purchase or sell the security and the number of other
potential purchasers; (iii) dealer undertakings to make a market in the
security; (iv) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer); and (v) any applicable SEC
interpretation or position with respect to such type of securities.
INVESTMENT PRACTICES
Options. An option, which may be standardized and exchange-traded, or customized
and privately negotiated, is an agreement that, for a premium payment or fee,
gives the option holder (the buyer) the right but not the obligation to buy or
sell the underlying asset (or settle for cash an amount based on an underlying
asset, rate or index) at a specified price (the exercise price) during a period
of time or on specified date. A call option entitles the holder to purchase, and
a put option entitles the holder to sell, the underlying asset (or settle for
cash an amount based on an underlying asset, rate or index). Likewise, when an
option is exercised the writer of the option is obligated to sell (in the case
of a call option) or to purchase (in the case of a put option) the underlying
asset (or settle for cash an amount based on an underlying asset, rate or
index). Investments in options are considered speculative. A Fund may lose the
premium paid for them if the price of the underlying security or other asset
decreased or remained the same (in the case of a call option) or increased or
remained the same (in the case of a put option). If a put or call option
purchased by a Fund were permitted to expire without being sold or exercised,
its premium would represent a loss to the Fund.
Options on U.S. and Foreign Government Securities. For hedging and investment
purposes, the Funds may purchase and write (sell) put and call options on U.S.
and foreign government securities that are traded on U.S. and foreign securities
exchanges and over-the-counter markets.
A put option gives the purchaser of such option, upon payment of a premium, the
right to deliver a specified amount of a security to the writer of the option on
or before a fixed date at a predetermined price. A call option gives the
purchaser of the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a fixed date at
a predetermined price.
The premium paid by the purchaser of an option reflects, among other things, the
relationship of the exercise price to the market price and volatility of the
underlying security, the remaining term of the option, supply and demand and
interest rates.
The risk associated with purchasing an option is that a Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk of
loss or premium and change in market value should the counterparty not perform
under the contract. Put and call options purchased are accounted for in the same
manner as portfolio securities. The cost of securities acquired through the
exercise of call options is increased by premiums paid. The proceeds from
securities sold through the exercise of put options are decreased by the
premiums paid.
When a Fund writes an option, the premium received by the Fund is recorded as a
liability and is subsequently adjusted to the current market value of the option
written. Premiums received from written options which expire unexercised are
recorded by the Fund on the expiration date as realized gains from options
written. The difference between the premium received and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium received is less than the
amount paid for the closing purchase transaction, as a realized loss. If a call
option is exercised, the premium received is added to the proceeds from the sale
of the underlying security or currency in determining whether the Fund has
realized a gain or loss. If a put option is exercised, the premium received
reduces the cost basis of the security or currency purchased by the Fund. In
writing an option, the Fund bears the market risk of an unfavorable change in
the price of the security or currency underlying the written option. Exercise of
an option written by the Fund could result in the Fund's selling or buying a
security or currency at a price different from the current market value.
If a put option written by a Fund were exercised the Fund would be obligated to
purchase the underlying security at the exercise price. If a call option written
by a Fund were exercised the Fund would be obligated to sell the underlying
security at the exercise price. The risk involved in writing a put option is
that there could be a decrease in the market value of the underlying security.
If this occurred, the option could be exercised and the underlying security
would then be sold by the option holder to the Fund at a higher price than its
current market value. These risks involved in writing a call option is that
there could be an increase in the market value or the underlying security. If
this occurred, the option could be exercised and the underlying security would
then be sold by the Fund at a lower price than its current market value. These
risks could be reduced by entering into a closing transaction. A Fund retains
the premium received from writing a put or call option whether or not the option
is exercised.
A Fund may purchase or write options on securities of the types in which it is
permitted to invest in privately negotiated transactions. A Fund will effect
such transactions only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions) deemed creditworthy
by the Adviser, and the Adviser has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written by a Fund in
negotiated transactions are illiquid and it may not be possible for the Fund to
effect a closing transaction at a time when the Adviser believes it would be
advantageous to do so.
Futures. A futures contract is an agreement that obligates the buyer to buy and
the seller to sell a specified quantity of an underlying asset (or settle for
cash the value of a contract based on an underlying asset, rate or index) at a
specific price on the contract maturity date. Futures contracts are
standardized, exchange-traded instruments and are fungible (i.e., considered to
be perfect substitutes for each other). This fungibility allows futures
contracts to be readily offset or cancelled through the acquisition of equal but
opposite positions, which is the primary method in which futures contracts are
liquidated. A cash-settled futures contract does not require physical delivery
of the underlying asset but instead is settled for cash equal to the difference
between the values of the contract on the date it is entered into and its
maturity date.
Warrants. The Funds may invest in warrants, which are securities permitting, but
not obligating, their holder to subscribe for other securities. The Funds may
invest in warrants for debt securities or warrants for equity securities that
are acquired as units with debt instruments.
Lending of Portfolio Securities. In order to increase income, a Fund may from
time to time lend securities from its portfolio to brokers, dealers and
financial institutions and receive collateral in the form of cash of U.S.
Government Securities. Under each Fund's procedures, collateral for such loans
must be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities (including interest accrued on the
loaned securities). The interest accruing on the loaned securities will be paid
to a Fund and the Fund will have the right, on demand, to call back the loaned
securities. The risks in lending portfolio securities, as with other extensions
of credit, consist of possible loss of rights in the collateral should the
borrower fail financially. In determining whether to lend securities to a
particular borrower, a Fund's Adviser (subject to review by the Board) will
consider all relevant facts and circumstances, including the creditworthiness of
the borrower. While securities are on loan, the borrower will pay a Fund any
income earned thereon and the Fund may invest any cash collateral in portfolio
securities, thereby earning additional income, or receive an agreed upon amount
of income from a borrower who has delivered equivalent collateral. A Fund may
pay fees to arrange the loans. A Fund will not lend portfolio securities in
excess of 30% of the value of its total assets nor lend its portfolio securities
to any officer, Director, employee or affiliate of the Fund or the Adviser.
Forward Commitments. A Fund may enter into forward commitments for the purchase
or sale of securities. Such transactions may include purchases on a
"when-issued" basis or purchases or sales on a "delayed delivery" basis. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event such as approval of a proposed financing by appropriate
municipal authorities (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the price, which is
generally expressed in yield terms, is fixed at the time the commitment is made,
but delivery and payment for the securities take place at a later date.
Normally, the settlement date occurs within two months after the transaction,
but delayed settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to market fluctuation,
and no interest accrues to the purchaser prior to the settlement date. At the
time a Fund enters into a forward commitment, it will record the transaction and
thereafter reflect the value of the security purchased or, if sold, the proceeds
to be received, in determining the net asset value ("NAV") of its shares. Any
unrealized appreciation or depreciation reflected in such valuation of a "when,
as and if issued" security would be cancelled in the event that the required
condition did not occur and the trade was cancelled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rate and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if a Fund's Adviser were to forecast
incorrectly the direction of interest rate movements, the Fund might be required
to complete such when-issued of forward transactions at prices inferior to then
current market values. No forward commitments will be made by a Fund if, as a
result, the Fund's aggregate commitments under such transactions would be more
than 30% of the then current value of the Fund's total assets.
A Fund's right to receive or deliver a security under a forward commitment may
be sold prior to the settlement date, but the Fund enters into forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. To facilitate such transactions, a Fund's
Custodian will maintain, in a segregated account of the Fund, cash or liquid
high-grade debt securities having value equal to, or greater than, any
commitments to purchase securities on a forward commitment basis and, with
respect to forward commitments to sell portfolio securities of the Fund, the
portfolio securities, themselves. If a Fund, however, chooses to dispose of the
right to receive or deliver a security subject to a forward commitment prior to
the settlement date of the transaction, it can incur a gain or loss. In the
event the other party to a forward commitment transaction were to default, a
Fund might lose the opportunity to invest money at favorable rates or to dispose
of securities at favorable prices.
Standby Commitment Agreements. The Funds may from time to time enter into
standby commitment agreements. A Fund enters into such agreements only for the
purpose of investing in the security underlying the commitment at a yield and
price that are considered advantageous to the Fund and that are unavailable on a
firm commitment basis. Each Fund will not enter into a standby commitment with a
remaining term in excess of 45 days and will limit its investment in such
commitments so that the aggregate purchase price of the securities subject to
the commitments, together with the value of portfolio securities that are not
readily marketable, will not exceed 50% of its assets taken at the time of
acquisition of such commitment of security.
Short Sales. A Fund may make short sales of securities or maintain a short
position, provided that at all times when a short position is open the Fund owns
an equal amount of such securities of the same issue as, and equal in amount to,
the securities sold short. In addition, a Fund may not make a short sale if more
than 10% of the Fund's net assets (taken at market value) would be held as
collateral for short sales at any one time. If the price of the security sold
short increases between the time of the short sale and the time a Fund replaces
the borrowed security, the Fund will incur a loss; conversely, if the price
declines, the Fund will realize a capital gain. Although a Fund's gain is
limited to the price at which it sold the security short, its potential loss is
unlimited. It is the Funds' present intention to make such sales only for the
purpose of deferring realization of gain or loss for federal income tax
purposes. Certain special federal income tax considerations may apply to short
sales, which are entered into by a Fund.
Reverse Repurchase Agreements. Each Fund may use reverse repurchase agreements
and dollar rolls as part of its investment strategy. Reverse repurchase
agreements involve sales by a Fund of portfolio assets concurrently with an
agreement by the Fund to repurchase the same assets at a later date at a fixed
price. During the reverse repurchase agreement period, the Fund continues to
receive principal and interest payments on these securities. Generally, the
effect of such a transaction is that a Fund can recover all or most of the cash
invested in the portfolio securities involved during the term of the reverse
repurchase agreement, while it will be able to keep the interest income
associated with those portfolio securities. Such transactions are advantageous
only if the interest cost to a Fund of the reverse repurchase transaction is
less than the cost of otherwise obtaining the cash.
Reverse repurchase agreements involve the risk that the market value of the
securities a Fund is obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, a Fund's use of
the proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.
A Fund may enter into dollar rolls in which the Fund sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified future
date. During the roll period, the Fund forgoes principal and interest paid on
the securities. The Fund is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale.
Swap. Each Fund may enter into swaps to hedge its exposure to interest rates and
credit risk or for investment purposes. A swap is an agreement that obligates
two parties to exchange a series of cash flows at specified intervals based upon
or calculated by reference to changes in specified prices or rates for a
specified amount of an underlying asset. The payment flows are usually netted
against each other, with the difference being paid by one party to the other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by the
failure of a counterparty is generally limited to the net interest payment to be
received by a Fund, and/or the termination value at the end of the contract.
Therefore, a Fund considers the creditworthiness of each counterparty to a swap
contract in evaluating potential credit risk. Additionally, risks may arise from
unanticipated movements in interest rates or in the value of the underlying
securities.
A Fund accrues for the interim payments on swap contracts on a daily basis, with
the net amount recorded within unrealized appreciation/depreciation of swap
contracts on the statement of assets and liabilities. Once the interim payments
are settled in cash, the net amount is recorded as realized gain/loss on swaps,
in addition to realized gain/loss recorded upon the termination of swap
contracts on the statement of operations. Fluctuations in the value of swap
contracts are recorded as a component of net change in unrealized
appreciation/depreciation of investments.
Interest Rate Swap Agreements. The Funds may enter into interest rate swaps and
may purchase or sell (i.e., write) interest rate caps and floors. A Fund expects
to enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio. A Fund may also enter into
these transactions to protect against any increase in the price of securities
the Fund anticipates purchasing at a later date. The Funds do not intend to use
these transactions in a speculative manner.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments) computed based on a contractually-based
principal (or "notional") amount. Interest rate swaps are entered into on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). Interest
rate caps and floors are similar to options in that the purchase of an interest
rate cap or floor entitles the purchaser, to the extent that a specified index
exceeds (in the case of a cap) or falls below (in the case of a floor) a
predetermined interest rate, to receive payments of interest on a notional
amount from the party selling the interest rate cap or floor. The Fund may enter
into interest rate swaps, caps and floors on either an asset-based or
liability-based basis.
The swap market has grown substantially in recent years, with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become well established and relatively liquid. Caps and floors are less liquid
than swaps. These transactions do not involve the delivery of securities or
other underlying assets or principal. Accordingly, unless there is a
counterparty default, the risk of loss to the Fund from interest rate
transactions is limited to the net amount of interest payments that the Fund is
contractually obligated to make. The Fund will enter into interest rate swap,
cap or floor transactions only with counterparties who have credit ratings of at
least A- (or the equivalent) from any one NRSRO or counterparties with
guarantors with debt securities having such a rating.
Credit Default Swap Agreements. The Funds may enter into credit default swaps.
The Fund may purchase credit protection on the referenced obligation of the
credit default swap ("Buy Contract") or provide credit protection on the
referenced obligation of the credit default swap ("Sale Contract"). A sale/(buy)
in a credit default swap provides upon the occurrence of a credit event, as
defined in the swap agreement, for the Fund to buy/(sell) from/(to) the
counterparty at the notional amount (the "Notional Amount") and
receive/(deliver) the principal amount of the referenced obligation. If a credit
event occurs, the maximum payout amount for a Sale Contract is limited to the
Notional Amount of the swap contract ("Maximum Payout Amount"). During the term
of the swap agreement, the Fund receives/(pays) interim fixed payments from/(to)
the respective counterparty, calculated at the agreed upon interest rate applied
to the Notional Amount. These interim payments are recorded within unrealized
appreciation/depreciation of swap contracts on the statement of assets and
liabilities. Credit default swaps may involve greater risks than if a Fund had
invested in the referenced obligation directly. Credit default swaps are subject
to general market risk, liquidity risk, counterparty risk and credit risk. If
the Fund is a buyer and no credit event occurs, it will lose its investment. In
addition, if the Fund is a seller and a credit event occurs, the value of the
referenced obligation received by the Fund coupled with the periodic payments
previously received, may be less than the Maximum Payout Amount it pays to the
buyer, resulting in a loss to the Fund.
Future Developments. A Fund may, following written notice to its stockholders,
take advantage of other investment practices which are not at present
contemplated for use by the Fund or which currently are not available but which
may be developed, to the extent such investment practices are both consistent
with the Fund's investment objective and legally permissible for the Fund. Such
investment practices, if they arise, may involve risks that exceed those
involved in the activities described above.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following investment restrictions, which may not be
changed without the approval of the holders of a majority of that Fund's
outstanding voting securities as defined above. The percentage limitations set
forth below, as well as those described in the Prospectus/Proxy Statement and
elsewhere in this SAI, apply only at the time an investment is made or other
relevant action is taken by a Fund.
1. Each Fund will not make loans except through (a) the purchase of
debt obligations in accordance with its investment objective and
policies; (b) the lending of portfolio securities; or (c) the use
of repurchase agreements;
2. Each Fund will not invest 25% or more of its total assets in
securities of issuers conducting their principal business
activities in the same industry, except that this restriction
does not apply to U.S. Government Securities;
3. Each Fund will not borrow money, except a Fund may borrow (a)
from a bank or other entity in a privately arranged transaction
and issue commercial paper, bonds, debentures or notes, in series
or otherwise, with such interest rates, conversion rights and
other terms and provisions as are determined by the Fund's Board,
if after such borrowing or issuance there is asset coverage of at
least 300% as defined in the 1940 Act, and (b) for temporary
purposes in an amount not exceeding 5% of the value of the total
assets of the Fund;
4. Each Fund will not pledge, hypothecate, mortgage or otherwise
encumber its assets, except to secure permitted borrowings;
5. Each Fund will not invest in companies for the purpose of
exercising control;
6. Each Fund will not make short sales of securities or maintain a
short position, unless at all times when a short position is open
it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and equal
in amount to, the securities sold short ("short sales against the
box"), and unless not more than 10% of the Fund's net assets
(taken at market value) is held as collateral for such sales at
any one time (it is the Fund's present intention to make such
sales only for the purpose of deferring realization of gain or
loss for federal income tax purposes);
7. Each Fund will not (a) purchase or sell real estate, except that
it may purchase and sell securities of companies which deal in
real estate or interests therein and securities that are secured
by real estate, provided such securities are Sovereign Debt
Obligations; (b) purchase or sell commodities or commodity
contracts; (c) invest in interests in oil, gas, or other mineral
exploration or development programs; and (d) purchase securities
on margin, except for such short-term credits as may be necessary
for the clearance of transactions;
8. Each Fund would own more than 3% of the total outstanding voting
stock of any investment company and not more than 5% of the value
of the Fund's total assets may be invested in the securities of
any investment company; and
9. Each fund will not act as an underwriter of securities, except
that the Fund may acquire restricted securities under
circumstances in which, if such securities were sold, the Fund
might be deemed to be an underwriter for purposes of the
Securities Act of 1933.
RISK FACTORS AND SPECIAL CONSIDERATIONS
General. The NAV of shares of a Fund varies as the aggregate value of the Fund's
portfolio securities increases or decreases. A Fund's NAV changes as the general
levels of interest rates fluctuate. When interest rates decline, the value of a
portfolio invested in fixed-income securities can be expected to rise.
Conversely, when interest rates rise, the value of a portfolio invested in
fixed-income securities can be expected to decline. If the Adviser's expectation
of changes in interest rates or its evaluation of the normal yield relationships
in the fixed-income markets proves to be incorrect, a Fund's income, NAV and
potential capital gain may be decreased or its potential capital loss may be
increased.
Although changes in the value of a Fund's portfolio securities subsequent to
their acquisition are reflected in the Fund's NAV, such changes will not affect
the income received by the Fund from such securities. The dividends paid by a
Fund increase or decrease in relation to the income received by the Fund from
its investments, which is reduced by the Fund's expenses before being
distributed to the Fund's stockholders.
For these reasons, an investment in shares of the Fund should not constitute a
complete investment program and may not be appropriate for investors who cannot
assume the greater risk of capital depreciation inherent in seeking higher
income.
Borrowing. A Fund may, if and when market conditions dictate, borrow, including
on a secured basis, from bank or other entities in privately arranged
transactions to increase the money available to the Fund to invest in securities
when the Fund believes that the income from the securities financed will be
greater than the interest expense paid on the borrowing. Such borrowings involve
additional risk to a Fund, since the interest expense may be greater than the
income from or appreciation of the securities carried by the borrowings and
since the value of the securities carried may decline below the amount borrowed.
A Fund may also borrow to finance repurchases of or tender offers for its shares
when the Fund deems it desirable in order to avoid the untimely disposition of
portfolio securities. A Fund reserves the right to issue preferred stock,
commercial paper, bonds, debentures or notes, in series or otherwise, with such
interest rates, conversion rights and other terms and provisions as are
determined by the Fund's Board of Directors.
A Fund may borrow to the maximum extent permitted under the 1940 Act. The 1940
Act requires a Fund to maintain "asset coverage" of not less than 300% of its
"senior securities representing indebtedness," as those terms are defined and
used in the 1940 Act. In addition, a Fund may not make any cash distributions to
its stockholders if, after the distribution, there would be less than 300% asset
coverage of a senior security representing indebtedness for borrowings
(excluding for this purpose certain evidences of indebtedness made by a bank or
other entity and privately arranged, and not intended to be publicly
distributed). This limitation on a Fund's ability to make distributions could
under certain circumstances impair the Fund's ability to maintain its
qualification for taxation as a registered investment company.
A Fund may also borrow for temporary purposes in an amount not exceeding 5% of
the value of the total assets of the Fund. Such borrowings are not subject to
the asset coverage restrictions set forth in the preceding paragraph.
Any investment gains made with the proceeds obtained from borrowings in excess
or interest paid on the borrowings will cause the net income per share or the
NAV per share of a Fund's common stock to be greater than would otherwise be the
case. On the other hand, if the investment performance of the additional
securities purchased fails to cover their cost (including any interest paid on
the money borrowed) to a Fund, then the net income per share or NAV per share of
the Fund's common stock will be less than would otherwise be the case.
This is the speculative factor known as "leverage."
Effects of Leverage. Utilization of leverage, which is usually considered
speculative, involves certain risks to stockholders. These include a higher
volatility of the NAV of the common stock, caused by favorable or adverse
changes in currency exchange rates. In addition, fluctuations in the interest
rates on a Fund's indebtedness will affect the return to stockholders, with
increases in such rates decreasing such return.
To the extent that the current interest rate on a Fund's indebtedness approaches
the net return on the leveraged portion of the Fund's investment portfolio, the
benefit of leverage to stockholders will be reduced, and if the current interest
rate on the indebtedness were to exceed the net return on such portion of the
Funds' portfolio, the Fund's leverage would result in a lower rate of return to
stockholders and in a lower NAV than if a Fund were not leveraged. In an extreme
case, if a Fund's current investment income were not sufficient to meet interest
requirements on the indebtedness or if a Fund failed to maintain the asset
coverage required by the 1940 Act, it could be necessary for the Fund to
liquidated certain of its investments at a time when it may be disadvantageous
to do so, thereby reducing its NAV.
Investments in Lower-Rated Securities. Securities rated below investment grade,
i.e., Ba and lower by Moody's or BB and lower by S&P ("lower-rated securities"),
or, if not rated, determined by the Adviser to be of equivalent quality, are
subject to greater risk of loss of principal and interest than higher-rated
securities and are considered to be predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal, which may in any case
decline during sustained periods of deteriorating economic conditions or rising
interest rates. They are also generally considered to be subject to greater
market risk than higher-rated securities in times of deteriorating economic
conditions. In addition, lower-rated securities may be more susceptible to real
or perceived adverse economic conditions than investment grade securities,
although the market values of securities rated below investment grade and
comparable unrated securities tend to react less to fluctuations in interest
rate levels than do those of higher-rated securities. Securities rated Ba by
Moody's or BB by S&P are judged to have speculative characteristics or to be
predominantly speculative with respect to the issuer's ability to pay interest
and repay principal. Securities rated B by Moody's and S&P are judged to have
highly speculative characteristics or to be predominantly speculative. Such
securities may have small assurance of interest and principal payments.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, the Funds may experience difficulty
in valuing such securities and, in turn, the Funds' assets.
The Adviser will try to reduce risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, the Adviser's research and credit
analysis are a correspondingly more important aspect of its program for managing
the Fund's securities than would be the case if the Fund did not invest in
lower-rated securities.
In seeking to achieve the Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in the Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the NAV of the Fund.
Ratings of securities by Moody's and S&P are a generally accepted barometer of
credit risk. They are, however, subject to certain limitations from an
investor's standpoint. The rating of a security is heavily weighted by past
developments and does not necessarily reflect probable future conditions. There
is frequently a lag between the time a rating is assigned and the time it is
updated. In addition, there may be varying degrees of difference in the credit
risk of securities within each rating category. See Appendix A for a description
of Moody's and S&P's bond ratings.
Certain lower-rated securities in which the Funds may invest may contain call or
buy-back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, the Funds may have to replace the
called security with a lower yielding security, resulting in a decreased rate of
return to the Funds.
U.S. Corporate Fixed-Income Securities. The U.S. corporate fixed-income
securities in which the Funds will invest may include securities issued in
connection with corporate restructurings such as takeovers or leveraged buyouts,
which may pose particular risks. Securities issued to finance corporate
restructurings may have special credit risks due to the highly leveraged
conditions of the issuer. In addition, such issuers may lose experienced
management as a result of the restructuring. Finally, the market price of such
securities may be more volatile to the extent that expected benefits from the
restructuring do not materialize. The Funds may also invest in U.S. corporate
fixed-income securities that are not current in the payment of interest or
principal or are in default, so long as the Adviser believes such investment is
consistent with the Funds' investment objectives. The Funds' rights with respect
to defaults on such securities will be subject to applicable U.S. bankruptcy,
moratorium and other similar laws.
Sovereign Debt Obligations. No established secondary markets may exist for many
of the Sovereign Debt Obligations in which the Funds will invest. Reduced
secondary market liquidity may have an adverse effect on the market price and a
Fund's ability to dispose of particular instruments when necessary to meet its
liquidity requirements or in response to specific economic events such as a
deterioration in the creditworthiness of the issuer. Reduced secondary market
liquidity for certain Sovereign Debt Obligations may also make it more difficult
for a Fund to obtain accurate market quotations for the purpose of valuing its
portfolio. Market quotations are generally available on many Sovereign Debt
Obligations only from a limited number of dealers and may not necessarily
represent firm bids of those dealers or prices for actual sales.
By investing in Sovereign Debt Obligations, the Funds will be exposed to the
direct or indirect consequences of political, social and economic changes in
various countries. Political changes in a country may affect the willingness of
a foreign government to make or provide for timely payments of its obligations.
The country's economic status, as reflected, among other things, in its
inflation rate, the amount of its external debt and its gross domestic product,
will also affect the government's ability to honor its obligations.
Many countries providing investment opportunities for the Funds have experienced
substantial, and in some periods extremely high, rates of inflation for many
years. Inflation and rapid fluctuations in inflation rates have had and may
continue to have adverse effects on the economies and securities markets of
certain of these countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries.
Investing in Sovereign Debt Obligations involves economic and political risks.
The Sovereign Debt Obligations in which the Funds will invest in most cases
pertain to countries that are among the world's largest debtors to commercial
banks, foreign governments, international financial organizations and other
financial institutions. In recent years, the governments of some of these
countries have encountered difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, obtaining new credit to finance interest payments. Certain governments
may not be able to make payments of interest on or principal of Sovereign Debt
Obligations as those payments have come due. Obligations arising from past
restructuring agreements may affect the economic performance and political and
social stability of those issuers.
Central banks and other governmental authorities which control the servicing of
Sovereign Debt Obligations may not be willing or able to permit the payment of
the principal or interest when due in accordance with the terms of the
obligations. As a result, the issuers of Sovereign Debt Obligations may default
on their obligations. Defaults on certain Sovereign Debt Obligations have
occurred in the past. Holders of certain Sovereign Debt Obligations may be
requested to participate in the restructuring and rescheduling of these
obligations and to extend further loans to the issuers. The interests of holders
of Sovereign Debt Obligations could be adversely affected in the course of
restructuring arrangements or by certain other factors referred to below.
Furthermore, some of the participants in the secondary market for Sovereign Debt
Obligations may also be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to other
market participants.
The ability of governments to make timely payments on their obligations is
likely to be influenced strongly by the issuer's balance of payments, including
export performance, and its access to international credits and investments. A
country whose exports are concentrated in a few commodities could be vulnerable
to a decline in the international prices of one or more of those commodities.
Increased protectionism on the part of a country's trading partners could also
adversely affect the country's exports and diminish its trade account surplus,
if any.
To the extent that a country receives payment for its exports in currencies
other than dollars, its ability to make debt payments denominated in dollars
could be adversely affected. To the extent that a country develops a trade
deficit, it will need to depend on continuing loans from foreign governments,
multilateral organizations or private commercial banks, aid payments from
foreign governments and on inflows of foreign investment. The access of a
country to these forms of external funding may not be certain, and a withdrawal
of external funding could adversely affect the capacity of a government to make
payments on its obligations. In addition, the cost of servicing debt obligations
can be affected by a change in international interest rates since the majority
of these obligations carry interest rates that are adjusted periodically based
upon international rates.
Another factor bearing on the ability of a country to repay Sovereign Debt
Obligations is the level of the country's international reserves. Fluctuations
in the level of these reserves can affect the amount of foreign exchange readily
available for external debt payments and, thus, could have a bearing on the
capacity of the country to make payments in its Sovereign Debt Obligations.
The Funds are permitted to invest in Sovereign Debt Obligations that are not
current in the payment of interest or principal or are in default, so long as
the Adviser believes it to be consistent with the Funds' investment objectives.
The Funds may have limited legal recourse in the event of a default with respect
to certain Sovereign Debt Obligations it holds. For example, remedies from
defaults on certain Sovereign Debt Obligations, unlike those on private debt,
must, in some cases, be pursued in the courts of the defaulting party itself.
Legal recourse therefore may be significantly diminished. Bankruptcy, moratorium
and other similar laws applicable to issuers of Sovereign Debt Obligations may
be substantially different from those applicable to issuers of private debt
obligations. The political context, expressed as the willingness of an issuer of
Sovereign Debt Obligations to meet the terms of the debt obligation, for
example, is of considerable importance. In addition, no assurance can be given
that the holders of commercial bank debt will not contest payments to the
holders of securities issued by foreign governments in the event of default
under commercial bank loan agreements.
Non-Diversified Status. Each Fund is a "non-diversified" investment company,
which means the Fund is not limited in the proportion of its assets that may be
invested in the securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify as a "regulated investment company" for
purposes of the United States Internal Revenue Code of 1986, as amended (the
"Code"), which will relieve the Fund of any liability for federal income tax to
the extent its earnings are distributed to stockholders. To so qualify, among
other requirements, the Fund will limit its investments so that, at the close of
each quarter of the taxable year, (i) not more than 25% of the market value of
the Fund's total assets will be invested in the securities of a single issuer,
and (ii) with respect to 50% of the market value of its total assets, not more
than 5% of the market value of its total assets will be invested in the
securities of a single issuer and the Fund will not own more than 10% of the
outstanding voting securities of a single issuer. A Fund's investments in U.S.
Government Securities are not subject to these limitations. Because the Fund, as
a non-diversified investment company may invest in a smaller number of
individual issuers than a diversified investment company, an investment in the
Fund may, under certain circumstances, present greater risk to an investor than
an investment in a diversified company.
Securities issued or guaranteed by foreign governments are not treated like U.S.
Government Securities for purposes of the diversification tests described in the
preceding paragraph, but instead are subject to these tests in the same manner
as the securities of non-governmental issuers. In this regard, Sovereign Debt
Obligations issued by different issuers located in the same country are often
treated as issued by a single issuer for purposes of these diversification
tests. Certain issuers of Structured Securities and Participations may be
treated as separate issuers for purposes of these tests.
Because the Funds are non-diversified investment companies, they may invest in a
smaller number of individual issuers than a diversified investment company, and
an investment in such Fund may, under certain circumstances, present greater
risk to an investor than an investment in a diversified investment company.
Repurchase of Shares. In recognition of the possibility that a Fund's shares
might trade at a discount to NAV, each Fund's Board has determined that it would
be in the interest of stockholders for the Fund to attempt to reduce or
eliminate such a market value discount should it exist. To that end, Managed
Dollar has a policy to conduct annual tender offer in the second quarter of each
year if its shares trade at a discount from NAV of 3% or more determined on the
basis of the discount or premium as of the last trading day in each week during
a designated 12-week period. Global High Income has no mandatory tender offer
provision. However, Global High Income has a policy that the Fund could take
such actions and the Directors would only consider such actions if the Fund's
shares had been trading at a discount to NAV in excess of 5% as of the last day
of each week in the 12 weeks preceding a Board meeting. The Directors of Global
High Income presently intend each quarter to consider the making of a tender
offer. The Directors may at any time, however, decide that the Fund should not
make a tender offer.
Subject to a Fund's fundamental policy with respect to borrowings, the Fund may
incur debt to finance repurchases and/or tender offers. Interest on any such
borrowing will reduce the Fund's net income.
There can be no assurance that repurchases and/or tender offers will result in a
Fund's shares trading at a price equal to their NAV. Each Fund anticipates that
the market price of its shares will from time to time vary from NAV. The market
price of a Fund's shares will, among other things, be affected by the relative
demand for and supply of such shares in the market, the Fund's investment
performance, the Fund's dividends and yield and investor perception of the
Fund's overall attractiveness as an investment as compared with other investment
alternatives. Nevertheless, the fact that a Fund's shares may be the subject of
tender offers at NAV from time to time may reduce the spread that might
otherwise exist between market price and NAV. In the opinion of the Adviser,
sellers may be less inclined to accept a significant discount if they have a
reasonable expectation of being able to recover NAV in conjunction with a
possible tender offer.
Although each Fund's Board believes that share repurchases and tender offers
might, in certain circumstances have a favorable effect an the market price of a
Fund's shares, it should be recognized that the acquisition of shares by the
Fund would decrease the total assets of the Fund and therefore have the effect
of increasing the Fund's expense ratio. Even if a tender offer has been made, it
is a Board's policy, which may be changed by the Board, not to accept tenders or
effect repurchases if (1) such transactions if consummated, would (a) result in
the delisting of the Fund's shares from the New York Stock Exchange ("NYSE")
(the NYSE having advised the Fund that it would consider delisting if the
aggregate market value of the Fund's outstanding shares is less than $5,000,000,
the number of publicly held shares falls below 600,000 or the number of
round-lot holders fall below 1,200), or (b) impair the Fund's status as a
regulated investment company under the Code (which would make the Fund a taxable
entity, causing the Fund's income to be taxed at the corporate level in addition
to the taxation of stockholders who receive dividends from the Fund); (2) the
Fund would not be able to liquidate portfolio securities in an orderly manner
and consistent with the Fund's investment policies and objective in order to
repurchase shares; or (3) there is, in the Board's judgment, any material (a)
legal action or proceeding instituted or threatened challenging such
transactions or otherwise materially adversely affecting the Fund, (b)
suspension of or limitation on prices for trading securities generally on the
NYSE of any foreign exchange on which portfolio securities of the Fund are
traded, (c) declaration of a banking moratorium by federal, state or foreign
authorities or any suspension of payment by banks in the United States, New York
State or foreign countries in which the Fund invests, (d) limitation affecting
the Fund or the issuers of its portfolio securities imposed by federal, state or
foreign authorities on the extension of credit by lending institutions or on the
exchange of foreign currency, (e) commencement of war, armed hostilities or
other international or national calamity directly or indirectly involving the
United States or other countries in which the Fund invests or (f) other event or
condition which would have a material adverse effect on the Fund or its
stockholders if shares were repurchased. A Board may modify these conditions in
light of experience.
Any tender offer made by a Fund will be at a price equal to the NAV of the
shares on a date subsequent to the Fund's receipt of all tenders. Each offer
will be made and stockholders notified in accordance with the requirements of
the Securities Exchange Act of 1934, as amended and the 1940 Act, either by
publication or mailing or both. Each offering document will contain such
information as is prescribed by such laws and the rules and regulations
promulgated thereunder. When a tender offer is authorized to be made by a Fund's
Board, a stockholder wishing to accept the offer will be required to tender all
(but not less thin all) of the shares owned by such stockholder (or attributed
to the stockholder for federal income tax purposes under Section 318 of the
Code). A Fund will purchase all shares tendered in accordance with the terms of
the offer unless it determines to accept none of them (based upon one of the
conditions set forth above). When the number of shares tendered exceeds the
number of shares offered for purchase, a Fund will purchase shares from
tendering stockholders on a pro rata basis, unless the Fund determines not to
purchase any shares. Each person tendering shares will be required to submit a
check in the amount of $25.00, payable to the Fund, which will be used to help
defray the costs associated with effecting the tender offer. This $25.00 fee
will be imposed upon each tendering stockholder any of whose tendered shares are
purchased in the offer, and will be imposed regardless of the number of shares
purchased. A Fund expects the cost to the Fund of effecting a tender offer will
exceed the aggregate of all such fees received from those who tender offer their
shares. Costs associated with the tender offer will be charged against capital.
During the period of the tender offer, a Fund's stockholders will be able to
obtain the Fund's current NAV by use of a toll-free telephone number.
If a Fund must liquidate portfolio securities in order to purchase Fund shares
tendered, the Fund may realize gains and losses. If the portfolio securities
sold are "Section 998" items, a Fund's distributable net investment income could
be positively or adversely affected. The portfolio turnover rate of a Fund may
or may not be affected by the Fund's repurchase of shares pursuant to a tender
offer.
MANAGEMENT OF THE FUNDS
Directors and Officers
The Directors and principal officers of the Funds and their principal
occupations during the past five years are set forth below. Unless otherwise
specified, the address of each such person is 1345 Avenue of the Americas, New
York, NY 10105. Each Director and officer is affiliated as such with one or more
of the other registered investment companies sponsored by the Adviser.
Directors
Principal Occupation
Fund During the Past Five
Name, Address* First Year Years and Other
and Age Elected Office Affiliations
------------- ------- ------ ------------
Robert M. Keith,** Global High President Executive Vice
49 Income - 2009 President of the
Adviser*** since July
2008. Director of
AllianceBernstein
Investments, Inc.
("ABI")*** since 2006
and the head of ABI
since July 2008.
Prior to joining ABI
in 2006, Executive
Managing Director of
Bernstein Global
Wealth Management, and
prior thereto, Senior
Managing Director and
Global Head of Client
Service and Sales of
the Adviser's
institutional
investment management
business since 2004.
Prior thereto, he was
a Managing Director
and Head of North
American Client
Service and Sales in
the Adviser's
institutional
investment management
business, with which
he has been associated
since prior to 2004.
William H. Foulk, Jr., +, # Global High Chairman Investment Adviser and
76 Income - 1992 Director an Independent
Managed Dollar Consultant.
- 1993 Previously, he was
Senior Manager of
Barrett Associates,
Inc., a registered
investment adviser,
with which he had been
associated since prior
to 2004. He was
formerly Deputy
Comptroller and Chief
Investment Officer of
the State of New York
and, prior thereto,
Chief Investment
Officer of the New
York Bank for Savings.
John H. Dobkin, + Global High Director Consultant. Formerly,
67 Income - 1992 President of Save
Managed Dollar Venice, Inc.
- 1993 (preservation
organization) from
2001 - 2002, Senior
Advisor from June 1999
- June 2000 and
President of Historic
Hudson Valley
(historic
preservation) from
December 1989 - May
1999. Previously,
Director of the
National Academy of
Design.
Michael J. Downey, + Global High Director Private Investor since
65 Income - 2005 January 2004.
Managed Dollar Formerly, managing
- 2005 partner of Lexington
Capital, LLC
(investment advisory
firm) from December
1997 until December
2003. From 1987 until
1993, Chairman and CEO
of Prudential Mutual
Fund Management.
Director of Asia
Pacific Fund, Inc.,
The Merger Fund and
Prospectus Acquisition
Corp. (financial
services).
D. James Guzy, + Global High Director Chairman of the Board
73 Income - 2005 of PLX Technology
Managed Dollar (semi-conductors) and
- 2005 of SRC Computers Inc.,
with which he has been
associated since prior
to 2004. Director of
Intel Corporation
(semi-conductors) and
Cirrus Logic
Corporation
(semi-conductors).
Nancy P. Jacklin, + Global High Director Professorial Lecturer
60 Income - 2006 at the Johns Hopkins
Managed Dollar School of Advanced
- 2006 International Studies
and Adjunct Professor
at Georgetown
University Law Center
in the 2008-2009
academic year.
Formerly, U.S.
Executive Director of
the International
Monetary Fund
(December 2002-May
2006); Partner,
Clifford Chance
(1992-2002); Sector
Counsel, International
Banking and Finance,
and Associate General
Counsel, Citicorp
(1985-1992); Assistant
General Counsel
(International),
Federal Reserve Board
of Governors
(1982-1985); and
Attorney Advisor, U.S.
Department of the
Treasury (1973-1982).
Member of the Bar of
the District of
Columbia and of New
York; member of the
Council on Foreign
Relations.
Garry L. Moody, + Global High Director Formerly, Partner,
57 Income - 2008 Deloitte & Touche LLP,
Managed Dollar Vice Chairman, and
- 2008 U.S. and Global
Managing Partner,
Investment Management
Services Group
1995-2008.
Marshall C. Turner, Jr., + Global High Director Interim CEO of MEMC
67 Income - 2005 Electronic Materials,
Managed Dollar Inc. (semi-conductor
- 2005 and solar cell
substrates) since
November 2008 until
March 2, 2009. He was
Chairman and CEO of
Dupont Photomasks,
Inc. (components of
semi-conductor
manufacturing),
2003-2005, and
President and CEO,
2005-2006, after the
company was renamed
Toppan Photomasks,
Inc. Director of
Xilinx, Inc.
(programmable logic
semi-conductors) and
MEMC Electronic
Materials, Inc.
Earl D. Weiner, + Global High Director Of Counsel, and
69 Income - 2007 Partner prior to
Managed Dollar January 2007, of the
- 2007 law firm Sullivan &
Cromwell LLP; member
of ABA Federal
Regulation of
Securities Committee
Task Force on Fund
Director's Guidebook,
member of Advisory
Board of Sustainable
Forestry Management
Limited.
* The address for the Funds' Directors is 1345 Avenue of the Americas, New
York, New York 10105.
** Mr. Keith is an "interested person," as defined in Section 2(a)(19) of the
1940 Act, of Global High Income due to his position as an Executive Vice
President of the Adviser.
*** The Adviser and ABI are affiliates of each Fund.
+ Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
# Member of the Fair Value Pricing Committee.
During the Fund's fiscal year ended in 2009, the Board of Global High Income met
9 times. During the Fund's fiscal year ended in 2008, the Board of Managed
Dollar met 10 times. The Funds do not have a policy that requires a Director to
attend annual meetings of stockholders.
Each Fund's Board has four standing committees: an Audit Committee, a Governance
and Nominating Committee, an Independent Directors Committee, and a Fair Value
Pricing Committee. The members of the Committees are identified above in the
table listing the Directors. The function of the Audit Committee of each Fund is
to assist the Board in its oversight of a Fund's financial reporting process.
The members of the Audit Committee are "independent" as required by applicable
listing standards of the NYSE. During the Fund's fiscal year ended in 2009, the
Audit Committee of Global High Income met 4 times. During the Fund's fiscal year
ended in 2008, the Audit Committee of Managed Dollar met 3 times. During the
Fund's fiscal year ended in 2009, the Governance and Nominating Committee of
Global High Income met 4 times. During the Fund's fiscal year ended in 2008, the
Governance and Nominating Committee of Managed Dollar met 4 times.
Each Fund's Board of Directors has adopted a charter for its Governance and
Nominating Committee, a copy of which may be found on the Adviser's website,
http://www.alliancebernstein.com (click on Investor Solutions/Mutual
Funds/Closed-End). Pursuant to the charter of the Governance and Nominating
Committee, the Governance and Nominating Committee assists each Board in
carrying out its responsibilities with respect to governance of a Fund and
identifies, evaluates and selects and nominates candidates for that Board. The
Committee also may set standards or qualifications for Directors. The Committee
may consider candidates as Directors submitted by a Fund's current Board
members, officers, investment adviser, stockholders and other appropriate
sources.
The Governance and Nominating Committee will consider candidates submitted by a
stockholder or group of stockholders who have owned at least 5% of a Fund's
outstanding common stock for at least two years at the time of submission and
who timely provide specified information about the candidates and the nominating
stockholder or group. To be timely for consideration by the Committee, the
submission, including all required information, must be submitted in writing to
the attention of the Secretary at the principal executive offices of a Fund not
less than 120 days before the date of the proxy statement for the previous
year's annual meeting of stockholders. The Committee will consider only one
candidate submitted by such a stockholder or group for nomination for election
at an annual meeting of stockholders. The Committee will not consider
self-nominated candidates.
The Governance and Nominating Committee will consider and evaluate candidates
submitted by stockholders on the basis of the same criteria as those used to
consider and evaluate candidates submitted from other sources. These criteria
include the candidate's relevant knowledge, experience, and expertise, the
candidate's ability to carry out his or her duties in the best interests of a
Fund and the candidate's ability to qualify as a disinterested Director.
The function of each Fund's Fair Value Pricing Committee is to consider, in
advance if possible, any fair valuation decision of the Adviser's Valuation
Committee relating to a security held by a Fund made under unique or highly
unusual circumstances not previously addressed by the Valuation Committee that
would result in a change in the Fund's NAV by more than $0.01 per share. The
Fair Value Pricing Committee did not meet during each Fund's most recently
completed fiscal year.
The function of each Fund's Independent Directors Committee is to consider and
take action on matters that the Board or Committee believes should be addressed
in executive session of the disinterested Directors, such as review and approval
of the Advisory Agreements. During the Fund's fiscal year ended in 2009, the
Independent Directors Committee of Global High Income met 8 times. During the
Fund's fiscal year ended in 2008, the Independent Directors Committee of Managed
Dollar met 7 times.
Officers
Position(s)
Name, Address* (Month and Year First Principal Occupation
and Age Elected) During the Past 5 Years
----------------- -------- -----------------------
Robert M. Keith,** President and Chief See biography above.
48 Executive Officer
(09/08)
Philip L. Kirstein, Senior Vice President Senior Vice President
63 and Independent and Independent
Compliance Officer Compliance Officer of
(10/04) the AllianceBernstein
Funds, with which he
has been associated
since October 2004.
Prior thereto, he was
Of Counsel to
Kirkpatrick & Lockhart,
LLP from October 2003
to October 2004, and
General Counsel of
Merrill Lynch
Investment Managers,
L.P. since prior to
2004.
Paul J. DeNoon, Vice President Senior Vice President
46 (04/94) of the Adviser,*** with
which he has been
associated since prior
to 2004.
Joseph J. Mantineo, Treasurer and Senior Vice President
50 Chief Financial of AllianceBernstein
Officer Investor Services, Inc.
(08/06) ("ABIS"),*** with which
he has been associated
since prior to 2004.
Phyllis J. Clarke, Controller Assistant Vice
48 (11/08) President of ABIS,***
with which she has been
associated since prior
to 2004.
Emilie D. Wrapp, Secretary, Global High Senior Vice President,
53 Income and Managed Assistant General
Dollar Counsel and Assistant
(10/05) Secretary of ABI,***
with which she has been
associated since prior
to 2004.
* The address for the Funds' officers is 1345 Avenue of the Americas, New
York, New York 10105.
** Mr. Keith was elected as President and Chief Executive Officer of each Fund
as of September 23, 2008.
*** An affiliate of the Fund.
A Fund does not pay any fees to, or reimburse expenses of, any Director during a
time when such Director is considered an "interested person" of the Fund, as
defined by the 1940 Act. The aggregate compensation paid by each of Global High
Income and Managed Dollar to each of its Directors during its fiscal year ended
in 2009 and 2008, respectively, the aggregate compensation paid to each of the
Directors during calendar year 2008 by all of the investment companies in the
AllianceBernstein Fund Complex, and the total number of investment companies
(and separate investment portfolios within those companies) in the
AllianceBernstein Fund Complex with respect to which each of the Directors
serves as a director or trustee, are set forth below. Neither the Funds nor any
other investment company in the AllianceBernstein Fund Complex provides
compensation in the form of pension or retirement benefits to any of its
directors or trustees.
Total
Number of
Investment
Total Portfolios
Number of within the
Investment Alliance-
Total Companies Bernstein
Aggregate Compensation in the Fund
Compensation from the Alliance- Complex,
from Global Alliance- Bernstein Including
High Income Bernstein Fund the Funds,
and Managed Fund Complex, as to
Dollar During Complex, Including which the
the Fiscal Including the Funds, Director
Year Ended the Funds, as to which is a
in 2009 and During the Director Director
2008, Calendar is a Director or a
Name of Director respectively Year 2008 or a Trustee Trustee
---------------- ------------ --------- ------------ ----------
Robert M. Keith* $ 0 $ 0 6 6
Global High
Income
William H. Foulk, Jr. $ 10,719 $ 486,700 35 91
Global High
Income
$ 10,674
Managed Dollar
John H. Dobkin $ 5,970 $ 245,470 33 89
Global High
Income
$ 6,862
Managed Dollar
Michael J. Downey $ 5,970 $ 243,300 33 89
Global High
Income
$ 6,265
Managed Dollar
D. James Guzy $ 5,970 $ 243,300 33 89
Global High
Income
$ 9,265
Managed Dollar
Nancy P. Jacklin $ 5,970 $ 244,500 33 89
Global High
Income
$ 6,265
Managed Dollar
Garry L. Moody $ 6,775 $ 269,230 32 88
Global High
Income
$ 5,270
Managed Dollar
Marshall C. Turner, Jr. $ 5,970 $ 243,300 33 89
Global High
Income
$ 6,265
Managed Dollar
Earl D. Weiner $ 6,377 $ 261,300 33 89
Global High
Income
$ 6,600
Managed Dollar
* Mr. Keith was elected Director for Global High Income as of March 31, 2009.
As of April 17, 2009, each of the Directors of each Fund owned less than 1% of
the shares of such Fund and the Directors and officers of each Fund as a group
owned less than 1% of the shares of each such Fund. During each Fund's most
recently completed fiscal year, none of the Funds' Directors engaged in a
purchase or sale of the securities of the Adviser or any of its parents or
subsidiaries in an amount exceeding 1% of the relevant class of securities.
The dollar range of each Fund's securities owned by each Director and the
aggregate dollar range of securities owned in the AllianceBernstein Fund Complex
are set forth below.
Aggregate Dollar
Range of Equity
Securities in the
Funds in the
Dollar Range of Equity AllianceBernstein
Securities in a Fund as of Fund Complex as
Name of Director December 31, 2008 of December 31, 2008
---------------- -------------------------- --------------------
Robert M. Keith* N/A Global High Income N/A
William H. Foulk, Jr. $10,001 - $50,000 Global High Income Over $100,000
NONE Managed Dollar
John H. Dobkin NONE Global High Income Over $100,000
NONE Managed Dollar
Michael J. Downey NONE Global High Income Over $100,000
NONE Managed Dollar
D. James Guzy NONE Global High Income $10,000 - $50,000
NONE Managed Dollar
Nancy P. Jacklin $10,001 - $50,000 Global High Income Over $100,000
NONE Managed Dollar
Garry L. Moody NONE Global High Income Over $100,000
NONE Managed Dollar
Marshall C. Turner, Jr. NONE Global High Income Over $100,000
NONE Managed Dollar
Earl D. Weiner $10,001 - $50,000 Global High Income Over $100,000
NONE Managed Dollar
* Mr. Keith was elected Director for Global High Income as of March 31, 2009.
Each Fund, the Adviser and each Fund's principal underwriter have adopted a Code
of Ethics under Rule 17j-1 of the 1940 Act. These Codes do permit personnel
subject to the Codes to invest in securities, including securities that may be
purchased or held by the Fund. These Codes may be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. For information on the operation
of the Public Reference Room call the SEC at 1-202-551-8090. In addition, these
Codes are available on the SEC's Internet site at http://www.sec.gov or upon
request (for a duplicating fee) at the following E-mail address:
publicinfo@sec.gov or by writing the SEC's Public Reference Section, Washington,
DC 20549-0102.
Adviser
The Funds' investment adviser, AllianceBernstein L.P. (the "Adviser"), 1345
Avenue of the Americas, New York, NY 10105, is a leading international
investment adviser managing client accounts with assets as of December 31, 2008
totaling more than $462 billion (of which more than $65 billion represented the
assets of investment companies). As of December 31, 2008, 2009, the Adviser
managed retirement assets for many of the largest public and private employee
benefit plans (including 49 of the nations' FORTUNE 100 companies), for public
employee retirement funds in 38 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide. The 36
registered investment companies managed by the Adviser, comprising 106 separate
investment portfolios, currently have approximately 4 million stockholder
accounts.
The Adviser is a registered investment adviser under the Investment Advisers Act
of 1940, as amended. As of December 31, 2008, AllianceBernstein Holding, L.P.
("Holding"), a Delaware limited partnership, owned approximately 34.3% of the
issued and outstanding units of limited partnership interest in the Adviser
("AllianceBernstein Units"). Units representing assignments of beneficial
ownership of limited partnership interests in Holding ("Holding Units") trade
publicly on the Exchange under the ticker symbol "AB". AllianceBernstein Units
do not trade publicly and are subject to significant restrictions on transfer.
AllianceBernstein Corporation ("AB Corp.") is the general partner of both the
Adviser and Holding. AB Corp. owns 100,000 general partnership units in Holding
and a 1% general partnership interest in the Adviser. AB Corp. is an indirect
wholly-owned subsidiary of AXA Financial, Inc. ("AXA Financial"), a Delaware
corporation.
As of December 31, 2008, AXA and certain of its subsidiaries beneficially owned
approximately 62.0% of the issued and outstanding AllianceBernstein Units and
approximately 1.6% of the issued and outstanding Holding Units which, including
the general partnership interests in the Adviser and Holding, represent an
economic interest of approximately 62.4% in the Adviser. As of December 31,
2008, SCB Partners, Inc., a wholly-owned subsidiary of SCB, Inc., beneficially
owned approximately 3.1% of the issued and outstanding AllianceBernstein Units.
AXA, a French company, is the holding company for an international group of
companies and a worldwide leader in financial protection and wealth management.
AXA operates primarily in Western Europe, North America and the Asia/Pacific
region and, to a lesser extent, in other regions including the Middle East,
Africa and South America. AXA has five operating business segments: life and
savings, property and casualty insurance, international insurance (including
reinsurance), asset management and other financial services. AXA Financial is a
wholly-owned subsidiary of AXA. AXA Equitable is an indirect wholly-owned
subsidiary of AXA Financial.
Under the Advisory Agreement, the Adviser furnishes advice and recommendations
with respect to the Fund's portfolio of securities and investments and provides
persons satisfactory to the Board of Directors to act as officers and employees
of the Fund. Such officers and employees may be employees of the Adviser or its
affiliates.
Each Fund has entered into an Advisory Agreement with the Adviser. Each Fund's
Advisory Agreement was approved by the vote, cast in person, of the Fund's
Directors including the Directors who are not parties to the Advisory Agreement
or interested persons as defined in the 1940 Act, of any such party, at a
meeting called and held for that purpose.
The Adviser provides investment advisory services and order placement facilities
for each of the Fund's and pays all compensation of Directors and officers of
the Fund who are affiliated persons of the Adviser. The Adviser or its
affiliates also furnish a Fund, without charge, management supervision and
assistance and office facilities and provide persons satisfactory to a Fund's
Board to serve as the Fund's officers. Each Fund has, under the Advisory
Agreement, assumed obligation to pay for all other expenses. As to the obtaining
of services other than those specifically provided to a Fund by the Adviser, the
Fund may employ its own personnel. For such services, the Fund may also utilize
personnel employed by the Adviser or its affiliates and, in such event, the
services will be provided to the Fund at cost and the payments therefor, which
must be specifically approved by the Fund's Board.
Under its Advisory Agreement, Global High Income pays the Adviser an advisory
fee at an annual rate of .90% of the Fund's average weekly net assets. Under its
Advisory Agreement, Managed Dollar pays the Adviser an advisory fee at an annual
rate of .70% of the Fund's average weekly net asset. Such fee is accrued daily
and paid monthly.
For purposes of the calculation of the fee payable to the Adviser, average
weekly net assets are determined on the basis of the average net assets of a
Fund for each weekly period (ending on Fridays) ending during the month. The net
assets for each weekly period are determined by averaging the net assets on
Friday of such weekly period with the net assets on Friday of the immediately
preceding weekly period. When a Friday is not a Fund business day, then the
calculation will be based on the net assets of a Fund on the Fund business day
immediately preceding such Friday. This advisory fee may be greater than that
paid by most funds. In addition to payments to the Adviser under the Advisory
Agreement, the Fund pays certain other costs.
For the fiscal years ended March 31, 2009, 2008 and 2007, Global High Income
paid advisory fees to the Adviser that, in the aggregate, amounted to
$8,008,276, $9,918,636 and $8,912,602, respectively. For the fiscal year ended
September 30, 2008, 2007 and 2006, Managed Dollar paid advisory fees to the
Adviser that, in the aggregate, amounted to $1,150,446, $1,267,930 and
$1,299,642, respectively.
Each Fund's Advisory Agreement is terminable with respect to that Fund without
penalty on 60 days written notice by a vote of a majority of the outstanding
voting securities of such Fund or by a vote of a majority of the Fund's
Directors, or by the Adviser on 60 days written notice, and will automatically
terminate in the event of its assignment. Each Fund's Advisory Agreement
provides that, in the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or of reckless disregard of its
obligations thereunder, the Adviser shall not be liable for any action or
failure to act in accordance with its duties thereunder.
The Advisory Agreements for the Funds continue in effect, provided that such
continuance is specifically approved at least annually by a vote of a majority
of the Fund's outstanding voting securities or by the Fund's Board, including in
either case approval by a majority of the Directors who are not parties to the
Advisory Agreement or interested persons of such parties as defined by the 1940
Act. Most recently, continuance of the Advisory Agreements of each Fund's
Advisory Agreements was approved by the respective Board, including a majority
of the Directors who are not parties to the Advisory Agreements or interested
persons of any such party, at a Meeting held on November 4-6, 2008.
Portfolio Managers
The dollar ranges of Global High Income's equity securities owned directly or
beneficially by the Fund's portfolio managers as of March 31, 2009 are set forth
below.
DOLLAR RANGE OF EQUITY SECURITIES IN GLOBAL HIGH INCOME
Paul J. DeNoon NONE
Fernando Grisales NONE
Michael Mon NONE
Douglas Peebles NONE
Matthew Sheridan NONE
Global High Income
------------------
The following tables provide information regarding registered investment
companies other than the Fund, other pooled investment vehicles and other
accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of the
Fund's fiscal year ended March 31, 2009.
REGISTERED INVESTMENT COMPANIES
(excluding Global High Income)
Number of Total Assets
Registered of Registered
Total Number Total Assets Investment Investment
of Registered of Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------------- ------------- ------------ -------------
Paul J. DeNoon 18 $5,977,000,000 1 $10,000,000
Fernando Grisales 1 $106,000,000 NONE NONE
Michael Mon 15 $5,864,000,000 NONE NONE
Douglas Peebles 53 $16,726,000,000 1 $10,000,000
Matthew Sheridan 15 $5,864,000,000 NONE NONE
POOLED INVESTMENT VEHICLES
Number of Total Assets
Registered of Registered
Total Number Total Assets Investment Investment
of Pooled of Pooled Companies Companies
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------------- ------------- ------------ -------------
Paul J. DeNoon 26 $9,638,000,000 2 $131,000,000
Fernando Grisales 2 $856,000,000 NONE NONE
Michael Mon 20 $8,896,000,000 NONE $2,732,000,000
Douglas Peebles 57 $22,174,000,000 3 NONE
Matthew Sheridan 20 $8,896,000,000 NONE NONE
OTHER ACCOUNTS
Number of
Other Total Assets
Total Number Total Assets Accounts of Other
of Other of Other with Accounts with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------------- ------------- ------------ -------------
Paul J. DeNoon 85 $16,557,000,000 5 $2,382,000,000
Fernando Grisales 4 $1,793,000,000 NONE NONE
Michael Mon 81 $16,409,000,000 5 $2,382,000,000
Douglas Peebles 326 $77,969,000,000 13 $4,686,000,000
Matthew Sheridan 81 $16,409,000,000 5 $2,382,000,000
Investment Professional Conflict of Interest Disclosure
As an investment adviser and fiduciary, the Adviser owes its clients and
stockholders an undivided duty of loyalty. We recognize that conflicts of
interest are inherent in our business and accordingly have developed policies
and procedures (including oversight monitoring) reasonably designed to detect,
manage and mitigate the effects of actual or potential conflicts of interest in
the area of employee personal trading, managing multiple accounts for multiple
clients, including AllianceBernstein Mutual Funds, and allocating investment
opportunities. Investment professionals, including portfolio managers and
research analysts, are subject to the above-mentioned policies and oversight
monitoring to ensure that all clients are treated equitably. We place the
interests of our clients first and expect all of our employees to meet their
fiduciary duties.
Employee Personal Trading. The Adviser has adopted a Code of Business
Conduct and Ethics that is designed to detect and prevent conflicts of interest
when investment professionals and other personnel of the Adviser own, buy or
sell securities which may be owned by, or bought or sold for, clients. Personal
securities transactions by an employee may raise a potential conflict of
interest when an employee owns or trades in a security that is owned or
considered for purchase or sale by a client, or recommended for purchase or sale
by an employee to a client. Subject to the reporting requirements and other
limitations of its Code of Business Conduct and Ethics, the Adviser permits its
employees to engage in personal securities transactions, and also allows them to
acquire investments in the AllianceBernstein Mutual Funds through direct
purchase and/or notionally in connection with deferred incentive compensation
awards. The Adviser's Code of Ethics and Business Conduct requires disclosure of
all personal accounts and maintenance of brokerage accounts with designated
broker-dealers approved by the Adviser. The Code also requires preclearance of
all securities transactions and imposes a one-year holding period for securities
purchased by employees to discourage short-term trading.
Managing Multiple Accounts for Multiple Clients. The Adviser has
compliance policies and oversight monitoring in place to address conflicts of
interest relating to the management of multiple accounts for multiple clients.
Conflicts of interest may arise when an investment professional has
responsibilities for the investments of more than one account because the
investment professional may be unable to devote equal time and attention to each
account. The investment professional or investment professional teams for each
client may have responsibilities for managing all or a portion of the
investments of multiple accounts with a common investment strategy, including
other registered investment companies, unregistered investment vehicles, such as
hedge funds, pension plans, separate accounts, collective trusts and charitable
foundations. Among other things, the Adviser's policies and procedures provide
for the prompt dissemination to investment professionals of initial or changed
investment recommendations by analysts so that investment professionals are
better able to develop investment strategies for all accounts they manage. In
addition, investment decisions by investment professionals are reviewed for the
purpose of maintaining uniformity among similar accounts and ensuring that
accounts are treated equitably. No investment professional that manages client
accounts carrying performance fees is compensated directly or specifically for
the performance of those accounts. Investment professional compensation reflects
a broad contribution in multiple dimensions to long-term investment success for
our clients and is not tied specifically to the performance of any particular
client's account, nor is it directly tied to the level or change in level of
assets under management.
Allocating Investment Opportunities. The Adviser has policies and
procedures intended to address conflicts of interest relating to the allocation
of investment opportunities. These policies and procedures are designed to
ensure that information relevant to investment decisions is disseminated
promptly within its portfolio management teams and investment opportunities are
allocated equitably among different clients. The investment professionals at the
Adviser routinely are required to select and allocate investment opportunities
among accounts. Portfolio holdings, position sizes, and industry and sector
exposures tend to be similar across similar accounts, which minimizes the
potential for conflicts of interest relating to the allocation of investment
opportunities. Nevertheless, investment opportunities may be allocated
differently among accounts due to the particular characteristics of an account,
such as size of the account, cash position, tax status, risk tolerance and
investment restrictions or for other reasons.
The Adviser's procedures are also designed to prevent potential conflicts of
interest that may arise when the Adviser has a particular financial incentive,
such as a performance-based management fee, relating to an account. An
investment professional may perceive that he or she has an incentive to devote
more time to developing and analyzing investment strategies and opportunities or
allocating securities preferentially to accounts for which the Adviser could
share in investment gains.
To address these conflicts of interest, the Adviser's policies and procedures
require, among other things, the prompt dissemination to investment
professionals of any initial or changed investment recommendations by analysts;
the aggregation of orders to facilitate best execution for all accounts; price
averaging for all aggregated orders; objective allocation for limited investment
opportunities (e.g., on a rotational basis) to ensure fair and equitable
allocation among accounts; and limitations on short sales of securities. These
procedures also require documentation and review of justifications for any
decisions to make investments only for select accounts or in a manner
disproportionate to the size of the account.
Portfolio Manager Compensation
The Adviser's compensation program for investment professionals is designed to
be competitive and effective in order to attract and retain the highest caliber
employees. The compensation program for investment professionals is designed to
reflect their ability to generate long-term investment success for our clients,
including stockholders of the AllianceBernstein Mutual Funds. Investment
professionals do not receive any direct compensation based upon the investment
returns of any individual client account, nor is compensation tied directly to
the level or change in level of assets under management. Investment
professionals' annual compensation is comprised of the following:
(i) Fixed base salary: This is generally the smallest portion of
compensation. The base salary is a relatively low, fixed salary within a similar
range for all investment professionals. The base salary is determined at the
outset of employment based on level of experience, does not change significantly
from year-to-year and hence, is not particularly sensitive to performance.
(ii) Discretionary incentive compensation in the form of an annual
cash bonus: The Adviser's overall profitability determines the total amount of
incentive compensation available to investment professionals. This portion of
compensation is determined subjectively based on qualitative and quantitative
factors. In evaluating this component of an investment professional's
compensation, the Adviser considers the contribution to his/her team or
discipline as it relates to that team's overall contribution to the long-term
investment success, business results and strategy of the Adviser. Quantitative
factors considered include, among other things, relative investment performance
(e.g., by comparison to competitor or peer group funds or similar styles of
investments, and appropriate, broad-based or specific market indices), and
consistency of performance. There are no specific formulas used to determine
this part of an investment professional's compensation and the compensation is
not tied to any pre-determined or specified level of performance. The Adviser
also considers qualitative factors such as the complexity and risk of investment
strategies involved in the style or type of assets managed by the investment
professional; success of marketing/business development efforts and client
servicing; seniority/length of service with the firm; management and supervisory
responsibilities; and fulfillment of the Adviser's leadership criteria.
(iii) Discretionary incentive compensation in the form of awards under
the Adviser's Partners Compensation Plan ("deferred awards"): the Adviser's
overall profitability determines the total amount of deferred awards available
to investment professionals. The deferred awards are allocated among investment
professionals based on criteria similar to those used to determine the annual
cash bonus. There is no fixed formula for determining these amounts. Deferred
awards, for which there are various investment options, vest over a four-year
period and are generally forfeited if the employee resigns or the Adviser
terminates his/her employment. Investment options under the deferred awards plan
include many of the same AllianceBernstein Mutual Funds offered to mutual fund
investors, thereby creating a close alignment between the financial interests of
the investment professionals and those of the Adviser's clients and mutual fund
stockholders with respect to the performance of those mutual funds. The Adviser
also permits deferred award recipients to allocate up to 50% of their award to
investments in the Adviser's publicly traded equity securities.(1)
_____________
(1) Prior to 2002, investment professional compensation also included
discretionary long-term incentive in the form of restricted grants of the
Adviser's Master Limited Partnership Units.
(iv) Contributions under the Adviser's Profit Sharing/401(k) Plan: The
contributions are based on the Adviser's overall profitability. The amount and
allocation of the contributions are determined at the sole discretion of the
Adviser.
The Adviser may act as an investment adviser to other persons, firms or
corporations, including investment companies, and is investment adviser to the
following registered investment companies: AllianceBernstein Balanced Shares,
Inc., AllianceBernstein Blended Style Series, Inc., AllianceBernstein Bond Fund,
Inc., AllianceBernstein Cap Fund, Inc., AllianceBernstein Corporate Shares,
AllianceBernstein Diversified Yield Fund, Inc., AllianceBernstein Exchange
Reserves, AllianceBernstein Fixed-Income Shares, Inc., AllianceBernstein Focused
Growth & Income Fund, Inc., AllianceBernstein Global Bond Fund, Inc.,
AllianceBernstein Global Growth Fund, Inc., AllianceBernstein Global Real Estate
Investment Fund, Inc., AllianceBernstein Global Thematic Growth Fund, Inc.,
AllianceBernstein Greater China `97 Fund, Inc., AllianceBernstein Growth and
Income Fund, Inc., AllianceBernstein High Income Fund, Inc., AllianceBernstein
Institutional Funds, Inc., AllianceBernstein International Growth Fund, Inc.,
AllianceBernstein Large Cap Growth Fund, Inc., AllianceBernstein Municipal
Income Fund, Inc., AllianceBernstein Municipal Income Fund II, AllianceBernstein
Small/Mid Cap Growth Fund, AllianceBernstein Trust, AllianceBernstein Utility
Income Fund, Inc., AllianceBernstein Variable Products Series Fund, Inc.,
Sanford C. Bernstein Fund, Inc., Sanford C. Bernstein Fund II, Inc., The
AllianceBernstein Pooling Portfolios and The AllianceBernstein Portfolios, all
registered open-end investment companies; and to AllianceBernstein Global High
Income Fund, Inc., AllianceBernstein Income Fund, Inc., ACM Managed Dollar
Income Fund, Inc., Alliance California Municipal Income Fund, Inc., Alliance
National Municipal Income Fund, Inc., Alliance New York Municipal Income Fund,
Inc. and The Spain Fund, Inc., all registered closed-end investment companies.
Administrator
The Adviser serves as administrator for each of the Funds and performs standard
administrative services for the Funds.
Pursuant to the Fund's Administration Agreement with the Adviser, Global High
Income reimburses the Adviser for its costs, including legal and accounting
costs, in serving as Administrator of the Fund; provided, however, that the
reimbursement may not exceed .15% of average weekly net assets.
Pursuant to the Fund's Administration Agreement with the Adviser, Managed Dollar
reimburses the Adviser for its costs, including legal and accounting costs, in
serving as Administrator of the Fund. Until March 31, 2007 Princeton
Administrators acted as administrator for the Fund for which the Fund paid a fee
at an annual rate of .12% of the average weekly net assts of the Fund, but in no
event less than $12,500 per month.
For the fiscal years ended March 31, 2009, 2008 and 2007, Global High Income
paid administrative fees to the Adviser that, in the aggregate, amounted to
$131,632, $146,264 and $102,250, respectively. For the fiscal years ended
September 30, 2008, 2007 and 2006, Managed Dollar paid administrative fees that,
in the aggregate, amounted to $133,719, $162,878 and $207,928, respectively.
Shareholder Servicing
AllianceBernstein Investor Services, Inc. ("ABIS"), an affiliate of the Adviser,
provides stockholder services for the Funds. The Funds reimburse ABIS for these
services. For these services and for the fiscal years ended March 31, 2009, 2008
and 2007, Global High Income paid ABIS $1,260, $1,400 and $775, respectively.
For these services and for its fiscal years ended September 30, 2008, 2007 and
2006, Managed Dollar paid ABIS $145, $280 and $335, respectively.
Custodian, Dividend Paying Agent, Transfer Agent and Registrar
Bank of New York, One Wall Street, New York, NY 10286, serves as custodian for
Global High Income. State Street Bank and Trust Company, One Lincoln Street,
Boston, MA 02111, serves as custodian for Managed Dollar. Computershare Trust
Company, N.A. ("Computershare"), P.O. Box 43010, Providence, RI 02940, serves as
the dividend paying agent, transfer agent and registrar for each of the Funds.
For these services and for the fiscal years ended March 31, 2009, 2008 and 2007,
Global High Income paid Bank of New York $380,966, $661,815 and $509,205,
respectively; and paid Computershare $35,174, $51,563 and $49,233, respectively.
For these services and for the fiscal years ended September 30, 2008, 2007 and
2006, Managed Dollar paid State Street Bank $143,854, $105,937 and $60,918,
respectively; and paid Computershare $16,285, $13,891 and $13,806, respectively.
Stock Ownership
As of May 1, 2009, to the knowledge of Global High Income, no person owned,
either of record or beneficially, 5% or more of the outstanding shares of the
Fund. As of May 1, 2009, to the knowledge of Managed Dollar, Bulldog Investors,
Park 80 West Plaza Two, Suite 750, Saddle Brook, NJ 07663, owned 973,112, or
5.26%, of the outstanding shares of the Fund.
VALUATION OF PORTFOLIO SECURITIES
Each Fund calculates and makes available for weekly publication the NAV of its
shares of common stock. The NAV per share of a Fund's common stock is determined
as of the close of trading on the NYSE each Friday or, when Friday is not a Fund
business day, on the immediately preceding Fund business day, by adding the
market value of all securities in the Fund's portfolio and other assets,
subtracting liabilities incurred or accrued and dividing by the total number of
the Fund's shares of common stock then outstanding.
In accordance with applicable rules under the 1940 Act, portfolio securities are
valued at current market value or at fair value as determined in good faith by
the Board of Directors. The Board of Directors has delegated to the Adviser
certain of the Board's duties with respect to the following procedures. Readily
marketable securities listed on the NYSE or on a foreign securities exchange
(other than foreign securities exchanges whose operations are similar to those
of the United States over-the-counter market) are valued, except as indicated
below, at the last sale price reflected on the consolidated tape at the close of
the NYSE or, in the case of a foreign securities exchange, at the last quoted
sale price, in each case on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are valued at
the quoted bid prices on such day. If no bid prices are quoted on such day, then
the security is valued at the mean of the bid and asked prices at the close of
the NYSE on such day as obtained from one or more dealers regularly making a
market in such security. Where a bid and asked price can be obtained from only
one such dealer, such security is valued at the mean of the bid and asked price
obtained from such dealer unless it is determined that such price does not
represent current market value, in which case the security shall be valued in
good faith at fair value by, or pursuant to procedures established by, the Board
of Directors. Securities for which no bid and asked price quotations are readily
available are valued in good faith at faire value by, or in accordance with
procedures established by, the Board of Directors. Readily marketable securities
not listed on the NYSE or on a foreign securities exchange are valued in like
manner. Portfolio securities traded on the NYSE and on one or more other foreign
or other national securities exchanges, and portfolio securities not traded on
the NYSE but traded on one or more foreign or other national securities
exchanges are valued in accordance with these procedures by reference to the
principal exchange on which the securities are traded.
Readily marketable securities traded only in the over-the-counter market,
securities listed on a foreign securities exchange whose operations are similar
to those of the United Stated over-the-counter market, and debt securities
listed on a U.S. national securities exchange whose primary market is believed
to be over-the-counter, are valued at the mean of the bid and asked prices at
the close of the NYSE on such day as obtained from two or more dealers regularly
making a market in such security. Where a bid and asked price can be obtained
from only one such dealer, such security is valued at the mean of the bid and
asked price obtained from such dealer unless it is determined that such price
does not represent current market value, in which case the security shall be
valued in good faith at fair value by, or in accordance with procedures
established by, the Board of Directors.
Listed put and call options purchased by a Fund are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day.
Open futures contracts and options thereon will be valued using the closing
settlement price or, in the absence of such a price, the most recent quoted bid
price. If there are no quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government Securities and other debt instruments having 60 days or less
remaining until maturity are valued at amortized cost if their original maturity
was 60 days or less, or by amortizing their fair value as of the 61st day prior
to maturity if their original term to maturity exceeded 60 days (unless in
either case the Board of Directors determines that this method does not
represent fair value.)
Fixed-income securities may be valued on the basis of prices provided by a
pricing service when such prices are believed to reflect the fair market value
of such securities. The prices provided by a pricing service take into account
many factors, including institutional size trading in similar groups of
securities and any developments related to specific securities. Mortgage backed
and asset backed securities may be valued at prices obtained from a bond pricing
service or at a price obtained from one or more of the major broker/dealers in
such securities. In cases where broker/dealers quotes are obtained, the Adviser
may establish procedures whereby changes in market yields or spreads are used to
adjust, on a daily basis, a recently obtained quoted bid price on a security.
All other assets of a Fund are valued in good faith at fair value by, or in
accordance with procedures established by, the Board of Directors.
Trading in securities on Far Eastern and European securities exchanges and
over-the-counter markets is normally competed well before the close of business
of each Fund business day. In addition, trading in foreign markets may not take
place on all Fund business days. Furthermore, trading may take place in various
foreign markets on days that are not Fund business days. A Fund's calculation of
the NAV per share, therefore, does not always take place contemporaneously with
the most recent determination of the prices of portfolio securities in these
markets. Events affecting the values of these portfolio securities that occur
between the time their prices are determined in accordance with the above
procedures and the close of the NYSE will not be reflected in the Fund's
calculation of NAV unless these prices do not reflect current market value, in
which case the securities will be valued in good faith by fair value by, or in
accordance with procedures established by, the Board of Directors.
The Board of Directors may suspend the determination of a Fund's NAV, subject to
the rules of the SEC and other governmental rules and regulations, at a time
when: (1) the NYSE is closed, other than customary weekend and holiday closings
or (2) an emergency exists as a result of which it is not reasonably practicable
for the Fund to dispose of securities owned by it or to determine fairly the
value of its net assets.
For purposes of determining a Fund's NAV per share, all assets and liabilities
initially expressed in a foreign currency will be converted into U.S. Dollars at
the mean of the current bid and asked prices of such currency against the U.S.
Dollar last quoted by a major bank that is a regular participant in the relevant
foreign exchange market or on the basis of a pricing service that takes into
account the quotes provided by a number of such major banks. If such quotations
are not available as of the close of the NYSE, the rate of exchange will be
determined in good faith by, or under the direction of, the Board of Directors.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Stockholders of each Fund whose shares are registered in their own names may
elect to be participants in each Fund's DRIP, under which dividends and capital
gain distributions to stockholders will be paid or reinvested in additional
shares of a Fund (the "Dividend Shares"). Computershare Trust Company, N.A. (the
"Agent") serves as the agent for participants under the DRIP for the Funds.
Stockholders who do not elect to participate in the DRIP will receive all
distributions in cash paid by check mailed directly to the stockholder of record
(or, if the shares are held in street or other nominee name, then to the
nominee) by the Agent, as dividend disbursing agent.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions. The federal income tax treatment of
reinvestment is described under "Taxation."
A stockholder who has elected to participate in the DRIP may withdraw from the
DRIP at any time. There will be no penalty for withdrawal from the DRIP and
stockholders who have previously withdrawn from the DRIP may rejoin it at any
time. Changes in elections must be in writing and should include the
stockholders name and address as they appear on the share certificate. An
election to withdraw from the DRIP will, until such election is changed, be
deemed to be an election by a stockholder to take all subsequent distributions
in cash. An election will be effective only for a distribution declared and
having a record date of at least 10 days after the date on which the election is
received. A stockholder whose shares are held in the name of a broker or nominee
should contact such broker or nominee concerning changes in that stockholder's
election.
Under a DRIP and commencing not more than five business days before the dividend
payment date, purchases of a Fund's shares may be made by the Agent, on behalf
of the participants in the DRIP, from time to time to satisfy dividend
reinvestments under the DRIP. Such purchases by the Agent on or before the
dividend payment date may be made on the NYSE or elsewhere at any time when the
price plus estimated commissions of a Fund's common stock on the NYSE is lower
than the Fund's most recently calculated NAV per share.
If the Agent determines on the dividend payment date that the shares purchased
as of such date are insufficient to satisfy the dividend reinvestment
requirements, the Agent, on behalf of the participants in the DRIP, will obtain
the necessary additional shares as follows. To the extent that outstanding
shares are not available at a cost of less than per share NAV, the Agent, on
behalf of the participants in the DRIP, will accept payment of the dividend, or
the remaining portion thereof, in authorized but unissued shares of a Fund on
the dividend payment date. Such shares will be issued at a per share price equal
to the higher of (1) the NAV per share on the payment date, or (2) 95% of the
closing market price per share on the payment date. If the closing sale or offer
price, plus estimated commissions, of the common stock on the NYSE on the
payment date is less than a Fund's NAV per share on such day, then the Agent
will purchase additional outstanding shares on the NYSE or elsewhere. If before
the Agent has completed such purchases, the market price plus commissions
exceeds the NAV of a Fund share, the average per share purchase price paid by
the Agent may exceed the NAV of the Fund's shares, resulting in the acquisition
of fewer shares than if shares had been issued by the Fund.
Participants in a DRIP have the option of making additional cash payments to the
Agent, semi-annually, in any amount of $100 or more for investment in a Fund's
shares. The Agent uses all funds received from participants to purchase Fund
shares in the open market on or about each January 15 and July 15. Participants'
cash payments are also used to acquire Fund shares under the same procedure as
that used for reinvestment of dividends and distributions. To allow ample time
for receipt and processing by the Agent, participants should send in voluntary
cash payments to be received by the Agent not later than five business days
before each January 15 and July 15. To avoid unnecessary cash accumulations,
cash payments received after that time and cash payments received more than 30
days prior to these dates will be returned by the Agent and interest will not be
paid on any uninvested cash payments. A participant may withdraw a voluntary
cash payment by written notice, if the notice is received by the Agent not less
than 48 hours before such payment is to be invested.
The Agent will maintain all stockholders' accounts in a DRIP and furnish written
confirmation of all transactions in the account, including information needed by
stockholders for tax records. Shares in the account of each DRIP participant
will be held by the Agent in non-certificated form in the name of the
participant, and each stockholder's proxy will include those shares purchased or
received pursuant to the DRIP.
In the case of stockholders such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Agent will administer the
DRIP on the basis of the number of shares certificated from time to time by the
record stockholders as representing the total amount registered in the record
stockholders' name and held for the account of beneficial owners who are to
participate in the DRIP.
There will be no brokerage charges with respect to shares issued directly by the
Fund to satisfy the dividend reinvestment requirements. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Agent's open market purchases of shares. In each case, the cost
per share of shares purchased for each stockholder's account will be the average
cost, including brokerage commissions, of any shares purchased in the open
market plus the cost of any shares issued by the Fund. A participant also will
pay brokerage commissions incurred in purchases from voluntary cash payments
made by the participant.
Stockholders participating in a DRIP may receive benefits not available to
stockholders not participating in a DRIP. If the market price plus commissions
of a Fund's shares is above the NAV, participants in a DRIP will receive shares
of a Fund at a discount of up to 5% from the current market value. However, if
the market price plus commissions is below the NAV, participants will receive
distributions in shares with a NAV greater than the value of any cash
distribution they would have received on their shares. There may be insufficient
shares available in the market to make distributions in shares at prices below
NAV. Also, since a Fund does not redeem it shares, the price on resale may be
more or less than the NAV.
In the case of foreign participants whose dividends are subject to U.S. income
tax withholding and in the case of any participants subject to 28% federal
backup withholding, the Agent will reinvest dividends after deduction of the
amount required to be withheld.
Experience under a DRIP may indicate that changes are desirable. Accordingly, a
Fund reserves the right to amend or terminate a DRIP as applied to any voluntary
cash payments made and any dividend or distribution paid subsequent to written
notice of the change sent to participants in the DRIP at least 90 days before
the record date for such dividend or distribution. A DRIP may also be amended or
terminated by the Agent on at least 90 days' written notice to participants in
the DRIP. There is no service charge to participants in a DRIP; however, a Fund
reserves the right to amend the DRIP to include a service charge payable to the
Agent by the participants. All correspondence concerning the DRIPs for the Funds
should be directed to Computershare Trust Company, N.A., P.O. Box 43010,
Providence, RI 02940.
DESCRIPTION OF COMMON STOCK
Common Stock of the Funds
Each Fund is authorized to issue up to 100,000,000 shares of common stock, par
value $.01 per share. As of June 19, 2009, Global High Income and Managed Dollar
had 73,336,108 and 15,166,366 shares outstanding, respectively. The Funds'
shares have no preemptive, conversion, exchange or redemption rights. Each share
has equal voting, dividend, distribution and liquidation rights. The shares of
each Fund outstanding are, and the shares of Global High Income, when issued
upon the Acquisitions will be, fully paid and nonassessable. Stockholders are
entitled to one vote per share. All voting rights for the election of Directors
are noncumulative, which means that the holders of more than 50% of the shares
of common stock of a Fund can elect 100% of the Directors then nominated for
election if they choose to do so and, in such event, the holders of the
remaining shares of common stock will not be able to elect any Directors. Under
the rules of the NYSE applicable to listed companies, each Fund is required to
hold an annual meeting of stockholders each year.
Certain Anti-Takeover Provisions of the Fund's Charters Articles of
Incorporation and Bylaws
The Funds presently have provisions in their Charters, and Bylaws (together, the
"Charter Documents") that are intended to limit (i) the ability of other
entities or persons to acquired control of a Fund, (ii) a Fund's freedom to
engage in certain transactions, or (iii) the ability of a Fund's Directors or
stockholders to amend the Charter Documents or effect changes in the Fund's
management. These provisions of the Charter Documents may be regarded as
"anti-takeover" provisions. The Board of Directors of each Fund is divided into
three classes, each having a term of three years. Each class of Directors serves
for a three year term. Accordingly, only those - Directors may have the effect
of maintaining the continuity of management and, thus, make it more difficult
for the Fund's stockholders to change the majority of Directors. Under Maryland
law and a Fund's Charter, the affirmative vote of the holders of a majority of
the votes entitles to be cast is required for the consolidation of the Fund with
another corporation, a merger of the Fund with or into another corporation
(except for certain mergers in which the Fund is the successor), a statutory
share exchange in which the Fund is not the successor, a sale or transfer of all
or substantially all of the Fund's assets, the dissolution of the Fund and
certain amendments to the Fund's Charter. In addition, the affirmative vote of
75% (which is higher than that required under Maryland law or the 1940 Act) of
the outstanding shares of common stock of a Fund is required generally to
authorize any of the following transactions or to amend the provisions of the
Articles of Incorporation relating to such transactions:
(i) merger, consolidation or statutory share exchange of the Fund with or
into any corporation, person or other entity;
(ii) issuance of any securities of the Fund to any corporation, person or
other entity for cash;
(iii) sale, lease or exchange of all or any substantial part of the assets
of the Fund to any corporation, person or other entity (except assets
having an aggregate fair market value of less than $1,000,000); or
(iv) sale, lease or exchange to the Fund, in exchange for securities of the
Fund, of any assets of any corporation, person or other entity (except
assets having an aggregate fair market value of less than $1,000,000);
If such corporation, person or entity is directly, or indirectly through
affiliates or associates, the beneficial owner of more than 5% of the
outstanding shares of the Fund (a "principal stockholder"). However, such vote
would not be required where, under certain condition, the Board of Directors
approves the transaction, although in certain cases involving merger,
consolidation or statutory share exchange or sale of all or substantially all of
the Fund's assets the affirmative vote of a majority of the outstanding shares
of a Fund would nevertheless be required.
The provisions of the Charter Documents described above and a Fund's right to
repurchase or make a tender offer for its common stock could have the effect of
depriving the owners of shares of opportunities to sell their shares at a
premium over prevailing market prices, by discouraging a third party from
seeking to obtain control of a Fund in a tender offer or similar transaction.
The overall effect of these provisions is to render more difficult the
accomplishment of a merger or the assumption of control by a principal
stockholder. However, they provide the advantage of potentially requiring
persons seeking control of a Fund to negotiate with its management regarding the
price to be paid and facilitating the continuity of the Fund's management and
investment objective and policies. The Board of Directors of each Fund has
considered the foregoing anti-takeover provisions and concluded that they are in
the best interests of the Fund and its stockholders.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of a Fund's Board, the Adviser is responsible
for the investment decisions and the placing of orders for portfolio
transactions for the Fund. A Fund's portfolio transactions occur primarily with
issuers, underwriters or major dealers acting as principals. Such transactions
are normally on a net basis, which does not involve payment of brokerage
commissions. The cost of securities purchased from an underwriter usually
includes a commission paid by the issuer to the underwriters; transactions with
dealers normally reflect the spread between bid and asked prices. Premiums are
paid with respect to options purchased by a Fund and brokerage commissions are
payable with respect to transactions in exchange-traded futures contracts.
A Fund has no obligation to enter into transactions in portfolio securities with
any dealer, issuer, underwriter or other entity. In placing orders, it is the
policy of each Fund to obtain the best price and execution for its transactions.
Where best price and execution may be obtained from more than one dealer, the
Adviser may, in its discretion, purchase and sell securities through dealers who
provide research, statistical and other information to the Adviser. Such
services may be used by the Adviser for all of its investment advisory accounts
and, accordingly, not all such services may be used by the Adviser in connection
with a Fund. The supplemental information received from a dealer is in addition
to the services required to be performed by the Adviser under the Advisory
Agreement, and the expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information. Consistent with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., and subject to
seeking best price and execution, a Fund may consider sales of shares of the
Fund as a factor in the selection of dealers to enter into portfolio
transactions with the Fund.
Brokerage Allocation and Other Practices
Neither a Fund nor the Adviser has entered into agreements or understandings
with any brokers or dealers regarding the placement of securities transactions
because of research or statistical services they provide. To the extent that
such persons or firms supply investment information to the Adviser for use in
rendering investment advice to a Fund, such information may be supplied at no
cost to the Adviser and, therefore, may have the effect of reducing the expenses
of the Adviser in rendering advice to the Fund. While it is impossible to place
an actual dollar value on such investment information, its receipt by the
Adviser probably does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of the types described in
Section 28(e)(3) of the Securities Exchange Act of 1934 and is designed to
augment the Adviser's own internal research and investment strategy
capabilities. Research and statistical services furnished by brokers through
whom a Fund effects securities transactions are used by the Adviser in carrying
out its investment management responsibilities with respect to all its client
accounts but not all such services may be utilized by the Adviser in connection
with the Fund. A Fund will deal in some instances in equity securities, which
are not listed on a national stock exchange but are traded in the
over-the-counter market. Where transactions are executed in the over-the-counter
market, a Fund will seek to deal with the primary market makers, but when
necessary in order to obtain the best price and execution, it will utilize the
services of others. In all cases, a Fund will attempt to negotiate best
execution. A Fund may from time to time place orders for the purchase or sale of
securities (including listed call options) with SCB & Co., an affiliate of the
Adviser. In such instances, the placement of orders with such broker would be
consistent with the Fund's objective of obtaining best execution and would not
be dependent upon the fact that SCB & Co. is an affiliate of the Adviser. With
respect to orders placed with SCB & Co. for execution on a national securities
exchange, commissions received must conform to Section 17(e)(2)(A) of the 1940
Act and Rule 17e-1 thereunder, which permit an affiliated person of a registered
investment company (such as a Fund), or any affiliated person of such person, to
receive a brokerage commission from such registered investment company provided
that such commission is reasonable and fair compared to the commissions received
by other brokers in connection with comparable transactions involving similar
securities during a comparable period of time.
The following table shows the brokerage commission paid on investment
transactions for the last three fiscal years:
Fund Brokerage Commission Paid ($)
Global High Income (Fiscal Year End - March 31)
2009 $0
2008 $0
2007 $0
Managed Dollar (Fiscal Year End - September 30)
2008 $0
2007 $0
2006 $0
DISTRIBUTIONS
Each Fund intends to distribute monthly its net investment income. Net
short-term capital gains, if any, will normally be distributed quarterly and net
long-term capital gains, if any, will normally be distributed annually.
TAXATION
General
Each Fund intends for each taxable year to qualify as a "regulated investment
company" under the Code. To so qualify, a Fund must, among other things, (i)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities or foreign currency, or certain other
income (including but not limited to, gains from options, futures and forward
contracts) derived with respect to its business of investing in stock,
securities or currency and net income derived from interests in certain
"qualified publicly traded partnerships"; and (ii) diversify its holdings so
that, at the end of each quarter of its taxable year, the following two
conditions are met: (a) at least 50% of the value of the Fund's assets is
represented by cash, U.S. Government Securities, securities of other regulated
investment companies and other securities with respect to which the Fund's
investment if limited, in respect of any one issuer, to an amount not greater
than 5% of the Fund's total assets and 10% of the outstanding voting securities
of such issuer and (b) not more than 25% of the value of the Fund's assets is
invested in securities of any one issuer (other than U.S. Government Securities
or securities of other regulated investment companies) or the securities of one
or more "qualified publicly traded partnerships."
The Treasury Department is authorized to issue regulations to provide that
foreign currency gains that are "not directly related" to a Fund's principal
business of investing in stock or securities may be excluded from the income
which qualifies for purposes of the 90% gross income requirement described above
with respect to the Fund's qualification as a "regulated investment company." No
such regulations have yet been issued.
If a Fund qualifies as a regulated investment company for any taxable year and
makes timely distributions to its stockholders of 90% or more of its net
investment income for that year (calculated without regard to its net capital
gain, i.e., the excess of its net long-term capital gain over its net short-term
capital loss), it will not be subject to federal income tax on the portion of
its taxable income for the year (including any net capital gain) that it
distributes to stockholders. Investors should consult their own counsel for a
complete understanding of the requirements the Fund must meet to qualify to be
taxed as a "regulated investment company."
The information set forth in the following discussion relates solely to the
significant United States federal income tax consequences of dividends and
distributions by a Fund and of sales or redemptions of Fund shares, and assumes
that a Fund qualifies to be taxed as a regulated investment company. Investors
should consult their own tax counsel with respect to the specific tax
consequences of their being stockholders of a Fund, including the effect and
applicability of federal, state and local tax laws to their own particular
situation and the possible effects of changes therein.
Dividends and Distributions
Each Fund intends to make timely distributions of its taxable income (including
any net capital gain) so that the Fund will not be subject to federal income
taxes. Each Fund also intends to declare and distribute dividends in the amounts
and at the times necessary to avoid the application of the 4% federal excise tax
imposed on certain undistributed income of regulated investment companies. A
Fund will be required to pay the 4% excise tax to the extent it does not
distribute to its stockholders during any calendar year an amount equal to the
sum of (i) 98% of its ordinary taxable income for the calendar year, (ii) 98% of
its capital gain net income and foreign currency gains for the twelve months
ended October 31 of such year and (iii) any ordinary income or capital gain net
income from the preceding calendar year that was not distributed during such
year. For this purpose, income or gain retained by a Fund that is subject to
corporate income tax will be considered to have been distributed by the Fund by
year-end. For federal income and excise tax purposes, dividends declared and
payable to stockholders of record as of a date in October, November or December
but actually paid during the following January will be taxable to these
stockholders for the year declared, and not for the subsequent calendar year in
which the stockholders actually received the dividend.
Dividends of a Fund's net ordinary income and distributions of any net realized
short-term capital gain are taxable to stockholders as ordinary income. Since
each Fund expects to derive substantially all of its gross income from sources
other than dividends, it is expected that none of the Fund's dividends or
distributions will qualify for the dividends-received deduction for
corporations.
Distributions of net capital gain by a Fund to its stockholders will be taxable
to the stockholders as long-term capital gains, irrespective of the length of
time a stockholder may have held his Fund shares. Any dividend or distribution
received by a stockholder on shares of a Fund will have the effect of reducing
the NAV of such shares by the amount of such dividend or distribution.
Furthermore, a dividend or distribution made shortly after the purchase of such
shares by a stockholder, although in effect a return of capital to that
particular stockholder, would be taxable to him as described above. Dividends
are taxable in the manner discussed regardless of whether they are paid to the
stockholder in cash or are reinvested in additional shares of a Fund.
After the end of the taxable year, a Fund will notify stockholders of the
federal income tax status of any distributions made by the Fund to stockholders
during such year.
Sales
Any gain or loss arising from a sale of Fund shares generally will be capital
gain or loss except in the case of a dealer or a financial institution, and will
be long-term capital gain or loss if such stockholder has held such shares for
more than one year at the time of the sale; otherwise it will be short-term
capital gain or loss. However, if a stockholder has held shares in a Fund for
six months or less and during that period has received a distribution of net
capital gain, any loss recognized by the stockholder on the sale of those shares
during the six-month period will be treated as a long-term capital loss to the
extent of such distribution. In determining the holding period of such shares
for this purpose, any period during which a stockholder's risk of loss is offset
by means of options, short sales or similar transactions is not counted.
Any loss realized by a stockholder on a sale or exchange of shares of a Fund
will be disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before and ending 30 days after the shares
are sold or exchanged. For this purpose, acquisitions pursuant to a Fund's DRIP
would constitute a replacement if made within the period. If disallowed, the
loss will be reflected in an upward adjustment to the basis of the shares
acquired.
Backup Withholding
A Fund generally will be required to withhold tax (currently at the rate of 28%)
of reportable payments (which may include dividends and distributions of net
capital gain) payable to a noncorporate stockholder unless the stockholder
certified on his subscription application that the social security or taxpayer
identification number provided is correct and that the stockholder has not been
notified by the Internal Revenue Service that he is subject to backup
withholding.
United States Federal Income Taxation of a Fund
The following discussion relates to certain significant United States federal
income tax consequences to a Fund with respect to the determination of its
"investment company taxable income" each year. This discussion assumes that a
Fund will be taxed as a regulated investment company for each of its taxable
years.
Options and Futures Contracts
Certain listed options and regulated futures contracts are considered "section
1256 contracts" for federal income tax purposes. Section 1256 contracts held by
a Fund at the end of each taxable year will be "marked to market" and treated
for federal income tax purposes as though sold for fair market value on the last
business day of such taxable year. Gain or loss realized by a Fund on section
1256 contracts (other than forward foreign currency contracts) will be
considered 60% long-term and 40% short-term capital gain or loss. A Fund can
elect to exempt its section 1256 contracts which are part of a "mixed straddle"
(as described below) from the application of section 1256.
With respect to over-the-counter put and call options or options traded on
certain foreign exchanges, gain or loss realized by a Fund upon the lapse or
sale of such options held by the Fund will be either long-term or short-term
capital gain or loss depending upon the Fund's holding period with respect to
such option. However, gain or loss realized upon the lapse or closing out of
such options that are written by a Fund will be treated as short-term capital
gain or loss. In general, if a Fund exercises an option, or if an option that
the Fund has written is exercised, gain or loss on the option will not be
separately recognized but the premium received or paid will be included in the
calculation of gain or loss upon disposition of the property underlying the
option.
Gain or loss realized by a Fund on the lapse or sale of put and call options on
foreign currencies which are traded over-the-counter or on certain foreign
exchanges will be treated as section 988 gain or loss and will therefore be
characterized as ordinary income or loss and will increase or decrease the
amount of the Fund's net investment income available to be distributed to
stockholders as ordinary income, as described above. The amount of such gain or
loss shall be determined by subtracting the amount paid, if any, for or with
respect to the option (including any amount paid by a Fund upon termination of
an option written by the Fund) from the amount received, if any, for or with
respect to the option (including any amount received by the Fund upon
termination of an option held by the Fund). In general, if a Fund exercises such
an option on a foreign currency, or such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the same manner as
if the Fund had sold the option (or paid another person to assume the Fund's
obligation to make delivery under the option) on the date on which the option is
exercised, for the fair market value of the option. The foregoing rules will
also apply to other put and call options which have as their underlying property
foreign currency and which are traded over-the-counter or on certain foreign
exchanges to the extent gain or loss with respect to such options is
attributable to fluctuations in foreign currency exchange rates.
Tax Straddles
Any option, futures contract, forward foreign currency contract, other forward
contract, or other position entered into or held by a Fund in conjunction with
any other position held by the Fund may constitute a "straddle" for federal
income tax purposes. A straddle of which at least one, but not all, the
positions are section 1256 contracts may constitute a "mixed straddle." In
general, straddles are subject to certain rules that may affect the character
and timing of a Fund's gains and losses with respect to straddle positions by
requiring, among other things, that (i) loss realized on disposition of one
position of a straddle not be recognized to the extent that the Fund has
unrealized gains with respect to the other position in such straddle; (ii) the
Fund's holding period in straddle positions be suspended while the straddle
exists (possibly resulting in gain being treated as short-term capital gain
rather than long-term capital gain); (iii) losses recognized with respect to
certain straddle positions which are part of a mixed straddle and which are
non-section 1256 positions be treated as 60% long-term and 40% short-term
capital loss; (iv) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be treated as
long-term capital losses; and (v) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. The Treasury
Department is authorized to issue regulations providing for the proper treatment
of a mixed straddle where at least one position is capital. No such regulations
have yet been issued. Various elections are available to a Fund which may
mitigate the effects of the straddle rules, particularly with respect to mixed
straddles. In general, the straddle rules described above do not apply to any
straddles held by a Fund all of the offsetting positions of which consist of
section 1256 contracts.
Original Issue Discount and Market Discount
Under current federal tax law, a Fund will include in income as interest each
year, in addition to stated interest received on debt instruments held by the
Fund, amounts attributable to the Fund from holding debt instruments with
"original issue discount" ("OID") (i.e., debt instruments purchased by the Fund
at a price less than their stated face amount) or debt instruments acquired at a
price less than their issue price plus the portion of "original issue discount"
previously accrued thereon, i.e., purchased at a "market discount." Current
federal tax law requires a holder (such as the Funds) of a debt instrument with
OID to accrue and include in income each year a portion of the discount at which
the security was purchased even though the Fund does not receive interest
payments in cash during the year which reflect such accrued discount. The Fund
will elect to likewise accrue and include in income each year a portion of the
market discount with respect to a debt instrument even though the Fund does not
receive interest payments in cash which reflect such accrued discount.
As a result of the applicable rules, in order to make the distributions
necessary for a Fund not to be subject to federal income or excise taxes, the
Fund may be required to pay out as an income distribution each year an amount
significantly greater than the total amount of cash which the Fund has actually
received as interest during the year. Such distributions will be made from the
cash assets of the Fund, from borrowings or by liquidation of portfolio
securities, if necessary. If a distribution of cash necessitates the liquidation
of portfolio securities, the Adviser will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such sales, shareholders may receive a larger capital
gain distribution than they would have in the absence of such sales.
Zero Coupon Treasury Securities
Under current federal tax law, a Fund will receive net investment income in the
form of interest by virtue of holding Treasury bills, notes and bonds, and will
recognize interest attributable to it under the original issue discount rules of
the Code from holding zero coupon Treasury securities. Current federal tax law
requires that a holder (such as a Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payment in cash on the security during
the year. Accordingly, a Fund may be required to pay out as an income
distribution each year an amount which is greater than the total amount of cash
interest the Fund actually received. Such distributions will be made from the
cash assets of a Fund or by liquidation of portfolio securities, if necessary. A
Fund may realize a gain or loss from such sales. In the event a Fund realize net
capital gains from such transactions, its stockholders may receive a larger
capital gain distribution, if any, than they would have received in the absence
of such transactions.
Foreign Taxes
Investment income received by a Fund from foreign government securities may be
subject to foreign income taxes, including taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitles a Fund to a reduced rate of such taxes or exemption from taxes on such
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of a Fund's assets to be invested within various
countries is not known. To the extent that investment income of a Fund is
subject to foreign income taxes, the Fund will be entitled to claim a deduction
or credit for the amount of such taxes for United States federal income tax
purposes. However, any such taxes will reduce the income available for
distribution to a Fund's stockholders.
Other Taxation
The foregoing is a brief summary of the federal tax laws applicable to investors
in the Funds. Investors may also be subject to state and local taxes, although
distributions of a Fund that are derived from interest on certain obligations to
the U.S. Government and agencies thereof may be exempt from state and local
taxes in certain states.
PROXY VOTING
You may obtain a description of Global High Income's and Managed Dollar's proxy
voting policies and procedures, and information regarding how the Fund voted
proxies relating to portfolio securities during the most recent 12-month period
ended March 31, 2009 and September 30, 2008, respectively, without charge.
Simply visit the Adviser's web site at www.alliancebernstein.com, or go to the
Commission's web site at www.sec.gov, or call the Adviser at (800) 227-4618.
Each Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. Each Fund's
Forms N-Q is available on the Commission's web site at www.sec.gov. A Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling 1-202-551-8090.
LEGAL MATTERS
Certain legal matters concerning the Funds and their participation in the
Acquisition, the issuance of Global High Income shares in connection with the
Acquisition and the tax consequences of the Acquisition will be passed upon by
Seward & Kissel LLP, One Battery Park Plaza, New York, NY 10004, counsel to the
Funds.
EXPERTS
The audited financial information in the Prospectus/Proxy Statement and the SAI
has been included in reliance on the report of Ernst & Young LLP, the
independent registered public accounting firm for the Funds, 5 Times Square, New
York, NY 10036, given on its authority as experts in auditing and accounting.
-------------------------------------------------------------------------------
FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
The financial statements and Report of Independent Registered Public
Accounting Firm contained in the Annual Report for the twelve months ended March
31, 2008, of Global High Income, which report contains historical financial
information regarding the Fund, has been filed with the SEC and is incorporated
herein by reference. The Fund's Semi-Annual Report for the six-month period
ended September 30, 2008 is also incorporated herein by reference.
The financial statements and Report of Independent Registered Public
Accounting Firm contained in the Annual Report for the twelve months ended
September 30, 2008, of Managed Dollar, which report contains historical
financial information regarding the Fund, has been filed with the SEC and is
incorporated herein by reference.
The pro forma Global High Income financial statements give effect to
the Acquisition of the assets and liabilities of Managed Dollar by Global High
Income pursuant to the Agreement and Plan of Acquisition and Liquidation. The
Acquisition would be accomplished by a tax-free exchange of the assets and
liabilities of Managed Dollar for shares of Global High Income.
Global High Income was incorporated under the laws of the State of
Maryland on May 20, 1993. Global High Income's unaudited Pro Forma Portfolio of
Investments, Statement of Assets and Liabilities and Statement of Operations are
prepared as though the Acquisition was effective for the period October 1, 2007
- September 30, 2008. You should read them in conjunction with Global High
Income's historical financial statements, which are incorporated by reference.
Global High Income's Pro Forma Statement of Operations reflects the assumption
that certain expenses would be lower for the combined Fund as a result of the
Acquisition. Managed Dollar will bear the expenses of the Acquisition, including
the cost of proxy solicitation and the costs associated with the disposition of
any assets or liabilities not being transferred to Global High Income in
connection with the Acquisition. The following represents the pro forma
financial information:
PRO FORMA
ALLIANCEBERNSTEIN GLOBAL HIGH INCOME FUND, INC
FINANCIAL STATEMENTS
ALLIANCEBERNSTEIN GLOBAL HIGH INCOME FUND, INC.
ACM MANAGED DOLLAR INCOME FUND, INC.
September 30, 2008
(unaudited)
PORTFOLIO OF INVESTMENTS
PRO FORMA ALLIANCEBERNSTEIN GLOBAL HIGH INCOME FUND, INC. AllianceBernstein Global High Income Fund, Inc.
September 30, 2008 (unaudited) ACM Managed Dollar Income Fund
------------------------------------------------------------------------------------------------------------------------------------
ACM ACM Pro Forma Pro Form
Alliance- Alliance- Managed Managed Alliance- Alliance-
Bernstein Bernstein Dollar Dollar Bernstein Bernstein
Global High Global High Income Income Global High Global High
Income Fund Income Fund Fund Fund Income Fund Income Fund
Principal (U.S. $ Principal (U.S. Adjust- Principal (U.S. $
Amount (000) Value) Amount (000) $ Value) ments++ Amount (000) Value)
------------------------------------------------------------------------------------------------------------------------------------
CORPORATES - NON-
INVESTMENT GRADES - 35.9%
Industrial - 30.2%
Basic - 3.9%
Abitibi-Consolidated, Inc.
6.00%, 6/20/13 $ -0- $ -0- $ 5 $ 1,325 $ -0- $ 5 $ 1,325
AK Steel Corp.
7.75%, 6/15/12 (a) 1,300 1,248,000 -0- -0- -0- 1,300 1,248,000
Algoma Acquisition Corp.
9.875%, 6/15/15 (a)(b) 1,100 991,375 -0- -0- -0- 1,100 991,375
Arch Western Finance LLC
6.75%, 7/01/13 (a) 700 658,000 165 155,100 -0- 865 813,100
Basell AF SCA
8.375%, 8/15/15 (a)(b) 3,000 1,410,000 369 173,430 -0- 3,369 1,583,430
Bowater Canada Finance Corp.
7.95%, 11/15/11 (a) 1,635 752,100 355 163,300 -0- 1,990 915,400
Caraustar Industries, Inc.
7.375%, 6/01/09 (a) 750 622,500 -0- -0- -0- 750 622,500
Cascades, Inc.
7.25%, 2/15/13 (a) 1,300 1,014,000 -0- -0- -0- 1,300 1,014,000
Citigroup (JSC Severstal)
9.25%, 4/19/14 (a)(b) 2,256 1,714,560 224 170,240 -0- 2,480 1,884,800
Domtar Corp.
5.375%, 12/01/13 (a) 2,320 1,960,400 330 278,850 -0- 2,650 2,239,250
Evraz Group SA
8.25%, 11/10/15 (a)(b) 3,933 2,890,755 665 488,775 -0- 4,598 3,379,530
8.875%, 4/24/13 (a)(b) 483 367,080 115 87,400 -0- 598 454,480
Georgia Gulf Corp.
10.75%, 10/15/16 (a) 1,500 675,000 -0- -0- -0- 1,500 675,000
Georgia-Pacific Corp.
7.00%, 1/15/15 (b) -0- -0- 250 227,500 -0- 250 227,500
7.125%, 1/15/17 (a)(b) 800 714,000 -0- -0- -0- 800 714,000
8.875%, 5/15/31 (a) 450 391,500 -0- -0- -0- 450 391,500
Graphic Packaging
International Corp.
9.50%, 8/15/13 (a) 1,300 1,176,500 -0- -0- -0- 1,300 1,176,500
Hexion US Finance Corp./
Hexion Nova
Scotia Finance ULC
7.304%, 11/15/14 (a)(c) 1,650 1,188,000 115 82,800 -0- 1,765 1,270,800
9.75%, 11/15/14 -0- -0- 115 90,850 -0- 115 90,850
Huntsman International LLC
7.875%, 11/15/14 (a) 850 731,000 195 167,700 -0- 1,045 898,700
Ineos Group Holdings PLC
8.50%, 2/15/16 (a)(b) 2,100 1,134,000 385 207,900 -0- 2,485 1,341,900
Jefferson Smurfit Corp. US
8.25%, 10/01/12 (a) 1,300 1,085,500 8 6,680 -0- 1,308 1,092,180
MacDermid, Inc.
9.50%, 4/15/17 (a)(b) 800 672,000 -0- -0- -0- 800 672,000
Momentive Performance
Materials, Inc.
10.125%, 12/01/14 (a)(d) 750 577,500 80 61,600 -0- 830 639,100
11.50%, 12/01/16 (a) 750 510,000 -0- -0- -0- 750 510,000
NewMarket Corp.
7.125%, 12/15/16 (a) 870 835,200 80 76,800 -0- 950 912,000
NewPage Corp.
10.00%, 5/01/12 (a) 1,030 921,850 285 255,075 -0- 1,315 1,176,925
Novelis, Inc.
7.25%, 2/15/15 (a) 1,160 1,009,200 250 217,500 -0- 1,410 1,226,700
Peabody Energy Corp.
Series B
6.875%, 3/15/13 (a) 1,500 1,447,500 415 400,475 -0- 1,915 1,847,975
Quality Distribution LLC
9.00%, 11/15/10 (a) 1,721 722,820 -0- -0- -0- 1,721 722,820
Smurfit-Stone Container
Enterprises, Inc.
8.00%, 3/15/17 (a) 1,000 780,000 -0- -0- -0- 1,000 780,000
Steel Capital SA for OAO
Severstal
9.75%, 7/29/13 (a)(b) 5,042 4,134,440 696 570,720 -0- 5,738 4,705,160
Tronox Worldwide LLC/
Tronox Finance Corp.
9.50%, 12/01/12 (a) 1,250 412,500 -0- -0- -0- 1,250 412,500
Vedanta Resources PLC
8.75%, 1/15/14 (a)(b) 3,845 3,428,971 559 498,516 -0- 4,404 3,927,487
Verso Paper Holdings LLC/
Verso Paper,
Series B
11.375%, 8/01/16 (a) 800 648,000 -0- -0- -0- 800 648,000
-------------- ----------------------- ---------------
36,824,251 4,382,536 -0- 41,206,787
-------------- ----------------------- ---------------
Capital Goods - 2.7%
Alion Science and
Technology Corp.
10.25%, 2/01/15 (a) 1,300 819,000 40 25,200 -0- 1,340 844,200
Allied Waste North America, Inc.
6.375%, 4/15/11 -0- -0- 610 591,700 -0- 610 591,700
6.875%, 6/01/17 (a) 1,230 1,143,900 -0- -0- -0- 1,230 1,143,900
Series B
7.125%, 5/15/16 (a) 350 326,375 440 410,300 -0- 790 736,675
7.375%, 4/15/14 (a) 1,250 1,215,625 -0- -0- -0- 1,250 1,215,625
Associated Materials, Inc.
11.25%, 3/01/14 (a)(e) 1,650 1,064,250 235 151,575 -0- 1,885 1,215,825
Ball Corp.
6.875%, 12/15/12 -0- -0- 450 449,437 -0- 450 449,437
Berry Plastics Holding Corp.
8.875%, 9/15/14 (a) 700 546,000 155 120,900 -0- 855 666,900
10.25%, 3/01/16 (a) 800 528,000 -0- -0- -0- 800 528,000
Bombardier, Inc.
6.30%, 5/01/14 (a)(b) 1,655 1,539,150 505 469,650 -0- 2,160 2,008,800
8.00%, 11/15/14 (a)(b) 1,050 1,039,500 350 346,500 -0- 1,400 1,386,000
Case Corp.
7.25%, 1/15/16 (a) 1,565 1,416,325 370 334,850 -0- 1,935 1,751,175
Case New Holland, Inc.
7.125%, 3/01/14 (a) 1,985 1,806,350 270 245,700 -0- 2,255 2,052,050
Crown Americas
7.625%, 11/15/13 (a) 1,300 1,280,500 450 443,250 -0- 1,750 1,723,750
Grohe Holding GMBH
8.625%, 10/01/14 (a)(b) EUR 800 822,153 -0- -0- -0- 800 822,153
L-3 Communications Corp.
5.875%, 1/15/15 (a) US$ 800 724,000 420 380,100 -0- 1,220 1,104,100
Owens Brockway Glass
Container, Inc.
6.75%, 12/01/14 (a) 2,835 2,693,250 330 313,500 -0- 3,165 3,006,750
Owens Corning, Inc.
6.50%, 12/01/16 (a) 1,015 898,187 140 123,888 -0- 1,155 1,022,075
7.00%, 12/01/36 (a) 1,155 928,477 185 148,717 -0- 1,340 1,077,194
Plastipak Holdings, Inc.
8.50%, 12/15/15 (a)(b) 1,450 1,225,250 135 114,075 -0- 1,585 1,339,325
Russell-Stanley Holdings, Inc.
9.00%, 11/30/08 (f)(g)(h) -0- -0- 365 45,667 -0- 365 45,667
Sequa Corp.
11.75%, 12/01/15 (a)(b) 590 495,600 80 67,200 -0- 670 562,800
Terex Corp.
8.00%, 11/15/17 (a) 1,415 1,287,650 65 59,150 -0- 1,480 1,346,800
United Rentals North
America, Inc.
6.50%, 2/15/12 (a) 1,500 1,252,500 5 4,175 -0- 1,505 1,256,675
7.75%, 11/15/13 (a) 500 381,250 538 410,225 -0- 1,038 791,475
-------------- ----------------------- ---------------
23,433,292 5,255,759 -0- 28,689,051
-------------- ----------------------- ---------------
Communications - Media - 3.7%
Allbritton Communications Co.
7.75%, 12/15/12 (a) 1,450 1,239,750 275 235,125 -0- 1,725 1,474,875
AMC Entertainment, Inc.
11.00%, 2/01/16 (a) 1,015 999,775 70 68,950 -0- 1,085 1,068,725
American Media Operations, Inc.
8.875%, 1/15/11 (a) 1,250 862,500 -0- -0- -0- 1,250 862,500
Cablevision Systems Corp.
Series B
8.00%, 4/15/12 (a) 900 846,000 290 272,600 -0- 1,190 1,118,600
CanWest MediaWorks, Inc.
8.00%, 9/15/12 -0- -0- 2 1,670 -0- 2 1,670
CCH I LLC
11.00%, 10/01/15 (a) 615 405,900 225 148,500 -0- 840 554,400
CCH I Holdings LLC
11.75%, 5/15/14 (a)(i) 3,850 1,482,250 -0- -0- -0- 3,850 1,482,250
Charter Communications
Operations LLC
8.00%, 4/30/12(b) -0- -0- 990 886,050 -0- 990 886,050
Clear Channel Communica-
tions, Inc.
5.50%, 9/15/14 (a) 4,855 1,505,050 545 168,950 -0- 5,400 1,674,000
5.75%, 1/15/13 -0- -0- 290 129,050 -0- 290 129,050
CSC Holdings, Inc.
6.75%, 4/15/12 -0- -0- 325 297,781 -0- 325 297,781
7.625%, 7/15/18 (a) 2,000 1,740,000 485 421,950 -0- 2,485 2,161,950
Dex Media, Inc.
9.00%, 11/15/13 (a)(e) 1,250 575,000 -0- -0- -0- 1,250 575,000
Dex Media West LLC
Series B
8.50%, 8/15/10 -0- -0- 180 158,850 -0- 180 158,850
DirecTV Holdings LLC
6.375%, 6/15/15 (a) 2,200 1,936,000 605 532,400 -0- 2,805 2,468,400
Echostar DBS Corp.
6.375%, 10/01/11 -0- -0- 325 299,000 -0- 325 299,000
6.625%, 10/01/14 (a) 1,535 1,231,837 455 365,138 -0- 1,990 1,596,975
7.125%, 2/01/16 (a) 1,000 802,500 160 128,400 -0- 1,160 930,900
Hughes Network Systems
LLC/HNS
9.50%, 4/15/14 (a) 1,050 1,018,500 -0- -0- -0- 1,050 1,018,500
Idearc, Inc.
8.00%, 11/15/16 (a) 3,020 822,950 770 209,825 -0- 3,790 1,032,775
Intelsat Bermuda Ltd.
11.25%, 6/15/16 (a) 1,920 1,867,200 577 561,132 -0- 2,497 2,428,332
Lamar Media Corp.
6.625%, 8/15/15 (a) 1,350 1,117,125 200 165,500 -0- 1,550 1,282,625
Liberty Media Corp.
5.70%, 5/15/13 (a) 1,300 1,081,233 -0- -0- -0- 1,300 1,081,233
7.875%, 7/15/09 -0- -0- 120 120,373 120 120,373
8.25%, 2/01/30 (a) 350 236,173 150 101,217 -0- 500 337,390
LIN Television Corp.
6.50%, 5/15/13 (a) 1,330 1,037,400 120 93,600 -0- 1,450 1,131,000
Nielsen Finance LLC /
Nielsen Finance Co.
12.50%, 8/01/16 (a)(e) 740 481,000 75 48,750 -0- 815 529,750
Quebecor Media, Inc.
7.75%, 3/15/16 (a) 2,240 1,960,000 570 498,750 -0- 2,810 2,458,750
Rainbow National Services LLC
8.75%, 9/01/12 (a)(b) 500 500,000 -0- -0- -0- 500 500,000
10.375%, 9/01/14 (a)(b) 985 1,004,700 -0- -0- -0- 985 1,004,700
The Reader's Digest Associa-
tion, Inc.
9.00%, 2/15/17 (a) 1,000 565,000 -0- -0- -0- 1,000 565,000
RH Donnelley Corp.
8.875%, 10/15/17 (a) 2,230 758,200 780 265,200 -0- 3,010 1,023,400
Series A-1
6.875%, 1/15/13 (a) 500 195,000 -0- -0- -0- 500 195,000
Series A-2
6.875%, 1/15/13 -0- -0- 252 98,280 -0- 252 98,280
Series A-3
8.875%, 1/15/16 (a) 2,165 736,100 235 79,900 -0- 2,400 816,000
Shaw Communications, Inc.
7.20%, 12/15/11 (a) 200 197,000 -0- -0- -0- 200 197,000
Sinclair Television Group, Inc.
8.00%, 3/15/12 -0- -0- 2 1,930 -0- 2 1,930
Sirius Satellite Radio, Inc.
9.625%, 8/01/13 (a) 1,275 675,750 190 100,700 -0- 1,465 776,450
Six Flags Operations, Inc.
12.25%, 7/15/16 (a)(b) 707 646,905 37 33,855 -0- 744 680,760
Thomson
5.75%, 9/25/15 (a)(j) EUR 975 466,685 -0- -0- -0- 975 466,685
Univision Communications, Inc. US$
7.85%, 7/15/11 (a) 1,000 780,000 270 210,600 -0- 1,270 990,600
WDAC Subsidiary Corp.
8.375%, 12/01/14 (a)(b) 1,550 1,054,000 -0- -0- -0- 1,550 1,054,000
WMG Holdings Corp.
9.50%, 12/15/14 (a)(e) 2,700 1,485,000 400 220,000 -0- 3,100 1,705,000
-------------- ----------------------- ---------------
32,312,483 6,924,026 -0- 39,236,509
-------------- ----------------------- ---------------
Communications - Telecommunica-
tions - 3.4%
Alltel Corp.
7.875%, 7/01/32 (a) 1,950 1,935,375 285 282,862 -0- 2,235 2,218,237
American Tower Corp.
7.00%, 10/15/17 (a)(b) 685 654,175 100 95,500 -0- 785 749,675
7.125%, 10/15/12 (a) 1,350 1,329,750 -0- -0- -0- 1,350 1,329,750
Centennial Communications Corp.
10.00%, 1/01/13 (a) 955 914,413 -0- -0- -0- 955 914,413
Cincinnati Bell, Inc.
8.375%, 1/15/14 (a) 1,550 1,348,500 -0- -0- -0- 1,550 1,348,500
Cricket Communications, Inc.
9.375%, 11/01/14 (a) 2,015 1,873,950 260 241,800 -0- 2,275 2,115,750
Digicel Ltd.
9.25%, 9/01/12 (a)(b) 3,416 3,381,840 349 345,510 -0- 3,765 3,727,350
Fairpoint Communications, Inc.
13.125%, 4/01/18 (a)(b) 1,270 1,155,700 180 163,800 -0- 1,450 1,319,500
Frontier Communications Corp.
6.25%, 1/15/13 (a) 1,300 1,217,125 490 458,763 -0- 1,790 1,675,888
Gallery Capital SA
10.125%, 5/15/13 (a)(b) 2,567 2,092,105 -0- -0- -0- 2,567 2,092,105
Inmarsat Finance PLC
7.625%, 6/30/12 (a) 1,000 960,000 372 357,120 -0- 1,372 1,317,120
Level 3 Financing, Inc.
8.75%, 2/15/17 (a) 1,845 1,337,625 105 76,125 -0- 1,950 1,413,750
9.25%, 11/01/14 (a) 540 407,700 265 200,075 -0- 805 607,775
MetroPCS Wireless, Inc.
9.25%, 11/01/14 (a) 1,010 944,350 -0- -0- -0- 1,010 944,350
Nextel Communications, Inc.
Series D
7.375%, 8/01/15 (a) 2,180 1,438,800 260 171,600 -0- 2,440 1,610,400
Qwest Capital Funding, Inc.
7.25%, 2/15/11 (a) 1,900 1,776,500 -0- -0- -0- 1,900 1,776,500
Sprint Capital Corp.
6.875%, 11/15/28 (a) 3,000 2,010,000 345 231,150 -0- 3,345 2,241,150
8.75%, 3/15/32 -0- -0- 145 113,100 -0- 145 113,100
Terrestar Networks, Inc.
15.00%, 2/15/14 (a)(b)(d) 1,392 974,337 -0- -0- -0- 1,392 974,337
Time Warner Telecom
Holdings, Inc.
9.25%, 2/15/14 (a) 1,300 1,202,500 100 92,500 -0- 1,400 1,295,000
Vip Finance
8.375%, 4/30/13 (a)(b) 3,725 2,961,628 220 174,915 -0- 3,945 3,136,543
Windstream Corp.
8.125%, 8/01/13 (a) 1,450 1,377,500 198 188,100 -0- 1,648 1,565,600
8.625%, 8/01/16 (a) 950 876,375 231 213,097 -0- 1,181 1,089,472
-------------- ----------------------- ---------------
32,170,248 3,406,017 -0- 35,576,265
-------------- ----------------------- ---------------
Consumer Cyclical -
Automotive - 1.9%
Affinia Group, Inc.
9.00%, 11/30/14 (a) 945 699,300 -0- -0- -0- 945 699,300
Allison Transmission
11.00%, 11/01/15 (a)(b) 1,745 1,518,150 75 65,250 -0- 1,820 1,583,400
Cooper-Standard
Automotive , Inc.
7.00%, 12/15/12 (a) 1,445 1,163,225 -0- -0- -0- 1,445 1,163,225
Ford Motor Co.
7.45%, 7/16/31 (a) 2,250 967,500 816 350,880 -0- 3,066 1,318,380
Ford Motor Credit Co.
5.538%, 1/13/12 (a)(c) 500 319,872 630 403,039 -0- 1,130 722,911
7.00%, 10/01/13 (a) 3,700 2,273,861 443 272,249 -0- 4,143 2,546,110
Gallery Capital SA
10.125%, 5/15/13 (b) -0- -0- 249 203,291 -0- 249 203,291
General Motors Corp.
8.25%, 7/15/23 -0- -0- 740 290,450 -0- 740 290,450
8.375%, 7/15/33 (a) 3,920 1,568,000 720 288,000 -0- 4,640 1,856,000
The Goodyear Tire &
Rubber Co.
8.625%, 12/01/11 -0- -0- 59 58,410 -0- 59 58,410
9.00%, 7/01/15 (a) 1,500 1,485,000 338 334,620 -0- 1,838 1,819,620
Keystone Automotive
Operations, Inc.
9.75%, 11/01/13 (a) 2,200 1,166,000 310 164,300 -0- 2,510 1,330,300
Lear Corp.
Series B
5.75%, 8/01/14 (a) 865 581,713 210 141,225 -0- 1,075 722,938
8.50%, 12/01/13 (a) 600 440,250 80 58,700 -0- 680 498,950
8.75%, 12/01/16 (a) 1,505 1,045,975 420 291,900 -0- 1,925 1,337,875
Tenneco, Inc.
8.625%, 11/15/14 (a) 800 636,000 -0- -0- -0- 800 636,000
TRW Automotive, Inc.
7.25%, 3/15/17 (a)(b) 2,800 2,212,000 580 458,200 -0- 3,380 2,670,200
Visteon Corp.
7.00%, 3/10/14 (a) 1,800 729,000 385 155,925 -0- 2,185 884,925
8.25%, 8/01/10 (a) 250 207,500 -0- -0- -0- 250 207,500
-------------- ----------------------- ---------------
17,013,346 3,536,439 -0- 20,549,785
-------------- ----------------------- ---------------
Consumer Cyclical -
Other - 3.1%
Beazer Homes USA, Inc.
6.875%, 7/15/15 (a) 1,000 620,000 -0- -0- -0- 1,000 620,000
Boyd Gaming Corp.
7.75%, 12/15/12 (a) 1,300 1,144,000 155 136,400 -0- 1,455 1,280,400
Broder Brothers Co.
Series B
11.25%, 10/15/10 (a) 700 364,000 142 73,840 -0- 842 437,840
Chukchansi Economic Development
Authority
8.00%, 11/15/13 (a)(b) 500 400,000 -0- -0- -0- 500 400,000
DR Horton, Inc.
6.00%, 4/15/11 (a) 1,500 1,342,500 -0- -0- -0- 1,500 1,342,500
Gaylord Entertainment Co.
6.75%, 11/15/14 -0- -0- 5 4,200 -0- 5 4,200
8.00%, 11/15/13 (a) 1,300 1,131,000 350 304,500 -0- 1,650 1,435,500
Greektown Holdings LLC
10.75%, 12/01/13 (b)(h) 1,230 848,700 240 165,600 -0- 1,470 1,014,300
Harrah's Operating Co., Inc.
5.625%, 6/01/15 (a) 3,804 1,036,590 205 55,863 -0- 4,009 1,092,453
5.75%, 10/01/17 (a) 196 50,960 38 9,880 -0- 234 60,840
6.50%, 6/01/16 (a) 1,615 444,125 442 121,550 -0- 2,057 565,675
10.75%, 2/01/16 (a)(b) 1,000 510,000 417 212,670 -0- 1,417 722,670
Host Hotels & Resorts LP
6.875%, 11/01/14 (a) 950 821,750 185 160,025 -0- 1,135 981,775
Series O
6.375%, 3/15/15 (a) 1,500 1,218,750 -0- -0- -0- 1,500 1,218,750
Series Q
6.75%, 6/01/16 (a) 300 245,250 590 482,325 -0- 890 727,575
KB Home
5.875%, 1/15/15 (a) 305 242,475 -0- -0- -0- 305 242,475
Levi Strauss & Co.
8.875%, 4/01/16 (a) 1,300 1,040,000 225 180,000 -0- 1,525 1,220,000
Meritage Homes Corp.
6.25%, 3/15/15 (a) 750 555,000 -0- -0- -0- 750 555,000
MGM Mirage
6.625%, 7/15/15 (a) 3,000 2,085,000 620 430,900 -0- 3,620 2,515,900
7.625%, 1/15/17 (a) 2,500 1,800,000 -0- -0- -0- 2,500 1,800,000
8.375%, 2/01/11 -0- -0- 620 506,850 -0- 620 506,850
M/I Homes, Inc.
6.875%, 4/01/12 (a) 1,500 1,200,000 -0- -0- -0- 1,500 1,200,000
Mohegan Tribal Gaming Auth
6.375%, 7/15/09 -0- -0- 155 147,250 -0- 155 147,250
7.125%, 8/15/14 (a) 2,050 1,455,500 250 177,500 -0- 2,300 1,633,000
Penn National Gaming, Inc.
6.875%, 12/01/11 (a) 800 752,000 280 263,200 -0- 1,080 1,015,200
Pinnacle Entertainment, Inc.
7.50%, 6/15/15 (a) 1,000 740,000 -0- -0- -0- 1,000 740,000
Quicksilver, Inc.
6.875%, 4/15/15 (a) 1,350 931,500 -0- -0- -0- 1,350 931,500
Six Flags, Inc.
9.625%, 6/01/14 (a) 611 342,160 92 51,520 -0- 703 393,680
Standard Pacific Corp.
6.50%, 8/15/10 (a) 750 671,250 -0- -0- -0- 750 671,250
Station Casinos, Inc.
6.625%, 3/15/18 (a) 4,015 1,063,975 390 103,350 -0- 4,405 1,167,325
Tropicana Entertainment LLC
9.625%, 12/15/14 (h) 750 105,000 -0- -0- -0- 750 105,000
Trump Entertainment Resorts,
Inc.
8.50%, 6/01/15 (a) 775 317,750 210 86,100 -0- 985 403,850
Turning Stone Resort Casino
Enterprise
9.125%,
12/15/10-9/15/14 (a)(b) 900 843,000 300 285,000 -0- 1,200 1,128,000
Universal City Development
Partners
11.75%, 4/01/10 -0- -0- 225 217,406 -0- 225 217,406
Universal City Florida
Holding Co.
8.375%, 5/01/10 (a) 400 386,000 110 106,150 -0- 510 492,150
WCI Communities, Inc.
6.625%, 3/15/15 (h) 750 262,500 -0- -0- -0- 750 262,500
William Lyon Homes, Inc.
10.75%, 4/01/13 (a) 2,069 889,670 206 88,580 -0- 2,275 978,250
Wynn Las Vegas Capital Corp.
6.625%, 12/01/14 (a) 2,000 1,705,000 470 400,675 -0- 2,470 2,105,675
-------------- ----------------------- ---------------
27,565,405 4,771,334 -0- 32,336,739
-------------- ----------------------- ---------------
Consumer Cyclical -
Restaurants - 0.2%
OSI Restaurant Partners, Inc.
10.00%, 6/15/15 (a) 1,000 445,000 100 44,500 -0- 1,100 489,500
Sbarro, Inc.
10.375%, 2/01/15 (a) 1,500 1,027,500 -0- -0- -0- 1,500 1,027,500
-------------- ----------------------- ---------------
1,472,500 44,500 -0- 1,517,000
-------------- ----------------------- ---------------
Consumer Cyclical -
Retailers - 1.1%
Asbury Automotive Group, Inc.
8.00%, 3/15/14 (a) 925 649,813 -0- -0- -0- 925 649,813
Autonation, Inc.
4.791%, 4/15/13 (c) -0- -0- 55 46,338 -0- 55 46,338
The Bon-Ton Dept Stores, Inc.
10.25%, 3/15/14 (a) 1,650 495,000 -0- -0- -0- 1,650 495,000
Burlington Coat Factory
Warehouse Corp.
11.125%, 4/15/14 (a) 1,000 552,500 130 71,825 -0- 1,130 624,325
Couche-Tard, Inc.
7.50%, 12/15/13 (a) 1,375 1,265,000 333 306,360 -0- 1,708 1,571,360
Dollar General Corp.
10.625%, 7/15/15 (a) 1,015 999,775 70 68,950 -0- 1,085 1,068,725
Duane Reade, Inc.
9.75%, 8/01/11 (a) 870 730,800 -0- -0- -0- 870 730,800
GSC Holdings Corp.
8.00%, 10/01/12 (a) 1,200 1,206,000 185 185,925 -0- 1,385 1,391,925
Hines Nurseries, Inc.
10.25%, 10/01/11 (a) 1,000 562,500 -0- -0- -0- 1,000 562,500
Michaels Stores, Inc.
10.00%, 11/01/14 (a) 2,000 1,260,000 135 85,050 -0- 2,135 1,345,050
11.375%, 11/01/16 (a) 1,000 472,500 105 49,612 -0- 1,105 522,112
Neiman-Marcus Group, Inc.
9.00%, 10/15/15 (a)(d) 800 670,000 -0- -0- -0- 800 670,000
10.375%, 10/15/15 (a) 500 418,750 -0- -0- -0- 500 418,750
Rite Aid Corp.
6.875%, 8/15/13 (a) 515 231,750 200 90,000 -0- 715 321,750
Sally Holdings LLC
9.25%, 11/15/14 (a) 800 754,000 -0- -0- -0- 800 754,000
Toys R US, Inc.
7.375%, 10/15/18 (a) 1,300 845,000 -0- -0- -0- 1,300 845,000
-------------- ----------------------- ---------------
11,113,388 904,060 -0- 12,017,448
-------------- ----------------------- ---------------
Consumer Non-Cyclical - 3.8%
ACCO Brands Corp.
7.625%, 8/15/15 (a) 1,180 902,700 -0- -0- -0- 1,180 902,700
Aramark Corp.
8.50%, 2/01/15 (a) 1,625 1,527,500 310 291,400 -0- 1,935 1,818,900
Bausch & Lomb, Inc.
9.875%, 11/01/15 (a)(b) 925 878,750 65 61,750 -0- 990 940,500
Biomet, Inc.
11.625%, 10/15/17 (a) 1,600 1,608,000 125 125,625 -0- 1,725 1,733,625
Boston Scientific Corp.
6.00%, 6/15/11 (a) 500 472,500 -0- -0- -0- 500 472,500
Catalent Pharma Solutions, Inc.
9.50%, 4/15/15 (a) 710 550,250 120 93,000 -0- 830 643,250
Chaoda Modern Agriculture
Holdings Ltd.
7.75%, 2/08/10 (a)(b) 3,976 3,747,380 -0- -0- -0- 3,976 3,747,380
Community Health Systems, Inc.
8.875%, 7/15/15 (a) 1,615 1,534,250 294 279,300 -0- 1,909 1,813,550
DaVita, Inc.
7.25%, 3/15/15 (a) 1,000 950,000 250 237,500 -0- 1,250 1,187,500
Dean Foods Co.
7.00%, 6/01/16 (a) 1,175 1,022,250 125 108,750 -0- 1,300 1,131,000
Del Monte Corp.
6.75%, 2/15/15 (a) 1,000 900,000 -0- -0- -0- 1,000 900,000
Dole Food Co., Inc.
7.25%, 6/15/10 -0- -0- 5 4,400 -0- 5 4,400
8.625%, 5/01/09 -0- -0- 180 171,900 -0- 180 171,900
8.875%, 3/15/11 (a) 1,200 1,008,000 92 77,280 -0- 1,292 1,085,280
Elan Finance PLC/Elan Finance
Corp.
7.75%, 11/15/11 (a) 1,500 1,357,500 590 533,950 -0- 2,090 1,891,450
Hanger Orthopedic Group, Inc.
10.25%, 6/01/14 (a) 450 461,250 190 194,750 -0- 640 656,000
HCA, Inc.
6.25%, 2/15/13 -0- -0- 5 4,175 -0- 5 4,175
6.375%, 1/15/15 (a) 2,210 1,740,375 415 326,813 -0- 2,625 2,067,188
6.50%, 2/15/16 -0- -0- 290 229,825 -0- 290 229,825
6.75%, 7/15/13 -0- -0- 10 8,400 -0- 10 8,400
7.875%, 2/01/11 -0- -0- 415 400,475 -0- 415 400,475
9.25%, 11/15/16 (a) 1,850 1,799,125 -0- -0- -0- 1,850 1,799,125
9.625%, 11/15/16 (d) -0- -0- 485 460,750 -0- 485 460,750
Healthsouth Corp.
10.75%, 6/15/16 (a) 1,650 1,666,500 50 50,500 -0- 1,700 1,717,000
IASIS Healthcare Corp.
8.75%, 6/15/14 (a) 1,500 1,417,500 345 326,025 -0- 1,845 1,743,525
Invacare Corp.
9.75%, 2/15/15 (a) 1,000 1,000,000 -0- -0- -0- 1,000 1,000,000
Merisant Co.
9.50%, 7/15/13 (a) 1,000 580,000 -0- -0- -0- 1,000 580,000
Multiplan, Inc.
10.375%, 4/15/16 (a)(b) 500 490,000 -0- -0- -0- 500 490,000
New Albertsons, Inc.
7.45%, 8/01/29 (a) 2,200 1,956,744 255 226,804 -0- 2,455 2,183,548
Pinnacle Foods Finance LLC
10.625%, 4/01/17 (a) 1,000 750,000 -0- -0- -0- 1,000 750,000
Select Medical Corp.
7.625%, 2/01/15 (a) 1,400 1,134,000 165 133,650 -0- 1,565 1,267,650
Simmons Co.
10.00%, 12/15/14 (a)(e) 1,245 697,200 -0- -0- -0- 1,245 697,200
Stater Brothers Holdings
8.125%, 6/15/12 (a) 1,300 1,274,000 165 161,700 -0- 1,465 1,435,700
Sun Healthcare Group, Inc.
9.125%, 4/15/15 (a) 800 764,000 -0- -0- -0- 800 764,000
Tenet Healthcare Corp.
7.375%, 2/01/13 (a) 1,045 950,950 215 195,650 -0- 1,260 1,146,600
Universal Hospital Services,
Inc.
6.303%, 6/01/15 (a)(c) 500 440,000 -0- -0- -0- 500 440,000
Viant Holdings, Inc.
10.12%, 7/15/17 (a)(b) 633 512,730 168 136,080 -0- 801 648,810
Visant Corp.
7.625%, 10/01/12 (a) 1,000 917,500 210 192,675 -0- 1,210 1,110,175
Visant Holdings Corp.
8.75%, 12/01/13 (a) 500 458,750 -0- -0- -0- 500 458,750
-------------- ----------------------- ---------------
35,469,704 5,033,127 -0- 40,502,831
-------------- ----------------------- ---------------
Energy - 1.8%
Chaparral Energy, Inc.
8.875%, 2/01/17 (a) 1,250 987,500 -0- -0- -0- 1,250 987,500
Chesapeake Energy Corp.
6.375%, 6/15/15 (a) 1,800 1,606,500 -0- -0- -0- 1,800 1,606,500
6.50%, 8/15/17 (a) 425 371,875 405 354,375 -0- 830 726,250
7.50%, 9/15/13 -0- -0- 185 178,987 -0- 185 178,987
CIE Generale De Geophysique
7.50%, 5/15/15 (a) 580 553,900 145 138,475 -0- 725 692,375
7.75%, 5/15/17 -0- -0- 25 23,750 -0- 25 23,750
Complete Production Services,
Inc.
8.00%, 12/15/16 (a) 1,355 1,287,250 145 137,750 -0- 1,500 1,425,000
Energy XXI Gulf Coast, Inc.
10.00%, 6/15/13 (a) 560 420,000 115 86,250 -0- 675 506,250
Forest Oil Corp.
7.25%, 6/15/19 (a) 2,035 1,739,925 225 192,375 -0- 2,260 1,932,300
Helix Energy Solutions Group,
Inc.
9.50%, 1/15/16 (a)(b) 500 467,500 -0- -0- -0- 500 467,500
Hilcorp Energy I LP/Hilcorp
Finance Co.
7.75%, 11/01/15 (a)(b) 1,105 950,300 115 98,900 -0- 1,220 1,049,200
Key Energy Services, Inc.
8.375%, 12/01/14 (a)(b) 1,000 960,000 -0- -0- -0- 1,000 960,000
Newfield Exploration Co.
6.625%, 9/01/14 (a) 1,030 927,000 -0- -0- -0- 1,030 927,000
7.125%, 5/15/18 -0- -0- 160 139,200 -0- 160 139,200
OPTI Canada, Inc.
8.25%, 12/15/14 (a) 1,200 1,074,000 -0- -0- -0- 1,200 1,074,000
PetroHawk Energy Corp.
9.125%, 7/15/13 (a) 1,600 1,504,000 217 203,980 -0- 1,817 1,707,980
Pioneer Natural Resources Co.
5.875%, 7/15/16 -0- -0- 160 137,847 -0- 160 137,847
Plains Exploration &
Production Co.
7.75%, 6/15/15 (a) 1,090 1,002,800 160 147,200 -0- 1,250 1,150,000
Pride International, Inc.
7.375%, 7/15/14 (a) 655 625,525 95 90,725 -0- 750 716,250
Range Resources Corp.
7.50%, 5/15/16 (a) 500 477,500 265 253,075 -0- 765 730,575
Southwestern Energy Co.
7.50%, 2/01/18 (b) -0- -0- 95 92,150 -0- 95 92,150
Tesoro Corp.
6.25%, 11/01/12 -0- -0- 400 350,000 -0- 400 350,000
6.50%, 6/01/17 (a) 1,880 1,504,000 -0- -0- -0- 1,880 1,504,000
-------------- ----------------------- ---------------
16,459,575 2,625,039 -0- 19,084,614
-------------- ----------------------- ---------------
Other Industrial - 0.8%
Education Management LLC
10.25%, 6/01/16 (a) 1,050 840,000 -0- -0- -0- 1,050 840,000
Neenah Foundary Co.
9.50%, 1/01/17 (a) 800 608,000 -0- -0- -0- 800 608,000
Noble Group Ltd.
6.625%, 3/17/15 (a)(b) 4,731 3,461,767 -0- -0- -0- 4,731 3,461,767
8.50%, 5/30/13 (a)(b) 341 281,325 170 140,250 -0- 511 421,575
RBS Global, Inc. and
Rexnord Corp.
9.50%, 8/01/14 (a) 1,400 1,316,000 135 122,850 -0- 1,535 1,438,850
11.75%, 8/01/16 (a) 350 330,750 -0- -0- -0- 350 330,750
Sensus Metering Systems, Inc.
8.625%, 12/15/13 (a) 800 752,000 -0- -0- -0- 800 752,000
Trimas Corp.
9.875%, 6/15/12 (a) 1,250 1,059,375 -0- -0- -0- 1,250 1,059,375
-------------- ----------------------- ---------------
8,649,217 263,100 -0- 8,912,317
-------------- ----------------------- ---------------
Services - 0.8%
Expedia, Inc.
8.50%, 7/01/16 (a)(b) 1,840 1,656,000 75 67,500 -0- 1,915 1,723,500
Lottomatica SpA
8.25%, 3/31/66 (a)(b)(j) EUR 725 734,870 -0- -0- -0- 725 734,870
Noble Group Ltd.
6.625%, 3/17/15 (b) US$ -0- -0- 401 312,780 -0- 401 312,780
Realogy Corp.
10.50%, 4/15/14 (a) 1,335 587,400 275 121,000 -0- 1,610 708,400
12.375%, 4/15/15 (a) 500 170,000 -0- -0- -0- 500 170,000
Service Corp. International
6.75%, 4/01/16 (a) 1,485 1,269,675 165 141,075 -0- 1,650 1,410,750
Ticketmaster
10.75%, 8/01/16 (a)(b) 1,250 1,175,000 -0- -0- -0- 1,250 1,175,000
Travelport LLC
9.875%, 9/01/14 (a) 1,300 1,059,500 60 48,900 -0- 1,360 1,108,400
West Corp.
9.50%, 10/15/14 (a) 500 382,500 80 61,200 -0- 580 443,700
11.00%, 10/15/16 (a) 500 360,000 -0- -0- -0- 500 360,000
-------------- ----------------------- ---------------
7,394,945 752,455 -0- 8,147,400
-------------- ----------------------- ---------------
Technology - 2.3%
Amkor Technology, Inc.
9.25%, 6/01/16 (a) 1,995 1,675,800 405 340,200 -0- 2,400 2,016,000
Avago Technologies Finance
10.125%, 12/01/13 (a) 950 959,500 230 232,300 -0- 1,180 1,191,800
CA, Inc.
4.75%, 12/01/09 (a) 500 491,063 200 196,425 -0- 700 687,488
Celestica, Inc.
7.875%, 7/01/11 (a) 1,300 1,261,000 -0- -0- -0- 1,300 1,261,000
Ceridian Corp.
11.25%, 11/15/15 (a)(b) 1,000 825,000 -0- -0- -0- 1,000 825,000
First Data Corp.
9.875%, 9/24/15 (a)(b) 1,687 1,324,295 143 112,255 -0- 1,830 1,436,550
Flextronics International Ltd.
6.50%, 5/15/13 (a) 1,350 1,198,125 435 386,062 -0- 1,785 1,584,187
Freescale Semiconductor, Inc.
8.875%, 12/15/14 (a) 1,550 1,069,500 580 400,200 -0- 2,130 1,469,700
10.125%, 12/15/16 (a) 1,500 960,000 285 182,400 -0- 1,785 1,142,400
Iron Mountain, Inc.
6.625%, 1/01/16 (a) 1,350 1,269,000 410 385,400 -0- 1,760 1,654,400
Lucent Technologies, Inc.
6.50%, 1/15/28 (a) 1,850 1,128,500 -0- -0- -0- 1,850 1,128,500
Nortel Networks Ltd.
6.875%, 9/01/23 (a) 1,000 370,000 -0- -0- -0- 1,000 370,000
10.125%, 7/15/13 -0- 235 149,813 -0- 235 149,813
10.75%, 7/15/16 (a) 600 367,500 -0- -0- -0- 600 367,500
NXP BV / NXP Funding LLC
5.541%, 10/15/13 (a)(c) 500 330,000 170 112,200 -0- 670 442,200
9.50%, 10/15/15 (a) 750 386,250 180 92,700 -0- 930 478,950
Sanmina Corp.
8.125%, 3/01/16 (a) 2,050 1,742,500 -0- -0- -0- 2,050 1,742,500
Seagate Technology HDD Holding
6.375%, 10/01/11 (a) 1,600 1,572,000 298 292,785 -0- 1,898 1,864,785
Sensata Technologies BV
8.00%, 5/01/14 (a) 800 676,000 -0- -0- -0- 800 676,000
Serena Software, Inc.
10.375%, 3/15/16 (a) 200 176,000 270 237,600 -0- 470 413,600
Sungard Data Systems, Inc.
9.125%, 8/15/13 (a) 950 855,000 270 243,000 -0- 1,220 1,098,000
10.25%, 8/15/15 (a) 300 260,250 -0- -0- -0- 300 260,250
Telcordia Technologies, Inc.
10.00%, 3/15/13 (a)(b) 900 724,500 -0- -0- -0- 900 724,500
Unisys Corp.
8.00%, 10/15/12 (a) 1,250 1,012,500 -0- -0- -0- 1,250 1,012,500
-------------- ----------------------- ---------------
20,634,283 3,363,340 -0- 23,997,623
-------------- ----------------------- ---------------
Transportation - Airlines - 0.1%
AMR Corp.
9.00%, 8/01/12 (a) 830 539,500 242 157,300 -0- 1,072 696,800
Continental Airlines, Inc.
8.75%, 12/01/11 -0- -0- 260 185,900 -0- 260 185,900
Series RJO3
7.875%, 7/02/18 (a) 710 461,669 75 48,475 -0- 785 510,144
-------------- ----------------------- ---------------
1,001,169 391,675 -0- 1,392,844
-------------- ----------------------- ---------------
Transportation - Railroads - 0.1%
Trinity Industries, Inc.
6.50%, 3/15/14 (a) 1,400 1,319,500 160 150,800 -0- 1,560 1,470,300
-------------- ----------------------- ---------------
Transportation - Services - 0.5%
Avis Budget Car Rental
7.75%, 5/15/16 (a) 2,500 1,562,500 255 159,375 -0- 2,755 1,721,875
Hertz Corp.
8.875%, 1/01/14 (a) 1,750 1,509,375 305 263,063 -0- 2,055 1,772,438
10.50%, 1/01/16 (a) 1,050 876,750 235 196,225 -0- 1,285 1,072,975
US Shipping Partners LP Shipping
Finance Corp.
13.00%, 8/15/14 (a) 800 336,000 -0- -0- -0- 800 336,000
-------------- ----------------------- ---------------
4,284,625 618,663 -0- 4,903,288
-------------- ----------------------- ---------------
277,117,931 42,422,870 -0- 319,540,801
-------------- ----------------------- ---------------
Utility - 2.7%
Electric - 2.2%
The AES Corp.
7.75%, 3/01/14 (a) 2,200 2,046,000 630 585,900 -0- 2,830 2,631,900
8.00%, 10/15/17 (a) 800 722,000 90 81,225 -0- 890 803,225
8.75%, 5/15/13 (b) -0- -0- 50 50,250 -0- 50 50,250
CMS Energy Corp.
8.50%, 4/15/11 -0- -0- 215 219,986 -0- 215 219,986
Dynegy Holdings, Inc.
7.75%, 6/01/19 (a) 1,900 1,520,000 320 256,000 -0- 2,220 1,776,000
8.375%, 5/01/16 (a) 1,460 1,270,200 425 369,750 -0- 1,885 1,639,950
Edison Mission Energy
7.00%, 5/15/17 (a) 1,925 1,732,500 200 180,000 -0- 2,125 1,912,500
7.50%, 6/15/13 (a) 700 672,000 500 480,000 -0- 1,200 1,152,000
7.75%, 6/15/16 (a) 700 658,000 170 159,800 -0- 870 817,800
Energy Future Holdings Corp.
10.875%, 11/01/17 (a)(b) 975 879,937 175 157,937 -0- 1,150 1,037,874
Mirant Americas Generation LLC
8.50%, 10/01/21 (a) 1,770 1,371,750 300 232,500 -0- 2,070 1,604,250
NRG Energy, Inc.
7.25%, 2/01/14 -0- -0- 85 78,838 -0- 85 78,838
7.375%, 2/01/16 - 1/15/17 (a) 2,690 2,435,900 925 836,950 -0- 3,615 3,272,850
PSEG Energy Holdings LLC
8.50%, 6/15/11 (a) 400 404,923 -0- -0- -0- 400 404,923
Reliant Energy, Inc.
7.625%, 6/15/14 (a) 2,190 1,642,500 185 138,750 -0- 2,375 1,781,250
7.875%, 6/15/17 (a) 855 632,700 225 166,500 -0- 1,080 799,200
Texas Competitive Electric
Holdings Co. LLC
10.25%, 11/01/15 (a)(b) 1,000 902,500 130 117,325 -0- 1,130 1,019,825
TXU Corp.
Series P
5.55%, 11/15/14 (a) 1,550 1,156,698 251 187,311 -0- 1,801 1,344,009
Series Q
6.50%, 11/15/24 (a) 1,550 987,159 379 241,376 -0- 1,929 1,228,535
-------------- ----------------------- ---------------
19,034,767 4,540,398 -0- 23,575,165
-------------- ----------------------- ---------------
Natural Gas - 0.5%
El Paso Corp.
7.375%, 12/15/12 (a) 1,000 961,579 330 317,321 -0- 1,330 1,278,900
Enterprise Products Operating LP
8.375%, 8/01/66 (a)(j) 1,545 1,432,169 460 426,407 -0- 2,005 1,858,576
Kinder Morgan Finance Co.
5.70%, 1/05/16 (a) 835 741,062 75 64,500 -0- 910 805,562
Regency Energy Partners
8.375%, 12/15/13 (a) 933 839,700 98 88,200 -0- 1,031 927,900
-------------- ----------------------- ---------------
3,974,510 896,428 -0- 4,870,938
-------------- ----------------------- ---------------
23,009,277 5,436,826 -0- 28,446,103
-------------- ----------------------- ---------------
Financial Institutions - 1.9%
Banking - 0.8%
ALB Finance BV
9.25%, 9/25/13 (a)(b) 2,985 1,552,200 273 141,960 -0- 3,258 1,694,160
CenterCredit International BV
8.625%, 1/30/14 (a)(b) 1,210 847,000 194 135,800 -0- 1,404 982,800
Kazkommerts International BV
8.50%, 4/16/13 (a)(b) 3,000 1,935,000 350 206,556 -0- 3,350 2,141,556
RS Finance (RSB)
7.50%, 10/07/10 (a)(b) 5,345 3,625,520 270 183,600 -0- 5,615 3,809,120
-------------- ----------------------- ---------------
7,959,720 667,916 -0- 8,627,636
-------------- ----------------------- ---------------
Brokerage - 0.1%
E*Trade Financial Corp.
7.375%, 9/15/13 (a) 405 330,075 85 69,275 -0- 490 399,350
Lehman Brothers Holdings, Inc.
Series MTN
6.875%, 5/02/18 (h) 1,690 211,250 -0- -0- -0- 1,690 211,250
-------------- ----------------------- ---------------
541,325 69,275 -0- 610,600
-------------- ----------------------- ---------------
Finance - 0.4%
Chaoda Modern Agriculture
7.75%, 2/08/10 (b) -0- -0- 519 518,834 -0- 519 518,834
General Motors Acceptance Corp.
6.75%, 12/01/14 (a) 2,795 1,072,760 200 76,763 -0- 2,995 1,149,523
6.875%, 9/15/11 (a) 500 223,093 765 341,333 -0- 1,265 564,426
8.00%, 11/01/31 (a) 820 309,367 260 98,092 -0- 1,080 407,459
Mobile Satellite Ventures LP
14.00%, 4/01/13 (a)(b)(e) 1,000 550,000 -0- -0- -0- 1,000 550,000
Residential Capital LLC
9.625%, 5/15/15 (a)(b) 3,640 873,600 572 137,280 -0- 4,212 1,010,880
-------------- ----------------------- ---------------
3,028,820 1,172,302 -0- 4,201,122
-------------- ----------------------- ---------------
Insurance - 0.3%
Crum & Forster Holdings Corp.
7.75%, 5/01/17 (a) 500 435,000 220 191,400 -0- 720 626,400
Fairfax Financial Holdings Ltd.
7.75%, 6/15/17 (a) 1,250 1,137,500 -0- -0- -0- 1,250 1,137,500
Liberty Mutual Group, Inc.
7.80%, 3/15/37 (a)(b) 495 298,974 95 57,379 -0- 590 356,353
Vanguard Health Holding Co.
11.25%, 10/01/15 (a)(e) 1,650 1,427,250 -0- -0- -0- 1,650 1,427,250
-------------- ----------------------- ---------------
3,298,724 248,779 -0- 3,547,503
-------------- ----------------------- ---------------
Other Finance - 0.1%
iPayment, Inc.
9.75%, 5/15/14 (a) 750 600,000 -0- -0- -0- 750 600,000
Trains HY-1-2006
7.117%, 5/01/16 (a)(b)(j) -0- -0- 393 364,449 -0- 393 364,449
-------------- ----------------------- ---------------
600,000 364,449 -0- 964,449
-------------- ----------------------- ---------------
REITS - 0.2%
Icahn Enterprises LP / Icahn
Enterprises Finance Corp.
7.125%, 2/15/13 (a) 2,185 1,671,525 315 240,975 -0- 2,500 1,912,500
-------------- ----------------------- ---------------
17,100,114 2,763,696 -0- 19,863,810
-------------- ----------------------- ---------------
Credit Default Index
Holdings - 1.1%
DJ CDX.NA.HY-100 - 1.1%
CDX North America High Yield
Series 8-T1
7.625%, 6/29/12 (a)(b) 9,800 9,089,500 1,078 999,845 -0- 10,878 10,089,345
Dow Jones CDX HY
Series 4-T1
8.25%, 6/29/10 (b) -0- -0- 935 945,485 -0- 935 945,485
-------------- ----------------------- ---------------
9,089,500 1,945,330 -0- 11,034,830
-------------- ----------------------- ---------------
Total Corporates - Non-
Investment Grades
(cost $474,653,124) 326,316,822 52,568,722 -0- 378,885,544
-------------- ----------------------- ---------------
EMERGING MARKETS -
SOVEREIGNS - 21.6%
Non Corporate Sectors - 21.6%
Sovereign - 21.6%
Argentina - 2.1%
Republic of Argentina
3.127%, 8/03/12 (a)(c) 9,750 7,028,592 944 680,217 -0- 10,694 7,708,809
7.00%, 10/03/15 (a) 11,600 6,658,400 -0- -0- -0- 11,600 6,658,400
7.82%, 12/31/33 (a) EUR 8,463 5,599,938 -0- -0- -0- 8,463 5,599,938
8.28%, 12/31/33 (k) US$ 3,406 1,945,539 1,090 622,487 -0- 4,496 2,568,026
Series $GDP
1.318%, 12/15/35 (a)(j) 3 230 -0- -0- -0- 3 230
-------------- ----------------------- ---------------
21,232,699 1,302,704 -0- 22,535,403
-------------- ----------------------- ---------------
Colombia - 1.1%
Republic of Colombia
7.375%, 1/27/17 - 9/18/37 (a) 9,099 9,108,099 1,011 1,030,937 -0- 10,110 10,139,036
11.75%, 2/25/20 -0- -0- 1,028 1,421,210 -0- 1,028 1,421,210
-------------- ----------------------- ---------------
9,108,099 2,452,147 -0- 11,560,246
-------------- ----------------------- ---------------
Costa Rica - 0.0%
Republic of Costa Rica
8.11%, 2/01/12 (b) -0- -0- 188 201,630 -0- 188 201,630
-------------- ----------------------- ---------------
Dominican Republic - 0.6%
Dominican Republic
8.625%, 4/20/27 (a)(b) 4,015 3,613,500 370 321,900 -0- 4,385 3,935,400
Dominican Republic STP
Zero Coupon, 7/23/09 (a)(b) DOP 3,150 2,619,686 -0- -0- -0- 3,150 2,619,686
-------------- ----------------------- ---------------
6,233,186 321,900 -0- 6,555,086
-------------- ----------------------- ---------------
Ecuador - 1.1%
Republic of Ecuador
9.375%, 12/15/15 (a)(b) US$ 5,698 4,786,320 943 792,120 -0- 6,641 5,578,440
10.00%, 8/15/30 (a)(b)(i) 7,393 5,322,960 1,087 782,640 -0- 8,480 6,105,600
-------------- ----------------------- ---------------
10,109,280 1,574,760 -0- 11,684,040
-------------- ----------------------- ---------------
El Salvador - 0.7%
Republic of El Salvador
7.625%, 9/21/34 (a)(b) 2,642 2,615,580 150 150,000 -0- 2,792 2,765,580
7.65%, 6/15/35 (a)(b) 3,469 3,399,620 355 347,900 -0- 3,824 3,747,520
8.50%, 7/25/11(b) -0- -0- 400 420,000 -0- 400 420,000
-------------- ----------------------- ---------------
6,015,200 917,900 -0- 6,933,100
-------------- ----------------------- ---------------
Indonesia - 2.3%
Republic of Indonesia
6.625%, 2/17/37 (a)(b) 3,650 2,906,313 520 414,050 -0- 4,170 3,320,363
6.75%, 3/10/14 (a)(b) 8,135 7,809,600 945 883,575 -0- 9,080 8,693,175
6.875%, 3/09/17 - 1/17/18(a)(b) 4,706 4,202,217 835 746,535 -0- 5,541 4,948,752
7.25%, 4/20/15 (b) -0- -0- 976 949,160 -0- 976 949,160
7.50%, 1/15/16 (b) -0- -0- 270 264,600 -0- 270 264,600
7.75%, 1/17/38 (a)(b) 2,662 2,395,800 387 348,300 -0- 3,049 2,744,100
8.50%, 10/12/35 (a)(b) 3,568 3,434,200 390 375,375 -0- 3,958 3,809,575
-------------- ----------------------- ---------------
20,748,130 3,981,595 -0- 24,729,725
-------------- ----------------------- ---------------
Jamaica - 0.4%
Government of Jamaica
9.25%, 10/17/25 -0- -0- 100 102,000 -0- 100 102,000
10.625%, 6/20/17 (a) 2,988 3,316,680 270 299,700 -0- 3,258 3,616,380
-------------- ----------------------- ---------------
3,316,680 401,700 -0- 3,718,380
-------------- ----------------------- ---------------
Lebanon - 0.5%
Lebanese Republic
7.875%, 5/20/11 (a)(b) 2,805 2,797,987 325 324,187 -0- 3,130 3,122,174
11.625%, 5/11/16 (a)(b) 1,262 1,451,300 146 167,900 -0- 1,408 1,619,200
-------------- ----------------------- ---------------
4,249,287 492,087 -0- 4,741,374
-------------- ----------------------- ---------------
Pakistan - 0.1%
Republic of Pakistan
6.875%, 6/01/17 (a)(b) 2,404 1,141,900 338 160,550 -0- 2,742 1,302,450
-------------- ----------------------- ---------------
Panama - 2.4%
Republic of Panama
6.70%, 1/26/36 (a) 3,139 2,966,355 3 2,835 -0- 3,142 2,969,190
7.125%, 1/29/26 -0- -0- 927 950,175 -0- 927 950,175
7.25%, 3/15/15 -0- -0- 1,321 1,370,537 -0- 1,321 1,370,537
8.875%, 9/30/27 (a) 10,586 12,650,270 724 865,180 -0- 11,310 13,515,450
9.375%, 4/01/29 (a) 4,621 5,730,040 661 819,640 -0- 5,282 6,549,680
-------------- ----------------------- ---------------
21,346,665 4,008,367 -0- 25,355,032
-------------- ----------------------- ---------------
Philippines - 4.5%
Republic of Philippines
7.50%, 9/25/24 -0- -0- 1,059 1,111,950 -0- 1,059 1,111,950
7.75%, 1/14/31 (a) 6,700 7,035,000 555 582,750 -0- 7,255 7,617,750
8.25%, 1/15/14 (a) 13,445 14,453,375 -0- -0- -0- 13,445 14,453,375
8.875%, 3/17/15 -0- -0- 1,500 1,672,500 -0- 1,500 1,672,500
9.50%, 2/02/30 (a) 2,125 2,635,000 -0- -0- -0- 2,125 2,635,000
9.875%, 1/15/19 (a) 14,521 17,770,800 1,718 2,102,489 -0- 16,239 19,873,289
10.625%, 3/16/25 -0- -0- 205 272,906 -0- 205 272,906
-------------- ----------------------- ---------------
41,894,175 5,742,595 -0- 47,636,770
-------------- ----------------------- ---------------
Turkey - 1.2%
Republic of Turkey
6.875%, 3/17/36 (a) 5,000 4,400,000 1,611 1,417,680 -0- 6,611 5,817,680
7.00%, 6/05/20 -0- -0- 1,950 1,830,563 -0- 1,950 1,830,563
7.375%, 2/05/25 -0- -0- 1,523 1,462,080 -0- 1,523 1,462,080
9.50%, 1/15/14 -0- -0- 151 166,296 -0- 151 166,296
11.00%, 1/14/13 -0- -0- 1,469 1,685,677 -0- 1,469 1,685,677
11.50%, 1/23/12 -0- -0- 1,447 1,642,345 -0- 1,447 1,642,345
-------------- ----------------------- ---------------
4,400,000 8,204,641 -0- 12,604,641
-------------- ----------------------- ---------------
Ukraine - 0.4%
Government of Ukraine
6.385%, 6/26/12 (a)(b) 2,500 2,075,000 110 91,300 -0- 2,610 2,166,300
7.65%, 6/11/13 (a)(b) 2,441 2,099,260 112 96,320 -0- 2,553 2,195,580
-------------- ----------------------- ---------------
4,174,260 187,620 -0- 4,361,880
-------------- ----------------------- ---------------
Uruguay - 1.1%
Republic of Uruguay
7.625%, 3/21/36 (a) 1,700 1,606,500 140 132,300 -0- 1,840 1,738,800
7.875%, 1/15/33 (a)(d) 4,950 4,912,395 1,083 1,074,925 -0- 6,033 5,987,320
8.00%, 11/18/22 (a) 3,354 3,353,577 -0- -0- -0- 3,354 3,353,577
9.25%, 5/17/17 -0- -0- 505 568,756 -0- 505 568,756
-------------- ----------------------- ---------------
9,872,472 1,775,981 -0- 11,648,453
-------------- ----------------------- ---------------
Venezuela - 3.1%
Republic of Venezuela
3.791%, 4/20/11(b)(c) -0- -0- 120 96,600 -0- 120 96,600
5.75%, 2/26/16 (a) 5,824 3,785,275 2,115 1,416,715 -0- 7,939 5,201,990
6.00%, 12/09/20 (a) 10,535 6,004,665 358 200,480 -0- 10,893 6,205,145
7.00%, 12/01/18 (a)(b) 16,282 11,010,703 610 404,125 -0- 16,892 11,414,828
7.65%, 4/21/25 6,667 4,050,203 1,942 1,179,765 -0- 8,609 5,229,968
8.50%, 10/08/14 (a) 2,793 2,199,488 1,165 917,438 -0- 3,958 3,116,926
9.25%, 9/15/27 -0- -0- 1,123 837,758 -0- 1,123 837,758
9.375%, 1/13/34 -0- -0- 318 221,010 -0- 318 221,010
-------------- ----------------------- ---------------
27,050,334 5,273,891 -0- 32,324,225
-------------- ----------------------- ---------------
Total Emerging Markets -
Sovereigns
(cost $252,666,516) 190,892,367 37,000,068 -0- 227,892,435
-------------- ----------------------- ---------------
CORPORATES - INVESTMENT
GRADES - 9.0%
Industrial - 4.4%
Basic - 1.9%
Freeport-McMoRan Copper &
Gold, Inc.
8.375%, 4/01/17 (a) 1,580 1,556,300 405 398,925 -0- 1,985 1,955,225
GTL Trade Finance, Inc.
7.25%, 10/20/17 (a)(b) 1,157 1,109,320 181 173,541 -0- 1,338 1,282,861
JPMorgan Chase
7.00%, 6/28/17 (a)(b) RUB 168,000 4,077,576 -0- -0- -0- 168,000 4,077,576
The Mosaic Co.
7.625%, 12/01/16 (a)(b)(i) US$ 1,435 1,466,177 445 454,668 -0- 1,880 1,920,845
Southern Copper Corp.
7.50%, 7/27/35 (a) 3,000 2,773,665 300 277,366 -0- 3,300 3,051,031
United States Steel Corp.
6.65%, 6/01/37 (a) 1,000 743,708 -0- -0- -0- 1,000 743,708
7.00%, 2/01/18 (a) 1,000 902,760 160 144,442 -0- 1,160 1,047,202
Vale Overseas Ltd.
6.875%, 11/21/36 (a) 5,552 4,941,874 404 359,603 -0- 5,956 5,301,477
Weyerhaeuser Co.
7.375%, 3/15/32 -0- -0- 125 109,607 -0- 125 109,607
-------------- ----------------------- ---------------
17,571,380 1,918,152 -0- 19,489,532
-------------- ----------------------- ---------------
Capital Goods - 0.1%
Masco Corp.
6.125%, 10/03/16 (a) 1,155 1,003,558 170 147,710 -0- 1,325 1,151,268
-------------- ----------------------- ---------------
Communications - Telecommunica-
tions - 0.4%
Embarq Corp.
6.738%, 6/01/13 -0- -0- 220 193,912 -0- 220 193,912
7.082%, 6/01/16 (a) 1,750 1,418,270 -0- -0- -0- 1,750 1,418,270
Qwest Corp.
6.50%, 6/01/17 (a) 610 488,000 -0- -0- -0- 610 488,000
6.875%, 9/15/33 (a) 1,000 672,500 -0- -0- -0- 1,000 672,500
8.875%, 3/15/12 -0- -0- 1,360 1,332,800 -0- 1,360 1,332,800
-------------- ----------------------- ---------------
2,578,770 1,526,712 -0- 4,105,482
-------------- ----------------------- ---------------
Consumer Cyclical - Other - 0.2%
Starwood Hotels & Resorts
Worldwide, Inc.
6.25%, 2/15/13 -0- -0- 180 169,655 -0- 180 169,655
7.375%, 11/15/15 (a) 1,000 944,507 -0- -0- -0- 1,000 944,507
Toll Brothers Finance Corp.
5.15%, 5/15/15 (a) 1,500 1,268,573 249 210,583 -0- 1,749 1,479,156
-------------- ----------------------- ---------------
2,213,080 380,238 -0- 2,593,318
-------------- ----------------------- ---------------
Consumer Cyclical -
Retailers - 0.3%
JC Penney Corp., Inc.
7.40%, 4/01/37 (a) 1,000 836,683 -0- -0- -0- 1,000 836,683
Limited Brands, Inc.
5.25%, 11/01/14 (a) 873 730,755 187 156,531 -0- 1,060 887,286
6.90%, 7/15/17 (a) 320 269,769 110 92,733 -0- 430 362,502
Macys Retail Holdings, Inc.
5.75%, 7/15/14 (a) 1,115 967,462 -0- -0- -0- 1,115 967,462
5.90%, 12/01/16 -0- -0- 175 144,260 -0- 175 144,260
-------------- ----------------------- ---------------
2,804,669 393,524 -0- 3,198,193
-------------- ----------------------- ---------------
Consumer Non-Cyclical - 0.4%
Cadbury Schweppes US Finance LLC
5.125%, 10/01/13 (b) -0- -0- 180 172,689 -0- 180 172,689
Coventry Health Care, Inc.
5.95%, 3/15/17 (a) 1,000 833,559 -0- -0- -0- 1,000 833,559
Reynolds American, Inc.
7.25%, 6/01/12 - 6/01/13 -0- -0- 825 847,326 -0- 825 847,326
Ventas Realty LP/Ventas Capital
Corp.
6.75%, 4/01/17 (a) 1,750 1,653,750 157 148,365 -0- 1,907 1,802,115
-------------- ----------------------- ---------------
2,487,309 1,168,380 -0- 3,655,689
-------------- ----------------------- ---------------
Energy - 0.8%
Gaz Capital SA
6.212%, 11/22/16 (a)(b) 2,814 2,225,199 100 74,451 -0- 2,914 2,299,650
6.51%, 3/07/22 (a)(b) 4,690 3,376,800 1,998 1,438,560 -0- 6,688 4,815,360
National Oilwell Varco, Inc.
Series B
6.125%, 8/15/15 -0- -0- 130 126,869 -0- 130 126,869
TNK-BP Finance SA
7.50%, 7/18/16 2,101 1,502,215 -0- 2,101 1,502,215
-------------- ----------------------- ---------------
7,104,214 1,639,880 -0- 8,744,094
-------------- ----------------------- ---------------
Other Industrial - 0.2%
Usiminas Commercial Ltd.
7.25%, 1/18/18 (a)(b) 2,219 2,156,788 209 203,140 -0- 2,428 2,359,928
-------------- ----------------------- ---------------
Technology - 0.1%
Electronic Data Systems Corp.
Series B
6.00%, 8/01/13 -0- -0- 178 181,486 -0- 178 181,486
Motorola, Inc.
6.50%, 9/01/25 (a) 1,250 958,955 -0- -0- -0- 1,250 958,955
7.50%, 5/15/25 -0- -0- 170 144,996 -0- 170 144,996
-------------- ----------------------- ---------------
958,955 326,482 -0- 1,285,437
-------------- ----------------------- ---------------
38,878,723 7,704,218 -0- 46,582,941
-------------- ----------------------- ---------------
Financial Institutions - 2.5%
Banking - 0.8%
ATF Bank
9.00%, 5/11/16 (a)(b) 2,735 1,804,772 402 265,272 -0- 3,137 2,070,044
The Bear Stearns Co., Inc.
5.55%, 1/22/17 (a) 1,090 936,027 200 171,748 -0- 1,290 1,107,775
Fifth Third Bancorp
6.25%, 5/01/13 -0- -0- 200 169,979 -0- 200 169,979
TransCapitalInvest Ltd. for
OJSC AK Transneft
7.70%, 8/07/13 (a)(b) 4,867 4,448,511 534 488,084 -0- 5,401 4,936,595
-------------- ----------------------- ---------------
7,189,310 1,095,083 -0- 8,284,393
-------------- ----------------------- ---------------
Brokerage - 0.0%
Merrill Lynch & Co., Inc.
5.70%, 5/02/17 -0- -0- 200 163,703 -0- 200 163,703
-------------- ----------------------- ---------------
Finance - 1.5%
Capital One Financial Corp.
6.15%, 9/01/16 -0- -0- 80 60,038 -0- 80 60,038
6.75%, 9/15/17 (a) 1,287 1,132,942 87 76,586 -0- 1,374 1,209,528
CIT Group, Inc.
5.40%, 1/30/16 (a) 1,000 484,001 -0- -0- -0- 1,000 484,001
Series MTN
5.125%, 9/30/14 -0- -0- 270 133,152 -0- 270 133,152
Countrywide Financial Corp.
6.25%, 5/15/16 (a) 1,180 840,068 216 153,775 -0- 1,396 993,843
Series MTN
5.80%, 6/07/12 -0- -0- 47 39,704 -0- 47 39,704
Countrywide Home Loans, Inc.
Series MTNL
4.00%, 3/22/11 -0- -0- 3 2,581 -0- 3 2,581
IIRSA Norte Finance Ltd.
8.75%, 5/30/24 (a)(b) 2,486 2,560,721 432 444,912 -0- 2,918 3,005,633
iStar Financial, Inc.
5.15%, 3/01/12 (a) 1,000 500,000 265 132,500 -0- 1,265 632,500
8.625%, 6/01/13 (a) 700 364,000 -0- -0- -0- 700 364,000
Series 1
5.875%, 3/15/16 (a) 1,250 612,500 -0- -0- -0- 1,250 612,500
Morgan Stanley
10.09%, 5/03/17 (a)(b) BRL 5,760 1,755,636 -0- -0- -0- 5,760 1,755,636
SLM Corp.
Series MTN
5.125%, 8/27/12 (a) US$ 1,215 789,750 130 84,500 -0- 1,345 874,250
Series MTNA
4.50%, 7/26/10 (a) 465 353,400 130 98,800 -0- 595 452,200
5.375%, 5/15/14 (a) 1,000 620,000 -0- -0- -0- 1,000 620,000
VTB Capital SA
6.609%, 10/31/12 (a)(b) 2,300 1,840,000 410 328,000 -0- 2,710 2,168,000
6.875%, 5/29/18 (a)(b) 2,915 2,240,906 -0- -0- -0- 2,915 2,240,906
-------------- ----------------------- ---------------
14,093,924 1,554,548 -0- 15,648,472
-------------- ----------------------- ---------------
Insurance - 0.1%
Liberty Mutual Group, Inc.
5.75%, 3/15/14 (a)(b) 600 535,972 280 250,120 -0- 880 786,092
-------------- ----------------------- ---------------
Other Finance - 0.1%
Aiful Corp.
6.00%, 12/12/11 (a)(b) 552 429,583 230 178,993 -0- 782 608,576
Red Arrow Intl Leasing PLC
8.375%, 6/30/12 (a) RUB 16,113 565,135 -0- -0- -0- 16,113 565,135
-------------- ----------------------- ---------------
994,718 178,993 -0- 1,173,711
-------------- ----------------------- ---------------
22,813,924 3,242,447 -0- 26,056,371
-------------- ----------------------- ---------------
Non-Corporate Sectors - 1.3%
Agencies - Not Government
Guaranteed - 1.0%
Gaz Capital SA
6.51%, 3/07/22 (a)(b) 13,838 9,877,564 -0- -0- -0- 13,838 9,877,564
Gazstream SA
5.625%, 7/22/13 (a)(b) 1,178 1,110,494 -0- -0- -0- 1,178 1,110,494
-------------- ----------------------- ---------------
10,988,058 - -0- 10,988,058
-------------- ----------------------- ---------------
Foreign Local Government -
Municipal - 0.3%
TNK-BP Finance SA
7.50%, 7/18/16 (a)(b) 3,676 2,573,200 575 402,500 -0- 4,251 2,975,700
-------------- ----------------------- ---------------
13,561,258 402,500 -0- 13,963,758
-------------- ----------------------- ---------------
Utility - 0.8%
Electric - 0.4%
Allegheny Energy Supply Co. LLC
7.80%, 3/15/11 US$ -0- -0- 280 278,600 -0- 280 278,600
8.25%, 4/15/12 (a)(b) 1,650 1,666,500 345 348,450 -0- 1,995 2,014,950
Aquila, Inc.
11.875%, 7/01/12 (a) 1,350 1,493,540 200 221,265 -0- 1,550 1,714,805
Oncor Electric Delivery Co.
5.95%, 9/01/13 (b) -0- -0- 110 101,708 -0- 110 101,708
6.80%, 9/01/18 (b) -0- -0- 120 106,688 -0- 120 106,688
Teco Finance, Inc.
6.572%, 11/01/17 -0- -0- 174 157,904 -0- 174 157,904
7.00%, 5/01/12 -0- -0- 251 255,123 -0- 251 255,123
-------------- ----------------------- ---------------
3,160,040 1,469,738 -0- 4,629,778
-------------- ----------------------- ---------------
Natural Gas - 0.4%
Enterprise Products Operating LP
Series B
6.65%, 10/15/34 (a) 1,000 852,147 -0- -0- -0- 1,000 852,147
Williams Co., Inc.
7.625%, 7/15/19 (a) 2,805 2,762,925 570 561,450 -0- 3,375 3,324,375
-------------- ----------------------- ---------------
3,615,072 561,450 -0- 4,176,522
-------------- ----------------------- ---------------
6,775,112 2,031,188 -0- 8,806,300
-------------- ----------------------- ---------------
Total Corporates - Investment
Grades
(cost $114,252,814) 82,029,017 13,380,353 -0- 95,409,370
-------------- ----------------------- ---------------
GOVERNMENTS - SOVEREIGN
BONDS - 6.9%
Brazil - 4.1%
Republic of Brazil
6.00%, 1/17/17 -0- -0- 471 454,515 -0- 471 454,515
7.125%, 1/20/37 (k) 27,055 27,799,013 5,272 5,416,980 -0- 32,327 33,215,993
8.25%, 1/20/34 -0- -0- 1,949 2,207,243 -0- 1,949 2,207,243
8.75%, 2/04/25 -0- -0- 515 605,125 -0- 515 605,125
8.875%, 10/14/19 (a) 4,000 4,690,000 1,544 1,810,340 -0- 5,544 6,500,340
-------------- ----------------------- ---------------
32,489,013 10,494,203 -0- 42,983,216
-------------- ----------------------- ---------------
Malaysia - 0.1%
Malaysia
7.50%, 7/15/11 -0- -0- 541 579,539 -0- 541 579,539
-------------- ----------------------- ---------------
Mexico - 0.3%
United Mexican States
Series A
8.00%, 9/24/22 -0- -0- 2,906 3,370,960 -0- 2,906 3,370,960
-------------- ----------------------- ---------------
Peru - 1.2%
Republic of Peru
7.35%, 7/21/25 (a) 3,665 3,646,675 1,310 1,303,450 -0- 4,975 4,950,125
8.375%, 5/03/16 -0- -0- 451 480,315 -0- 451 480,315
8.75%, 11/21/33 (a) 5,308 6,316,520 1,049 1,248,310 -0- 6,357 7,564,830
-------------- ----------------------- ---------------
9,963,195 3,032,075 -0- 12,995,270
-------------- ----------------------- ---------------
Russia - 0.9%
Russian Federation
7.50%, 3/31/30 (b) 4,410 4,432,050 4,352 4,455,544 -0- 8,762 8,887,594
11.00%, 7/24/18(b) -0- -0- 435 591,600 -0- 435 591,600
-------------- ----------------------- ---------------
4,432,050 5,047,144 -0- 9,479,194
-------------- ----------------------- ---------------
South Africa - 0.3%
Republic of South Africa
7.375%, 4/25/12 (a) 2,901 2,973,525 142 145,372 -0- 3,043 3,118,897
-------------- ----------------------- ---------------
Total Governments - Sovereign Bonds
(cost $68,950,659) 49,857,783 22,669,293 - 72,527,076
-------------- ----------------------- ---------------
GOVERNMENT-TREASURIES- 6.7%
Brazil-2.3%
Republic of Brazil
10.25%, 1/10/28 BRL 4,079 1,899,739 -0- -0- -0- 4,079 1,899,739
12.50%, 1/05/16 - 1/05/22 (a) 41,666 22,631,428 -0- -0- -0- 41,666 22,631,428
-------------- ----------------------- ---------------
24,531,167 -0- -0- 24,531,167
-------------- ----------------------- ---------------
Colombia-0.6%
Republic of Colombia
11.75%, 3/01/10 (a) COP 2,820,000 1,315,631 -0- -0- -0- 2,820,000 1,315,631
12.00%, 10/22/15 (a) 11,268,000 5,417,422 -0- -0- -0- 11,268,000 5,417,422
-------------- ----------------------- ---------------
6,733,053 -0- -0- 6,733,053
-------------- ----------------------- ---------------
Mexico-3.0%
Mexican Bonos
Series M 30
10.00%, 11/20/36 (a) MXN 68,680 7,268,217 -0- -0- -0- 68,680 7,268,217
Series MI10
9.00%, 12/20/12 (a) 256,518 23,982,952 -0- -0- -0- 256,518 23,982,952
-------------- ----------------------- ---------------
31,251,169 -0- -0- 31,251,169
-------------- ----------------------- ---------------
Peru-0.7%
Peru Bono Soberano
7.84%, 8/12/20 (a) PEN 2,280 724,501 -0- -0- -0- 2,280 724,501
8.20%, 8/12/26 (a) 19,679 6,349,405 -0- -0- -0- 19,679 6,349,405
-------------- ----------------------- ---------------
7,073,906 -0- -0- 7,073,906
-------------- ----------------------- ---------------
United States-0.1%
U.S. Treasury Notes
4.50%, 5/15/17 (a) US$ 1,500 1,580,742 -0- -0- -0- 1,500 1,580,742
-------------- ----------------------- ---------------
Total Government Treasuries
(cost $74,440,299) 71,170,037 -0- -0- 71,170,037
-------------- ----------------------- ---------------
COMMERCIAL MORTGAGE- BACKED
SECURITIES - 3.0%
Credit Suisse Mortgage Capital
Certificates
Series 2006-C4, Class A3
5.467%, 9/15/39 (a) 5,615 4,935,518 -0- -0- -0- 5,615 4,935,518
Series 2006-C4, Class AM
5.509%, 9/15/39 (a) 5,900 4,719,908 -0- -0- -0- 5,900 4,719,908
JP Morgan Chase Commercial
Mortgage Securities
Series 2006-CB15, Class AM
5.855%, 6/12/43 (a) 670 554,443 -0- -0- -0- 670 554,443
JP Morgan Chase Commercial
Mortgage Securities Corp.
Series 2007-C1, Class A4
5.716%, 2/15/51 (a) 3,000 2,506,792 -0- -0- -0- 3,000 2,506,792
Merrill Lynch Countrywide
Commercial Mortgage Trust
Series 2006-4, Class AM
5.204%, 12/12/49 (a) 8,050 6,297,127 -0- -0- -0- 8,050 6,297,127
Morgan Stanley Capital
Series 2006-IQ12, Class A4
5.332%, 12/15/43 (a) 7,900 6,852,122 -0- -0- -0- 7,900 6,852,122
Morgan Stanley Capital I
Series 2006-IQ12, Class AM
5.37%, 12/15/43 (a) 7,700 6,060,170 -0- -0- -0- 7,700 6,060,170
-------------- ----------------------- ---------------
Total Commercial Mortgage-Backed
Securities (cost $34,814,831) 31,926,080 -0- -0- 31,926,080
-------------- ----------------------- ---------------
EMERGING MARKETS -
TREASURIES - 2.8%
Non-Corporate Sectors - 2.8%
Sovereign - 2.8%
Republic of Colombia
9.85%, 6/28/27 (a) COP 3,624,000 1,511,301 -0- -0- -0- 3,624,000 1,511,301
Turkey Government Bond
Zero Coupon, 11/26/08 (a) TRY 29,527 22,667,991 -0- -0- -0- 29,527 22,667,991
16.00%, 3/07/12 (a) 7,238 5,305,206 -0- -0- -0- 7,238 5,305,206
-------------- ----------------------- ---------------
Total Emerging Markets -
Treasuries (cost $28,962,377) 29,484,498 -0- -0- 29,484,498
-------------- ----------------------- ---------------
BANK LOANS - 2.6%
Industrials - 2.1%
Basic - 0.3%
Celanese US Holdings LLC
4.28%, 4/02/14 (j) 995 909,565 -0- -0- -0- 995 909,565
Graphic Packaging Holding Co.
2.79%-3.76%, 5/16/14 (j) 1,232 1,102,094 -0- -0- -0- 1,232 1,102,094
Hexion Specialty
5.06%, 5/06/13 (j) 817 613,026 -0- -0- -0- 817 613,026
6.06%, 5/06/13 (j) 177 132,827 -0- -0- -0- 177 132,827
-------------- ----------------------- ---------------
2,757,512 -0- -0- 2,757,512
-------------- ----------------------- ---------------
Capital Goods - 0.1%
Graham Packaging
4.75%-6.06%, 10/07/11 (j) 992 888,237 -0- -0- -0- 992 888,237
-------------- ----------------------- ---------------
Communications - Media - 0.5%
Charter Communications
Operating LLC
4.80%, 3/06/14 (j) 995 790,736 -0- -0- -0- 995 790,736
CSC Holdings, Inc. (Cablevision)
4.57%, 3/29/13 (j) 1,240 1,116,412 -0- -0- -0- 1,240 1,116,412
IDEARC, Inc. (Verizon)
5.71%-5.77%, 11/17/14 (j) 1,489 873,338 -0- -0- -0- 1,489 873,338
Thomson Learning
6.20%, 7/03/14 (j) 1,241 1,006,661 -0- -0- -0- 1,241 1,006,661
Univision Communications, Inc.
7.85%, 7/15/11 (j) 1,250 795,838 -0- -0- -0- 1,250 795,838
Wide Open West Finance LLC
5.30%-6.27%, 6/30/14 (j) 1,000 750,000 -0- -0- -0- 1,000 750,000
-------------- ----------------------- ---------------
5,332,985 -0- -0- 5,332,985
-------------- ----------------------- ---------------
Communications - Telecommunica-
tions - 0.2%
Alltel Corp.
5.32%, 5/15/15 (j) 1,489 1,437,629 -0- -0- -0- 1,489 1,437,629
Charter Communications
Operating LLC
8.77%, 3/06/14 (j) 1,244 1,175,966 -0- -0- -0- 1,244 1,175,966
-------------- ----------------------- ---------------
2,613,595 -0- -0- 2,613,595
-------------- ----------------------- ---------------
Consumer Cyclical -
Automotive - 0.1%
Ford Motor Co.
5.49%, 12/16/13 (j)(c) 1,241 819,035 -0- -0- -0- 1,241 819,035
-------------- ----------------------- ---------------
Consumer Cyclical - Other - 0.2%
Harrah's Operating Co., Inc.
5.80%-6.76%, 1/28/15 (j) 1,493 1,219,029 -0- -0- -0- 1,493 1,219,029
West Corp.
8.50%, 10/24/13 (c ) 1,247 1,197,000 -0- -0- -0- 1,247 1,197,000
-------------- ----------------------- ---------------
2,416,029 -0- -0- 2,416,029
-------------- ----------------------- ---------------
Consumer Non-Cyclical - 0.3%
Aramark Corp.
2.44%, 1/27/14 (j) 45 39,011 -0- -0- -0- 45 39,011
5.64%, 1/27/14 (j) 705 614,052 -0- -0- -0- 705 614,052
Carestream Health, Inc.
4.80%-5.76%, 4/30/13 (j) 949 816,566 -0- -0- -0- 949 816,566
HCA, Inc.
6.01%, 11/18/13 (j) 1,737 1,537,781 -0- -0- -0- 1,737 1,537,781
Wrigley Jr Company
6.625%, 12/01/14 (a) 300 294,207 -0- -0- -0- 300 294,207
--------------- ----------------------- ---------------
3,301,617 -0- -0- 3,301,617
-------------- ----------------------- ---------------
Energy - 0.1%
Ashmore Energy International
3.66%, 3/30/12 (j) 118 103,477 -0- -0- -0- 118 103,477
6.76%, 3/30/14 (j) 853 746,216 -0- -0- -0- 853 746,216
-------------- ----------------------- ---------------
849,693 -0- -0- 849,693
-------------- ----------------------- ---------------
Services - 0.1%
Chrysler Financial Services
Americas LLC
6.82%, 8/03/12 (j) 746 505,467 -0- -0- -0- 746 505,467
Sabre, Inc.
4.80%-5.71%, 9/30/14 (j) 1,250 848,212 -0- -0- -0- 1,250 848,212
-------------- ----------------------- ---------------
1,353,679 -0- -0- 1,353,679
-------------- ----------------------- ---------------
Technology - 0.2%
Asurion Corp.
5.49%-5.80%, 7/03/14 (j) 1,000 871,500 -0- -0- -0- 1,000 871,500
Freescale Semiconductor, Inc.
4.24%, 11/29/13 (j) 1,244 1,010,022 -0- -0- -0- 1,244 1,010,022
Sungard Data Systems, Inc.
4.55%, 2/28/14 (j) 744 646,165 -0- -0- -0- 744 646,165
-------------- ----------------------- ---------------
2,527,687 -0- -0- 2,527,687
-------------- ----------------------- ---------------
22,860,069 -0- -0- 22,860,069
-------------- ----------------------- ---------------
Financial Institutions - 0.2%
Finance - 0.1%
First Data Corp.
5.95%-6.51%, 9/24/14 (j) 1,489 1,269,761 -0- -0- -0- 1,489 1,269,761
-------------- ----------------------- ---------------
REITS - 0.1%
Landsource Communities
8.50%, 6/01/09(d) 1,127 631,330 -0- -0- -0- 1,127 631,330
-------------- ----------------------- ---------------
1,901,091 -0- -0- 1,901,091
-------------- ----------------------- ---------------
Utility - 0.3%
Electric - 0.3%
FirstLight Power Resources, Inc.
3.66%, 11/01/13 (j) 55 51,787 -0- -0- -0- 55 51,787
5.75%, 11/01/13 (j) 425 401,928 -0- -0- -0- 425 401,928
7.71%, 5/01/14 (j) 1,000 940,000 -0- -0- -0- 1,000 940,000
Northeast Biofuels LLC
Zero Coupon, 6/28/13 (d)(l) 20 9,953 -0- -0- -0- 20 9,953
Zero Coupon, 6/28/13 (l) 480 240,047 -0- -0- -0- 480 240,047
TXU Corp.
5.99%-7.26%, 10/10/14 (j) 1,741 1,463,171 -0- -0- -0- 1,741 1,463,171
-------------- ----------------------- ---------------
3,106,886 -0- -0- 3,106,886
-------------- ----------------------- ---------------
Total Bank Loans
(cost $30,323,138) 27,868,046 -0- -0- 27,868,046
-------------- ----------------------- ---------------
QUASI-SOVEREIGNS - 2.5%
Quasi-Sovereign Bonds - 2.5%
Malaysia - 0.0%
Petronas Capital Ltd.
7.00%, 5/22/12 (b) -0- -0- 364 395,672 -0- 364 395,672
-------------- ----------------------- ---------------
Mexico - 0.4%
Pemex Project Funding Master
Trust
5.75%, 3/01/18 (a)(b) 4,028 3,811,696 285 269,695 -0- 4,313 4,081,391
-------------- ----------------------- ---------------
Netherlands - 0.2%
Majapahit Holding BV
7.75%, 10/17/16 (a)(b) 2,165 1,920,942 -0- -0- -0- 2,165 1,920,942
-------------- ----------------------- ---------------
Russia - 1.2%
RSHB Capital SA for OJSC
Russian Agricultural Bank
6.299%, 5/15/17 (a)(b) 3,881 2,712,043 163 113,904 -0- 4,044 2,825,947
7.125%, 1/14/14 (a)(b) 4,824 3,991,860 1,065 881,288 -0- 5,889 4,873,148
7.75%, 5/29/18 (a)(b) 6,645 5,037,907 368 278,999 -0- 7,013 5,316,906
-------------- ----------------------- ---------------
11,741,810 1,274,191 -0- 13,016,001
-------------- ----------------------- ---------------
Venezuela - 0.7%
Petroleos de Venezuela SA
5.25%, 4/12/17 (a)(b) 11,695 6,315,300 1,062 573,480 -0- 12,757 6,888,780
-------------- ----------------------- ---------------
Total Quasi-Sovereigns
(cost $30,069,130) 23,789,748 2,513,038 -0- 26,302,786
-------------- ----------------------- ---------------
EMERGING MARKETS - CORPORATE
BONDS - 0.9%
Industrial - 0.1%
Consumer Cyclical - Other - 0.0%
Royal Caribbean Cruises Ltd.
8.00%, 5/15/10 -0- -0- 235 231,475 -0- 235 231,475
-------------- ----------------------- ---------------
Consumer Non-Cyclical - 0.1%
Foodcorp Ltd.
8.875%, 6/15/12 (a)(b) EUR 1,000 886,912 -0- -0- -0- 1,000 886,912
-------------- ----------------------- ---------------
Technology - 0.0%
MagnaChip Semiconductor SA
8.00%, 12/15/14 (a) 1,300 152,750 -0- -0- -0- 1,300 152,750
-------------- ----------------------- ---------------
1,039,662 231,475 -0- 1,271,137
-------------- ----------------------- ---------------
Financial Institutions - 0.3%
Banking - 0.3%
Banco BMG SA
9.15%, 1/15/16 (a)(b) 3,300 2,937,000 450 400,500 -0- 3,750 3,337,500
-------------- ----------------------- ---------------
Utility - 0.3%
Electric - 0.0%
AES El Salvador Trust
6.75%, 2/01/16(b) -0- -0- 270 258,293 -0- 270 258,293
-------------- ----------------------- ---------------
Other Utilities - 0.3%
MMG Fiduc (AES El Salvador)
6.75%, 2/01/16 (a)(b) 3,100 2,584,058 -0- -0- -0- 3,100 2,584,058
-------------- ----------------------- ---------------
2,584,058 258,293 -0- 2,842,351
-------------- ----------------------- ---------------
Non Corporate Sectors - 0.2%
Sovereign - 0.2%
Russia - 0.2%
Alfa Bond Issuance PLC
8.625%, 12/09/15 (a)(j) 2,360 1,950,021 225 185,913 -0- 2,585 2,135,934
-------------- ----------------------- ---------------
Total Emerging Markets -
Corporate Bonds
(cost $11,833,335) 8,510,741 1,076,181 -0- 9,586,922
-------------- ----------------------- ---------------
GOVERNMENTS - SOVEREIGN
AGENCIES - 0.7%
Governments - Sovereign
Agencies - 0.7%
Indonesia- 0.1%
Majapahit Holding BV
7.875%, 6/29/37 (a)(b) 699 517,260 -0- -0- -0- 699 517,260
-------------- ----------------------- ---------------
Kazakhstan - 0.6%
KazMunaiGaz Finance Sub BV
8.375%, 7/02/13 (a)(b) 6,973 5,996,780 710 610,600 -0- 7,683 6,607,380
-------------- ----------------------- ---------------
Total Governments - Sovereign
Agencies cost $8,227,843) 6,514,040 610,600 -0- 7,124,640
-------------- ----------------------- ---------------
ASSET-BACKED SECURITIES - 0.6%
Home Equity Loans - Floating
Rate - 0.6%
Countrywide Asset-Backed
Certificates
Series 2006-S5, Class A1
3.317%, 6/25/35 (a)(c) 216 203,639 -0- -0- -0- 216 203,639
Series 2007-S2, Class A1
3.347%, 5/25/37 (a)(c) 3,696 3,088,289 -0- -0- -0- 3,696 3,088,289
GMAC Mortgage Corp. Loan Trust
Series 2006-HE5, Class 2A1
3.277%, 2/25/37 (a)(c) 3,596 3,285,620 -0- -0- -0- 3,596 3,285,620
-------------- ----------------------- ---------------
Total Asset-Backed Securities
(cost $6,602,067) 6,577,548 -0- -0- 6,577,548
-------------- ----------------------- ---------------
INFLATION-LINKED SECURITIES-0.4%
Uruguay - 0.4%
Republic of Uruguay
3.70%, 6/26/37 (a) UYU 81,481 2,733,521 -0- -0- -0- 81,481 2,733,521
Uruguay Government International
Bond
4.25%, 4/05/27 (a) 44,574 1,757,138 -0- -0- -0- 44,574 1,757,138
-------------- ----------------------- ---------------
Total Inflation-Linked Securities
(cost $5,250,546) 4,490,659 -0- -0- 4,490,659
-------------- ----------------------- ---------------
WARRANTS - 0.2%
Central Bank of Nigeria, expiring
11/15/20 (m) 10,750 2,343,500 -0- -0- -0- 10,750 2,343,500
Republic of Venezuela,
expiring 4/15/20 (m) 45,599 -0- 7,140 -0- -0- 52,739 -0-
-------------- ----------------------- ---------------
Total Warrants (cost $0) 2,343,500 -0- -0- 2,343,500
-------------- ----------------------- ---------------
LOCAL GOVERNMENTS - REGIONAL
BONDS - 0.1%
Colombia - 0.1%
Bogota Distrio Capital
9.75%, 7/26/28 (a)(b)
(cost $1,346,187) COP 2,871,000 1,078,076 -0- -0- -0- 2,871,000 1,078,076
-------------- ----------------------- ---------------
PREFERRED STOCKS - 0.0%
Financial Institutions - 0.0%
REITS - 0.0%
Sovereign REIT
12.00% (b) -0- -0- 185 140,600 -0- 185 140,600
-------------- ----------------------- ---------------
Non Corporate Sectors - 0.0%
Agencies - Government
Sponsored - 0.0%
Federal National Mortgage
Association
8.25% (a)(j) US$ 70,450 153,581 9,550 20,819 -0- 80,000 174,400
-------------- ----------------------- ---------------
Total Preferred Stocks
(cost $2,168,350) 153,581 161,419 -0- 315,000
-------------- ----------------------- ---------------
EMERGING MARKETS - NON INVEST-
MENT GRADE - 0.0%
Non-Corporate Sectors - 0.0%
Sovereign - 0.0%
Costa Rica- 0.0%
Republic of Costa Rica
8.05%, 1/31/13
(cost $191,617) -0- -0- 181 192,765 -0- 181 192,765
-------------- ----------------------- ---------------
SHORT-TERM INVESTMENTS - 7.7%
Agency Discount Notes - 6.1%
Federal Home Loan Bank Discount
Notes
Zero Coupon, 10/10/08 9,000 8,998,875 -0- -0- -0- 9,000 8,998,875
Zero Coupon, 10/14/08 6,000 5,998,914 -0- -0- -0- 6,000 5,998,914
Zero Coupon, 10/15/08 24,000 23,995,344 -0- -0- -0- 24,000 23,995,344
Zero Coupon, 10/17/08 7,000 6,998,446 -0- -0- -0- 7,000 6,998,446
Zero Coupon, 11/12/08 18,000 17,959,050 -0- -0- -0- 18,000 17,959,050
-------------- ----------------------- ---------------
63,950,629 -0- -0- 63,950,629
-------------- ----------------------- ---------------
Investment Companies - 0.3%
AllianceBernstein Fixed-Income
Shares, Inc. - Government
STIF Portfolio (n) -0- -0- 2,852,389 2,852,389 -0- 2,852,389 2,852,389
-------------- ----------------------- ---------------
Time Deposit - 1.3%
The Bank of New York Mellon
1.00%, 10/01/08 14,040 14,040,000 -0- -0- -0- 14,040 14,040,000
-------------- ----------------------- ---------------
Total Short-Term Investments
(cost $80,807,663) 77,990,629 2,852,389 -0- 80,843,018
-------------- ----------------------- ---------------
Total Investments - 101.6%
(cost $1,225,560,496) 940,993,172 133,024,828 1,074,018,000
Other assets less liabilities -
(1.6)% (13,821,526) (3,575,719) (175,000)(O) (17,572,245)
-------------- ----------------------- ---------------
Net Assets - 100.0% 927,171,646 129,449,109 (175,000) 1,056,445,755
-------------- ----------------------- ---------------
CREDIT DEFAULT SWAP CONTRACTS
Pro-Forma Pro Forma
Alliance- ACM Alliance- Alliance- ACM Alliance-
Bernstein Managed Bernstein Bernstein Managed Bernstein
Global High Dollar Income Global High Global High Dollar Global High
Income Fund Fund Income Fund Income Fund Income Fund Income Fund
Swap Counterparty Notional Notional Notional Unrealized Unrealized Unrealized
& Referenced Amount Amount Amount Interest Termination Appreciation/ Appreciation/ Appreciation/
Obligation (000) (000) (000) Rate Date (Depreciation) (Depreciation) (Depreciation)
------------------ -------------- -------------- ------------- -------- -------- ------------- -------------- -------------
Citigroup Global
Markets, Inc.
(Federal
Republic of Brazil
12.25% 3/6/30) $ 21,380 $ -0- $ 21,380 3.09% 8/20/10 $ 877,435 $ -0- $ $877,435
Citigroup Global
Markets, Inc.
(Republic of
Philippines 10.625%
3/16/25) 4,590 510 5,100 4.95 3/20/09 93,565 10,396 103,961
JPMorgan Chase (OAO
Gazprom 10.50%
10/21/09) 12,210 1,490 13,700 1.04 10/20/10 (558,146) (68,111) (626,257)
JPMorgan Chase Bank
(Petroleos De
Venezuela 6.62%
5/20/09) 9,570 -0- 9,570 6.62 5/20/09 158,796 -0- 158,796
JP Morgan Chase
Petroleos De
Venezuela SA 5.50%,
4/12/37 -0- 1,730 1,730 6.62 5/20/09 -0- 28,706 28,706
FORWARD CURRENCY EXCHANGE CONTRACTS
Pro-Forma ACM Pro-Forma ACM
Alliance- ACM Alliance- Managed Alliance- Alliance- Managed
Bernstein Managed Bernstein Alliance- Dollar Bernstein Bernstein Dollar
Global High Dollar Global High Bernstein Income Global High Global High Income
Income Fund Income Fund Income Fund Global High Fund US Income Fund Income Fund Fund US $
Contract Contract Contract Income Fund $ Value on US $ Value on US $ Value at Value at
Amount Amount Amount US $ Value Origination Origination September 30, September 30,
(000) (000) (000) on Origination Date Date 2008 2008
---------- ----------- ----------- --------------- ----------- ------------ ------------- -------------
Sale Contracts:
Euro
settling 10/30/08 364 -0- 364 $ 534,274 $-0- $ 534,274 $ 513,676 $-0-
Mexican Nuevo Peso
settling 10/28/08 238,161 -0- 238,161 23,311,388 -0- 23,311,388 21,694,788 -0-
New Turkish Lira
settling 11/05/08 6,799 -0- 6,799 5,348,200 -0- 5,348,200 5,290,812 -0-
New Turkish Lira
settling 11/05/08 3,386 -0- 3,386 2,808,950 -0- 2,808,950 2,634,878 -0-
New Turkish Lira
settling 11/05/08 7,590 -0- 7,590 6,293,908 -0- 6,293,908 5,906,812 -0-
Pro-Forma Pro-Forma
Alliance- Alliance- ACM Alliance-
Bernstein Bernstein Managed Bernstein
Global High Global High Dollar Global High
Income Fund Income Fund Income Fund Income Fund
US $ Value Unrealized Unrealized Unrealized
at September Appreciation/ Appreciation/ Appreciation/
30, 2008 (Depreciation) (Depreciation)(Depreciation)
----------- ------------- ------------- --------------
Sale Contracts:
Euro
settling 10/30/08 $ 513,676 $ 20,598 $ -0- $ 20,598
Mexican Nuevo Peso
settling 10/28/08 21,694,788 1,616,600 -0- 1,616,600
New Turkish Lira
settling 11/05/08 5,290,812 57,388 -0- 57,388
New Turkish Lira
settling 11/05/08 2,634,878 174,072 -0- 174,072
New Turkish Lira
settling 11/05/08 5,906,812 387,097 -0- 387,097
REVERSE REPURCHASE AGREEMENTS
Pro-Forma
AllianceBernstein AllianceBernstein AllianceBernstein
Global High Income Managed Dollar Fund Global High Income Fund
Amount Amount Amount
Broker Interest Rate Maturity (000) (000) (000)
--------------------- ------------- ---------- ----------------- ------------------ -----------------------
ABN Amro 2.35% 10/6/2008 $ 28,845,412 $ -0- $ 28,845,412
ABN Amro 0.75% 10/8/2008 2,361,433 -0- 2,361,433
ABN Securities, Ltd. 0.75% 12/31/2008 -0- 755,555 755,555
ABN Securities, Ltd. 2.35% 12/31/2008 -0- 5,555,413 5,555,413
---------------
$ 37,517,813
(a) Position, or a portion thereof, has been segregated to collateralize
forward currency exchange contracts. The aggregate market value of
these securities amounted to $801,056,494.
(b) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. These securities are considered liquid and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. At September 30, 2008, the aggregate market
value of these securities amounted to $266,451,825 or 25.5% of net
assets.
(c) Floating Rate Security. Stated interest rate was in effect at
September 30, 2008.
(d) Pay-In-Kind Payments (PIK).
(e) Indicates a security that has a zero coupon that remains in effect
until a predetermined date at which time the stated coupon rate
becomes effective until final maturity.
(f) Illiquid security, valued at fair value. (See note B)
(g) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. This security, which represents 0.0% of net assets as of
September 30, 2008, is considered illiquid and restricted).
Restricted Acquisition Acquisition Market Value Percentage of
Securities Date Cost Value Net Assets
----------------------- ------------- ------------ ------------- -------------
Russell-Stanley
Holdings, Inc.
9.00%, 11/30/08 2/26/99 $4,562,626 $45,667 0.04%*
* Based on the net assets of ACM Managed Dollar.
(h) Security is in default and is non-income producing.
(i) Coupon rate adjusts periodically based upon a predetermined schedule.
Stated interest rate in effect at September 30, 2008.
(j) Variable rate coupon, rate shown as of September 30, 2008.
(k) Position, or a portion thereof, has been segregated to collateralize
reverse repurchase agreements. The aggregate market value of these
securities amounted to $35,960,573.
(l) This position or a portion of this position represents an unsettled
loan purchase. At September 30, 2008, the market value of these
unsettled loan purchases amounted to $544,207. The coupon rate will be
determined at the time of settlement and will be based upon the
London-Interbank Offered Rate ("LIBOR") plus a premium which was
determined at the time of purchase.
(m) Non-income producing security.
(n) Investment in affiliated money market mutual fund.
(o) Includes adjustment for estimated merger costs of $175,000 borne by
ACM Managed Dollar Income Fund.
* The Federal National Mortgage Association has been placed into a
conservatorship of the U.S. Government.
The fund currently owns investments collateralized by subprime
mortgage loans. Subprime loans are offered to homeowners who do not
have a history of debt or who have had problems meeting their debt
obligations. Because repayment is less certain, subprime borrowers pay
a higher rate of interest than prime borrowers. As of September 30,
2008, the fund's total exposure to subprime investments was 0.36%+.
These investments are valued in accordance with the fund's Valuation
Policies (see Note B.1 for additional details).
+ Based on Global High Income Fund.
++ All holdings of ACM Managed Dollar Income comply with the investment
strategies and restrictions of Global High Income Fund.
Currency Abbreviations:
BRL - Brazilian Real
COP - Colombian Peso
EUR - Euro Dollar
MXN - Mexican Peso
PEN - Peruvian New Sol
RUB - Russian Rouble
TRY - New Turkish Lira
UYU - Uruguayan Peso
Glossary:
CMBS - Commercial Mortgage-Backed Securities
OJSC - Open Joint Stock Company
REITs - Real Estate Investment Trusts
STP - Structured Product
See Notes to Pro Forma AllianceBernstein Global High Income Fund
Finanacial Statements.
STATEMENT OF ASSETS AND LIABILITIES
PRO FORMA ALLIANCEBERNSTEIN GLOBAL HIGH INCOME FUND, INC.
AllianceBernstein Global High Income Fund, Inc.
September 30, 2008 (unaudited) ACM Managed Dollar Income Fund
------------------------------------------------------------------------------------------------------------------------------------
ACM Pro Forma
AllianceBernstein Managed AllianceBernstein
Global High Dollar Global High
Income Fund Income Fund Adjustments Income Fund
---------------- ----------- ----------- -----------------
ASSETS
Investments in securities, at value
Unaffiliated Issuers
(cost $1,072,124,850 and 150,583,257, respectively) $ 940,993,172 $ 130,172,439 $ -0- $ 1,071,165,611
Affiliated Issuers
(cost $0 and 2,852,389, respectively) -0- 2,852,389 -0- 2,852,389
Cash 10,348,844 516,838 -0- 10,865,682
Unrealized appreciation of forward currency
exchange contracts 2,255,755 -0- -0- 2,255,755
Unrealized appreciation of swap contracts 1,129,796 39,102 -0- 1,168,898
Interest and dividends receivable 20,384,869 2,815,276 -0- 23,200,145
Receivable for investment securities sold 10,516,282 176,850 -0- 10,693,132
-------------- -------------- -------------- --------------
Total assets 985,628,718 136,572,894 -0- 1,122,201,612
-------------- -------------- -------------- --------------
LIABILITIES
Due to broker 2,616,373 -0- -0- 2,616,373
Unrealized depreciation of swap contracts 558,146 68,111 -0- 626,257
Reverse repurchase agreements 31,206,845 6,310,968 -0- 37,517,813
Payable for investment securities purchased 22,920,606 298,466 -0- 23,219,072
Advisory fee payable 785,945 91,141 -0- 877,086
Administrative fee payable 24,107 31,969 -0- 56,076
Tender fee payable -0- 57,906 -0- 57,906
Dividends payable -0- 54 -0- 54
Accrued expenses and other liabilities 345,050 265,170 175,000 785,220 (a)
-------------- -------------- -------------- --------------
Total liabilities 58,457,072 7,123,785 175,000 65,755,857
-------------- -------------- -------------- --------------
NET ASSETS $ 927,171,646 $ 129,449,109 $ 175,000 $ 1,056,445,755
============== ============== ============== ==============
Composition of Net Assets $ 763,361 $ 184,956 -0- $ 948,317
Capital stock, at par 1,033,169,810 214,125,362 -0- 1,247,295,172
Undistributed/(distributions) in excess of
net investment income 206,371 (29,084) (175,000) 2,287 (a)
Accumulated net realized gain/loss on investment
and foreign currency transactions 21,630,488 (64,392,298) -0- (42,761,810)
Net unrealized depreciation of investments and
foreign currency denominated assets and liabilities (128,598,384) (20,439,827) -0- (149,038,211)
-------------- -------------- -------------- --------------
$ 927,171,646 $ 129,449,109 $ (175,000) $ 1,056,445,755
============== ============== ============== ==============
Net Asset Value Per Share
Net Assets $ 927,171,646 $ 129,449,109 $ 1,056,620,755
Shares of capital stock outstanding 76,336,108(b) 18,495,567 (c) (7,839,685) 86,991,990
-------------- -------------- -------------- --------------
Net asset value per share $ 12.15 $ 7.00 $ 12.15
-------------- -------------- -------------- --------------
------------------------------------------------------------------------------------------------------------------------------------
See Notes to Pro Forma AllianceBernstein Global High Income Fund Financial Statements.
(a) Includes adjustment for estimated merger costs of $175,000.
(b) 100 million shares of common stock authorized, $ .01 par value (based on 76,336,108 shares outstanding).
(c) 300 million shares of common stock authorized, $ .01 par value (based on 18,495,567 shares outstanding).
STATEMENT OF OPERATIONS
PRO FORMA ALLIANCEBERNSTEIN GLOBAL HIGH INCOME FUND, INC.
AllianceBernstein Global High Income Fund, Inc.
Twelve Months Ended September, 30 2008 (unaudited) ACM Managed Dollar Income Fund
------------------------------------------------------------------------------------------------------------------------------------
ACM Pro Forma
AllianceBernstein Managed AllianceBernstein
Global High Dollar Global High
Income Fund Income Fund Adjustments* Income Fund
---------------- ----------- ------------ -----------------
INVESTMENT INCOME
Interest $ 96,253,768 $ 12,622,481 $ -0- $ 108,876,249
Dividends
Unaffiliated issuers 117,046 56,966 -0- 174,012
Affiliated issuers -0- 73,085 -0- 73,085
-------------- -------------- -------------- --------------
96,370,814 12,752,532 -0- 109,123,346
-------------- -------------- -------------- --------------
EXPENSES
Advisory fee 9,630,587 1,150,446 (1,493,385) 9,287,648 (a)
Custodian 393,739 143,854 (96,843) 440,750 (b)
Printing 202,311 66,181 (107,306) 161,186 (b)
Audit and Legal 98,566 116,929 (59,713) 155,782 (b)
Administrative 148,749 133,719 (149,468) 133,000 (b)
Registration 63,794 16,446 (3,035) 77,205 (b)
Transfer agency 51,524 16,285 (9,665) 58,144 (b)
Directors' fees 51,515 55,907 (51,172) 56,250 (b)
Miscellaneous 68,113 11,483 (2,261) 77,335 (b)
-------------- -------------- -------------- --------------
Total expenses before interest expense 10,708,898 1,711,250 (1,972,848) 10,447,300
Interest expense 2,561,610 443,858 (2,314,054) 691,414
-------------- -------------- -------------- --------------
Total expenses 13,270,508 2,155,108 (4,286,902) 11,138,714
-------------- -------------- -------------- --------------
Net investment income 83,100,306 10,597,424 4,286,902 97,984,632
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain on:
Investment transactions 18,238,541 1,115,889 -0- 19,354,430
Swap contracts 1,399,918 -0- -0- 1,399,918
Foreign Currency transactions 3,985,613 80,072 -0- 4,065,685
Net change in unrealized
appreciation/depreciation of:
Investments (197,794,579) (25,114,859) -0- (222,909,438)
Swap contracts (2,621,564) (72,622) -0- (2,694,186)
Foreign currency denominated assets and liabilities 1,760,918 -0- -0- 1,760,918
-------------- -------------- -------------- --------------
Net loss on investment transactions (175,031,153) (23,991,520) -0- (199,022,673)
-------------- -------------- -------------- --------------
Contributions from Adviser -0- 39,460 -0- 39,460
-------------- -------------- -------------- --------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (91,930,847) $ (13,354,636) 4,286,902 $ (100,998,581)
============== ============== ============== ==============
------------------------------------------------------------------------------------------------------------------------------------
(a) Advisory fee based on an annual rate of .90% of the Portfolio's average weekly net assets.
(b) Expenses are based on one fund.
* Does not reflect the estimated acquisition costs of $175,000 which would be assumed by ACM Managed Dollar Income Fund prior to
the acquisition.
See Notes to Pro Forma AllianceBernstein Global High Income Fund Financial Statements.
NOTES TO FINANCIAL STATEMENTS
PRO FORMA
ALLIANCEBERNSTEIN GLOBAL HIGH INCOME FUND, INC.
September 30, 2008 (unaudited)
NOTE A: General
The Pro Forma AllianceBernstein Global High Income Fund, Inc. Financial
Statements give effect to the proposed acquisition (the "Acquisition") of the
assets and liabilities of ACM Managed Dollar Income Fund, Inc. (the "Acquired
Fund") by AllianceBernstein Global High Income Fund, Inc. (the "Fund" or
"Acquiring Fund") pursuant to the Agreement and Plan of Reorganization. The
Acquisition would be accomplished by a tax-free exchange of the assets and
liabilities of the Acquired Fund for shares of the Fund. After the proposed
acquisition, the tax survivor for federal income tax purposes will be the
Acquiring Fund.
AllianceBernstein Global High Income Fund, Inc. (the "Registrant"), formerly
Alliance World Dollar Government Fund II, Inc., was incorporated under the laws
of the State of Maryland on May 20, 1993 and is registered under the Investment
company Act of 1940, as amended, as a non-diversified, closed-end management
investment company. The Fund's unaudited Pro Forma Portfolio of Investments,
Statement of Assets and Liabilities and Statement of Operations are prepared as
though the Acquisition was effective for the period October 1, 2007 - September
30, 2008. You should read them in conjunction with the Fund's historical
financial statements, which are included in the Fund's Shareholder reports. The
Fund's Pro Forma Statement of Operations reflects the assumption that certain
expenses would be lower for the combined Fund as a result of the Acquisition.
The Acquired Fund will bear the expenses of the Acquisition including the cost
of proxy solicitation.
NOTE B: Significant Accounting Policies
The Fund's Pro Forma Financial Statements have been prepared in conformity with
U.S. generally accepted accounting principles, which require management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available or
are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange (other than securities listed on the NASDAQ Stock Market,
Inc. ("NASDAQ")) or on a foreign securities exchange are valued at the last sale
price at the close of the exchange or foreign securities exchange. If there has
been no sale on such day, the securities are valued at the mean of the closing
bid and asked prices on such day. Securities listed on more than one exchange
are valued by reference to the principal exchange on which the securities are
traded; securities listed only on NASDAQ are valued in accordance with the
NASDAQ Official Closing Price; listed put or call options are valued at the last
sale price. If there has been no sale on that day, such securities will be
valued at the closing bid prices on that day; open futures contracts and options
thereon are valued using the closing settlement price or, in the absence of such
a price, the most recent quoted bid price. If there are no quotations available
for the day of valuation, the last available closing settlement price is used;
securities traded in the over-the-counter market, ("OTC") are valued at the mean
of the current bid and asked prices as reported by the National Quotation Bureau
or other comparable sources; U.S. government securities and other debt
instruments having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less; or by amortizing
their fair value as of the 61st day prior to maturity if their original term to
maturity exceeded 60 days; fixed-income securities, including mortgage backed
and asset backed securities, may be valued on the basis of prices provided by a
pricing service or at a price obtained from one or more of the major
broker/dealers. In cases where broker/dealer quotes are obtained, the Adviser
may establish procedures whereby changes in market yields or spreads are used to
adjust, on a daily basis, a recently obtained quoted price on a security; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not limited
to, information obtained by contacting the issuer and/or analysts, analysis of
the issuer's financial statements or other available documents. In addition, the
Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities. Investments in money market funds are valued at their
net asset value each day.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/ depreciation as such income
and/or capital gains are earned.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date the securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund amortizes premiums and
accretes original issue discount and market discount as adjustments to interest
income.
4. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the
ex-dividend date. Income dividends and capital gains distributions are
determined in accordance with federal tax regulations and may differ from those
determined in accordance with U.S. generally accepted accounting principles. To
the extent these differences are permanent, such amounts are reclassified within
the capital accounts based on their federal tax basis treatment; temporary
differences do not require such reclassification.
NOTE C: Advisory Fee and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, the Fund pays the
Adviser an advisory fee at an annual rate of .90% of the Fund's average weekly
net assets. Such fee is accrued daily and paid monthly.
Pursuant to the Fund's Administration Agreement, the Fund reimburses the Adviser
for the Adviser's costs, including legal and accounting costs, in serving as
Administrator of the Fund provided, however, that the reimbursement may not
exceed .15% of average weekly net assets. For the twelve months ended September
30, 2008, the Fund paid the Adviser $133,000 for its administrative services,
representing .01% of the Fund's average weekly net assets.
Under the terms of the Fund's Shareholder Inquiry Agency Agreement with
AllianceBernstein Investor Services, Inc. ("ABIS"), a wholly-owned subsidiary of
the Adviser, the Fund reimburses ABIS for costs relating to servicing phone
inquiries on behalf of the Fund. During the twelve months ended September 30,
2008, there was no reimbursement paid to ABIS.
NOTE D: Capital Stock
The pro-forma combining net asset value per share assumes the issuance of
Acquiring Fund shares to Acquired Fund shareholders in connection with the
proposed merger. The number of shares assumed to be issued is equal to the net
asset value per share of the Acquired Fund divided by the net asset value per
share of the Acquiring Fund as of September 30, 2008. The pro-forma number of
shares outstanding for the combined entity consists of the following at
September 30, 2008.
Additional Shares Total Shares
Shares of Acquiring Assumed Issued Outstanding
Fund Pre-Combination with Merger Post-Combination
-------------------- ----------- ----------------
76,336,108 10,655,882 86,991,990
APPENDIX A
-------------------------------------------------------------------------------
BOND RATINGS
-------------------------------------------------------------------------------
Moody's Investors Service, Inc.
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise
what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks
appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in
the future.
Baa Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger
with respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Absence of Rating When no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to
the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
---------------------------------------------------------------------
An application for rating was not received or accepted.
The issue or issuer belongs to a group of securities or companies that are
unrated as a matter of policy.
There is a lack of essential data pertaining to the issue or issuer.
The issue was privately placed, in which case the rating is not published in
Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note Moody's applies numerical modifiers, 1, 2 and 3 in each
generic rating classification from Aa through B in its
corporate bond rating system. The modifier 1 indicates
that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.
Standards & Poor's Ratings Services
-----------------------------------
AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the highest rated
issues only in small degree.
A Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
BBB Debt rated BBB normally exhibits adequate protection
parameters. However, adverse economic conditions or
changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C Debt rated BB, B, CCC, CC or C is regarded as having
significant speculative characteristics. BB indicates
the lowest degree of speculation and C the highest.
While such debt will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions.
BB Debt rated BB is less vulnerable to nonpayment than other
speculative debt. However, it faces major ongoing
uncertainties or exposure to adverse business, financial
or economic conditions which could lead to an inadequate
capacity to pay interest and repay principal.
B Debt rated B is more vulnerable to nonpayment than debt
rated BB, but there is capacity to pay interest and repay
principal. Adverse business, financial or economic
conditions will likely impair the capacity or willingness
to pay principal or repay interest.
CCC Debt rated CCC is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial and
economic conditions to pay interest and repay principal.
In the event of adverse business, financial or economic
conditions, there is not likely to be capacity to pay
interest or repay principal.
CC Debt rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has
been taken, but payments are being continued.
D The D rating, unlike other ratings, is not prospective;
rather, it is used only where a default has actually
occurred.
Plus (+) or
Minus (-) The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing
within the major rating categories.
NR Not rated.
Fitch Ratings
-------------
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as
strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issuers is generally rated F- 1+.
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse
changes in economic conditions and circumstances, however,
are more likely to have adverse impact on these bonds, and
therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.
BB Bonds are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time
by adverse economic changes. However, business and
financial alternatives can be identified which could
assist the obligor in satisfying its debt service
requirements.
B Bonds are considered highly speculative. While bonds in
this class are currently meeting debt service
requirements, the probability of continued timely payment
of principal and interest reflects the obligor's limited
margin of safety and the need for reasonable business and
economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if
not remedied, may lead to default. The ability to meet
obligations requires an advantageous business and economic
environment.
CC Bonds are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD, DD, D Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should
be valued on the basis of their ultimate recovery value in
liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these
bonds, and D represents the lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within
the rating category. Plus and minus signs, however, are
are not used in the AAA, DDD, DD or D categories.
NR Indicates that Fitch does not rate the specific issue.
Dominion Bond Rating Service Limited
------------------------------------
Each rating category is denoted by the subcategories "high" and "low". The
absence of either a "high" or "low" designation indicates the rating is in the
"middle" of the category. The AAA and D categories do not utilize "high",
"middle", and "low" as differential grades.
AAA--Long-term debt rated AAA is of the highest credit quality, with
exceptionally strong protection for the timely repayment of principal and
interest. Earnings are considered stable, the structure of the industry in which
the entity operates is strong, and the outlook for future profitability is
favorable. There are few qualifying factors present that would detract from the
performance of the entity. The strength of liquidity and coverage ratios is
unquestioned and the entity has established a credible track record of superior
performance. Given the extremely high standard that Dominion has set for this
category, few entities are able to achieve a AAA rating.
AA--Long-term debt rated AA is of superior credit quality, and protection of
interest and principal is considered high. In many cases they differ from
long-term debt rated AAA only to a small degree. Given the extremely restrictive
definition Dominion has for the AAA category, entities rated AA are also
considered to be strong credits, typically exemplifying above-average strength
in key areas of consideration and unlikely to be significantly affected by
reasonably foreseeable events.
A--Long-term debt rated "A" is of satisfactory credit quality. Protection of
interest and principal is still substantial, but the degree of strength is less
than that of AA rated entities. While "A" is a respectable rating, entities in
this category are considered to be more susceptible to adverse economic
conditions and have greater cyclical tendencies than higher-rated securities.
BBB--Long-term debt rated BBB is of adequate credit quality. Protection of
interest and principal is considered acceptable, but the entity is fairly
susceptible to adverse changes in financial and economic conditions, or there
may be other adverse conditions present which reduce the strength of the entity
and its rated securities.
BB--Long-term debt rated BB is defined to be speculative and non-investment
grade, where the degree of protection afforded interest and principal is
uncertain, particularly during periods of economic recession. Entities in the BB
range typically have limited access to capital markets and additional liquidity
support. In many cases, deficiencies in critical mass, diversification, and
competitive strength are additional negative considerations.
B--Long-term debt rated B is considered highly speculative and there is a
reasonably high level of uncertainty as to the ability of the entity to pay
interest and principal on a continuing basis in the future, especially in
periods of economic recession or industry adversity.
CCC, CC and C--Long-term debt rated in any of these categories is very highly
speculative and is in danger of default of interest and principal. The degree of
adverse elements present is more severe than long-term debt rated B. Long-term
debt rated below B often have features which, if not remedied, may lead to
default. In practice, there is little difference between these three categories,
with CC and C normally used for lower ranking debt of companies for which the
senior debt is rated in the CCC to B range.
D--A security rated D implies the issuer has either not met a scheduled payment
of interest or principal or that the issuer has made it clear that it will miss
such a payment in the near future. In some cases, Dominion may not assign a D
rating under a bankruptcy announcement scenario, as allowances for grace periods
may exist in the underlying legal documentation. Once assigned, the D rating
will continue as long as the missed payment continues to be in arrears, and
until such time as the rating is suspended, discontinued, or reinstated by
Dominion.
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